Developing Your Business Acumen
Business acumen is difficult to define a combination of forethought, creativity, and agility that is a key factor in setting successful business professionals apart from their less accomplished peers. But it doesn't just come from experience. It has to be cultivated and nurtured.
Understanding Business Acumen
In any successful business, there are individuals whose achievements stand out from the crowd, people with a knack for success. Entrepreneurs like Steve Jobs and Warren Buffett come to mind. This is not the result of fate or good luck. The distinguishing factor in the achievements of such people is their business acumen. Their business acumen expresses itself in the following characteristics.
- Ability to create strategic plans - People with strong business acumen are able to create strategic plans that meet company objectives, anticipating and planning for a broad range of factors that might impact the business. They perform thorough due diligence by gathering information, recognizing possible risks and solutions, and selecting the best course of action.
- The capacity for creativity. : Many business situations require quick inventive thinking. Creatively navigating the unexpected is a valuable business skill. Consumer behavior, technological advances, and politics can influence a company's strategy, and all can be unpredictable. Responding to unexpected situations, business-savvy leaders identify creative opportunities for improvising to their benefit.
- Adaptability. You can also refer to it as agility or flexibility. But by any name, adaptability is key to business success. Things don't always go according to plan. Businesses face change daily. Someone with business acumen understands the implications of change and new developments and adjusts plans and strategies accordingly to keep their company competitive and reposition it for success.
- Discovering Your Company's Competitive Edge: Nothing's more important to business success than attaining a competitive edge. Such insight is a part of developing strong business acumen. Successful leaders need to know what makes their companies unique in the market, which business activities the companies excel at, and how these activities influence the bottom line. Activities that result in a lower cost structure for a product or service, or that increase the customer's willingness to pay a higher price for a product or service, are known as differentiated activities.
- Understanding Operational Effectiveness: Business acumen involves a keen understanding of how your business operates, makes money, and sustains profitable growth, now and in the future. Understanding the company's differentiated activities and how they contribute to reduce costs or the ability to raise prices is fundamental to evaluating your organization's operational effectiveness. Operational effectiveness is the means by which your company is able to perform optimally with the resources at its disposal. It's a measure of how well the company executes certain activities compared to others in the same industry and market. In business, inefficiency equals ineffective.
- Understanding Revenue and costs: Revenue and costs are what ultimately define profitability, understanding these and what drives them within your business equips you to make strategic choices.
- Developing the Operational Perspective: All companies are in the business of creating value. The more value they create, the more profitable they're likely to be. When one company provides more value than its rivals, it builds a competitive advantage. To see how it's done requires viewing it from an operational perspective and analyzing activities in its value chain.
- Analyzing your companies value chain: requires identifying the sub-activities for each primary and support activity. And then examining them to determine which create value, and which can be improved. For example, can you improve the efficiency of your supply chain? Do you have the right mix of suppliers to ensure the best prices and delivery options? Are you maintaining the optimal inventory levels? Can the quality of materials received be improved? These and other questions about the various activities that comprise your value chain will help to identify areas of possible improvement. Business accumen requires developing an operational perspective. These are the types of situations and their intended questions required a value chain analysis and by extension, developing such a perspective. Understanding what your company is doing, why it's doing it, and how it does it puts you in a position to make logical, strategic, and profitable decisions.
- Enhancing Strategic Thinking Skills: In many ways, business acumen is the capacity for understanding the key factors behind business actions so that you can comprehend their consequences and make the right decisions. You need to understand how different parts of your business relate to one another. It's the ability to think and act strategically. A better understanding of your own thought and decision-making processes is key to learning to think strategically. There is a soft side as well as a hard side to strategic thinking. The hard side involves applying the rigorous analytical tools, frameworks, and techniques they teach in business schools. But strategic thinking's softer side is also vital to understanding and developing strategy. The word soft doesn't imply weakness, but rather includes those qualitative thinking skills that often seem to be in opposition to logical, data-driven reasoning. You need to be able to engage your imagination. Not in a flight of fancy kind of way, but in the sense of imagining what the end results could look like if managed properly. With a firm understanding of your thought patterns, you can expand your capacity for strategic thinking.
All of this implies that developing business acumen is a learning process. It requires spending the time and energy to observe your organization and how value is created, decisions are arrived at and what their consequences are, positive and negative, and then learning from the experience. This then leads to a final aspect of business acumen, the thinking part. Actively spend time simply thinking. Maybe it can be part of your morning routine, while you're driving to work or at other times when you're alone. However you choose, the more often you take the time to quietly consider all aspects of the issue at hand, the better you'll become at seeing patterns and making connections. You'll get better at anticipating outcomes and devising alternatives when decisions don't go as planned. This is why strategic thinking is so important to the development of business acumen. Business success is seldom linear. Even well-considered decisions can go awry and even seasoned decision-makers have to keep learning and adjusting. There is never an end state with business acumen. It's an ongoing journey down an ever-growing path. Strategic thinking is the guidebook.