10 Steps to Expand Your Business Acumen
To create a path to a successful future in management or leadership, you need to develop your business acumen.
I love business. Every day when I wake up, I tune the TV to CNBC and scan the Wall Street Journal. I’m always trying to learn what business leaders think and how businesses achieve success—a mindset I’d like you to be able to adopt.
Whether you’re new to the corporate world or have years of experience, you know that challenges abound. You may work on projects that don’t make sense or may witness business politics that just are not productive. You may witness decisions that don’t contribute to the company’s strategic intent. Sometimes you’ll scratch your head wondering why something was done, and sometimes you’ll find out an impact of someone’s oversight and you’re doing clean up.
I’d like you to step back for a moment and consider some of these questions:
- Who are the customers of your company, what do they buy, and why?
- Which competitors are your executives most concerned about?
- How much revenue is produced by your company and is the company profitable?
- How do you relate your work to the company’s strategy?
These simple questions underscore the fact that executives want more people to understand the essential elements of business. Why? Because every action – every decision in any organization – has a financial and strategic impact. If you work in functional departments such as engineering, operations, customer service, HR, or other areas, you may not have the perspectives required to recognize unfamiliar business challenges and address those issues with a clear strategic mindset. To address these issues, and more, people who aspire to roles in upper management or leadership, or those who want to be more effective in their jobs, business acumen is needed. But what is business acumen?
Business acumen is a portfolio of skills, behaviors, and capabilities needed to support an organization in the achievement of its financial and strategic goals.
Let me separate two key thoughts from this definition of business acumen:
- A portfolio of skills, behaviors and capabilities: A portfolio is a collection of assets. This portfolio is made up of what you know, what you’ve practices, and how you are seen as a contributor. Like an artist or an investor, the portfolio changes over time. In business, the more you experience, the greater the value of your portfolio. This also implies that you’re always learning. Business acumen requires purposeful, continuous learning.
- Supporting an organization in the achievement of its financial and strategic goals: Every business exists to sell its products and services, achieve competitive advantage, and produce a profit. Even not-for profit enterprises must bring in enough money to cover the investments made, and produce a return, to keep the organization running.
Forming a foundation of business acumen excellence is a model for how people think about business. This multi-dimensional model, shown as The Business Acumen Canvas© offers you way to view business acumen competencies from a holistic standpoint. Here’s a link to a video about the business acumen canvas, and where you can download a copy. The Business Acumen Canvas is a multi-dimensional model that reveals the most important business acumen competencies and forms the foundation for business acumen training.
To improve your effectiveness and for building business acumen competencies focus on the following…
- Learn how your company makes money (its business model). You need to understand how your company earns revenue from the products it sells, prices charged, and profits earned. To understand the business model, you need to develop financial acumen, a subset of the field of business acumen.
- Learn about the markets where your company operates. Markets are where buyers (customers) and sellers (competitors) come together. One of the core business acumen competencies is customer understanding (who we sell to and why) and competitive knowledge (how we win in the market). You also need to learn the dynamics of the industry where your company operates, and the influences on that industry (e.g., economics, regulations, technology, etc.)
- Learn how to think strategically. This means knitting together various data elements to form insights, surface issues, and solve problems.
- Learn about your company’s organizational structure. This can help you develop a broad awareness of workflows and communication. To build business acumen, you must be an impactful communicator. This will also help you earn credibility.
- Learn about the processes used to get work done. There are so many processes in any organization. Processes are guided by people, so your ability to understand what’s to be done, why, how, and with home, will open your eyes to greater levels of efficiency. These efficiencies can result in saving money, improving product quality, or helping the company make more money, which requires financial acumen.
- Learn about your company’s products developed and markets where business is carried out. Without products to sell or customers to buy, there is no business. If you can link the work you do to the reasons that customers buy your products you’ll be a more impactful businessperson.
- Learn accounting and finance. You don’t have to be an accountant or a financial analyst. However, money is the language of business. Every decision has a financial consequence. Financial acumen is a core business acumen competency. You need to learn the key financial performance drivers of your business.
- Learn strategy planning. Successful firms understand what they want to do, why and for whom. This means that the right customers are targeted with the right products at the right price. Strategy is spoken about in terms of an envisioned future, goals to meet what’s envisioned, and strategies undertaken to meet those goals. To develop business acumen, you need to develop a strong understanding of your company’s strategy and how you can ensure that strategy produces positive outcomes.
- Learn about data. Businesses run on data. It’s the premium fuel that gives everyone in the business the wherewithal to create strategies, uncover and solve problems, and steer the business. Data is everywhere. There’s financial data, process data, market data, operational data, and so on. Learn about the data that’s important to your company.
- Learn how to assess business performance. To keep score in any business, you need to know how much money is earned, but also, the ways in which money is made and how results are tracked. The achievement of positive business results requires discipline, tools, and the consistently applied practice of analyzing financial and non-financial metrics (KPIs). This scorekeeping is a vital business acumen competency.
The importance of business acumen in your career cannot be emphasized enough.
With more than 73% of executives stating they have a managerial talent gap, they’re eager to promote people who demonstrate significant levels of business acumen.
To summarize what’s been discussed, here are a few points to keep in mind:
- Business acumen is vital for people to positively contribute to an organization’s results, and to earn credibility as a skilled contributor.
- Business acumen can be developed by understanding and mastering the core competencies listed here, plus what’s on the Business Acumen Canvas.
- To build business acumen, you need to understand what you already know, and what you need to learn. You can find out what’s ahead for you by taking the business acumen self-assessment. Go to this link to take this assessment.
- There are many other skills that help a person develop business acumen, including communication, collaboration, storytelling, and other soft skills that build executive presence.
