What is Business Acumen?
As defined by Wikipedia, is “keenness and quickness in understanding and dealing with a business situation in a manner that is likely to lead to a good outcome”. To break it down, the business comprises two components – ‘business literacy’ – the knowledge and understanding of various functions within the organization, and ‘acumen’ – the ability to make good judgments and quick decisions’. Collectively, strong business acumen acts as a vehicle for improving performance and developing leaders.
In the industrial age, business acumen was a skill reserved for senior leadership, who were considered solely responsible for the decision making and strategy building in an organization. The digital age, however, has starkly different requirements. Today, in the VUCA world, leaders are required at all levels of the organization, with the additional requirement of an ‘entrepreneurial spirit’, a crucial part of acumen.
Unfortunately, most people with even a little competence in business acumen, favor one or the other part of the capability – usually the mere awareness of the various functions.
Business acumen, however, refers to:
- An overall big-picture understanding of the business model
- An understanding of the importance and interdependence of various functions within an organization
- A comprehensive understanding of the drivers of profitability and cash flow
- The ability to foresee and break down complexities and uncertainties
- Awareness of the implications of risk and choice
- Decisiveness and quick judgment
- Agility in failing fast, cutting losses and moving on
This is true irrespective of the level, function, business, organization or industry a professional might work at. In other words, business acumen is a crucial skill for every person and organization to have. In fact, job descriptions are increasing including business acumen as a key competency for most roles within the organization. Surprisingly enough, however, research shows that over 80% of employees do not have the basic literacy of their business, let alone strong business acumen.
To succeed, organizations and professionals alike need to invest significant time in developing business acumen. But how can this be done? The tricks and techniques are simple enough, but they do require sustained effort and motivation from learners:
Part 1 – Building Business Literacy
Learn to love numbers.
The business of every professional is business, and business is made up of numbers. You will find numbers everywhere – budgets, employees, performance reviews, salaries, profits, cash flow, revenues, etc. Running away from numbers is not going to help.
Read company reports.
There is a lot that you can learn about a business just by reading their company reports. It is a guarantee that company reports will make no sense to a newbie – but keep at it. Soon enough, it will start making more and more sense, and eventually, you will find yourself understanding your own business, competitors’ businesses and customer businesses, sometimes better than they do themselves.
Follow the industry and market trends.
A business is never standalone. It is a network of multiple stakeholders – customers, competitors, partners, etc., any of those actions can significantly disrupt your business. The digital age has also taught us that these disruptions can come from the unlikeliest of sources. So, make sure you read as much as you can about what’s happening in the world, even if it seems to not affect your business – environmental, political, social, and economic forces can all impact your business, so nothing is off-limits!
Leverage what every function brings to the table.
Every function within an organization is a cog in the machine that is your business. As much as each of us would like to believe that our role is the most important in the company, the organization derives its strength from its various parts – Money, people, customers, innovation, product/service offerings are all equally important, as an organization cannot survive without a single one. Understanding this is the first step to leveraging each of their strengths.
Let your customers teach you their business.
Your biggest asset is your customer. You need them just as much, if not more than they need you. So, make sure you understand what they need. What better way to do so than understanding your customer’s business? Gain their trust and get them talking. They will tell you more than you expect, and you learn far more from these interactions than from any report.
And do this all with a sense of urgency.
The world is rapidly changing. This doesn’t allow any of us to take our own sweet time to learn new things. Always assume the world will end if you don’t act quickly, and you’ll also find your agility improving.
Once you have made a habit of all of this, you’re only half done. The second part of building business acumen is where the real challenge lies. Herein also is the biggest impact of skill development.
Part 2 – Developing Acumen
You’ve built the knowledge. Now let’s focus on the skill. It won’t be as easy, I’m afraid. But it’s not impossible either.
Considering every aspect of business while making a decision can be grossly overwhelming, even for the most seasoned business leader – Learning the theory isn’t going to prepare you for the real-life implications, and on-the-job experience won’t save you from making mistakes.
Ultimately, developing business acumen is primarily a matter of practice and experience. So, what can you do?
Find a mentor.
As goes the adage – ‘the players keep changing, but the game remains the same’. The right mentor, someone you find yourself resonating with, can set you on the path of seeing things correctly, while also being your safety blanket for when you falter.
Be confident in the risks you take.
Any good mentor will tell you that business is about taking risks – not reckless ones, but calculated ones. You’re not always going to succeed but be happy that you tried.
The reality remains that no amount of practice can really prepare you completely for what’s out there, because the business landscape keeps changing. Go with the flow, take your risks, make mistakes, cut your losses, learn from them and move on to bigger and better things.
Make the most of your experiences.
Quitting after one bad fall doesn’t make for a good business leader. As John C. Maxwell said, “Sometimes you win, sometimes you learn.” Take every experience you have, both good and bad, analyze it and build on it. Things that don’t work aren’t the only ones that we should work on. What’s important is to keep thinking outside the box, and to keep moving forward.
It takes courage to be a good business leader, but courage is not an option. After all, it is survival of the fittest, and only those who show courage consistently are able to achieve their dreams, irrespective of what they are.
How confident are you in your business acumen skills? Where do you see yourself lacking? What do you hope to improve? Answering these questions is the first step to building business acumen and becoming an industry leader.
At KNOLSKAPE, we effectively develop business acumen in leaders with assisted practice in a safe learning environment using Build-Your-Business Simulation. Watch the video on BYB simulation to know more