I believe knowing how your employer’s organisation works and understanding how you contribute to the success of the business is fundamental. Business Acumen skills should be up there with the basic management skills: planning, organising, leading and controlling.
That’s my opinion, but look at this statistic from research sponsored by BTS: “Over 65 percent of surveyed leaders agreed that insufficient business acumen limits their organisation’s ability to realise strategic goals to a strong extent.”
So, why is business acumen up there with the essential management skills?
In this blog, I’ve included two examples to demonstrate why it matters. I’ve cited a case from the public sector (to show it’s not just important for commercial organisations) and chosen an example to demonstrate the importance of context.
Why it Matters: No Market is Static. Organisations Need to Keep on Top of Changes in Customer Behaviour and Demands.
Nokia
In 2007, Nokia owned more than 50% of the global smartphone market. Six years later its share was only 3%. What happened?
There wasn’t just one contributing factor, but Nokia was no longer designing products that its customers wanted and wasn’t looking at what the next trends were going to be. An analyst at CCS Insight was quoted, “Complacency had kicked in…they felt they could do no wrong.” (BBC, 2013)
Woolworths
In 2008, Woolworths went into administration as customer behaviour changed, driven by the effect of the credit crunch and increasing competition from Argos, Wilkinson, Poundland and the supermarkets.
“The days when you went to Woolworths for kids’ toys or Easter eggs have been replaced by the weekly supermarket shop…Woolworths’ price points are higher than Tesco’s, it’s ranging isn’t that good and it’s not that convenient.” (Retail Week, 2008)
The key message in both examples is that if you snooze, you lose. The advantages of today can easily be lost due to changes in the marketplace and new innovations. It is vital that staff understand what customers want. Equally, ensuring managers have the traditional essential management skills will not help if the organisation if it is losing sales and there is precious little work to be managed.
Needed: Commercial Acumen in the Public Sector
It’s not just commercial organisations that need better business acumen skills. In November 2016, a stinging report by the Public Accounts Committee highlighted “poor commercial expertise” within the NHS, following the collapse of a £800m contract outsourcing the care of older and mentally ill people. The ill-informed decisions affected health care services and wasted resources that were already stretched.
Context Matters: Not all Environments are the Same
In the political arena, Donald Trump, President of the USA, claimed his business acumen qualified him to run the country. However, since he was elected there have been a number of situations where he has failed to get his way. Think of his plans for repealing Obamacare and “The Wall” the Mexicans were supposed to pay for.
If he had read the memoires of Milan Panic, Californian businessman and former Prime Minister of Yugoslavia, he may have learned that business and politics are very different. Milan says that “as CEO, I could simply issue directives; my employees would follow my lead,” but that this was not the case when working with politicians who had their own opinions and agendas. Experience gained in the business environment does not automatically translate into the political environment.
What is Business Acumen and Why Use Business Acumen Games?
At Elgood, we define business acumen as “the ability to take a ‘big picture’ view of a situation, to weigh it up quickly, make a logical, sound decision confidently, and then influence others in order to have a positive impact towards achieving the objectives of the organisation”. Essentially, it’s a mixture of knowledge, skills and abilities based on experience.
It is often difficult to upskill people where a poor decision can have far-reaching consequences. Using business acumen games allows individuals to try something new in a risk-free environment. Feedback is almost instant, helping participants to make the links between cause and effect and to reflect on the impact their decisions can have.
One Size Does Not Fit All
However, before you reach for an ‘off the shelf’ package, take heed of the experiences of President Trump and Mr Panic. Context matters, so think about your own organisation. What are the fundamental rules that can be applied to most situations? Think about the law of supply and demand and what sector, industry or organisational peculiarities you need to include.
Find out more about Business Acumen or Business Acumen Games.