Business acumen is not one skill; it is an amalgamation of many skills. Simply put, business acumen is how keen and quick you are in dealing with risks and opportunities in business to lead to a favourable outcome. Of all the skills it encompasses, two stand out in particular –
“Business literacy” – how well you know the functions within an organisation, and “acumen,” the ability to make quick and fruitful decisions. Business leaders today need both business acumen and interpersonal skills to be effective. You may be the most-liked leader in your organisation but may still struggle if you do not have an overall business sense. A great business leader does not just need to know the in-and-out of their business, but also need a strong understanding of the marketplace. They also must have relevant knowledge and skills, technical or otherwise, relevant to their business.
More than ever, business acumen today is extremely important for business leaders to turn their company strategy into action. Business acumen includes many competencies that directly affect the overall performance of a company. Broadly speaking, business acumen has five core competencies:
It is paramount for a business leader to have a comprehensive understanding of their business. It is not enough to just know how your business operates but also how it creates value for others to successfully create and execute business strategies. An effective business leader is one who has a firm grasp of the main success factors or their current and emerging business. They must have a deep insight into their customer base. They must also know who their competitors are and what they have to offer. Business leaders must keep abreast of the trends that redefine and shape the marketplace.
It is also crucial that a business leader has financial acumen and the ability to strategically think to drive profit and growth.
A hundred decisions need to be made across different management layers and functions in a company that directly affect revenue, profit, and competitiveness. Most companies follow a top-down approach when making business decisions. However, that runs the risk of creating bottlenecks. For an organisation to be agile, decision-making rights need to be distributed.
One of the key responsibilities of a business leader is to smartly delegate decision-making rights wherever necessary. That may mean that all your non-finance managers must also know how to forecast and manage budgets and understand financial implications. They must understand how to utilise best the assets, cash flow and how their decisions impact profitability. Business leaders need to inculcate the spirit of ownership in their subordinates to significantly improve decision-making at all levels in an organisation.
Putting customers at the forefront when making business decisions sets you apart from the competition in the market. You cannot control your customers, their needs and wants are dynamic that change with time. That makes business acumen all the more necessary for business leaders of today to develop business strategies that remain profitable even in the future.
Customers can make or break an organisation. There is nothing more valuable to an organisation than loyal customers. These loyal ones refer new customers, which help in increasing the market share, revenue, and profit of an organisation.
Can you drive a car with a blindfold on? No, right? Business acumen without customer-centricity is like driving a car without being able to see what’s in front. It can only end in a disaster.
With time, businesses are getting more complex. A direct customer-supplier relationship is being replaced by complex ecosystems and value chains. Business leaders today need to have a 360-degree vision to grab all opportunities and collaborate with organisations even outside their purview. It is becoming increasingly important to share business insights with customers, suppliers, and other alliance partners.
The evolving industry landscapes are creating many new opportunities, as well as risks. To mitigate risks and to take advantage of the opportunities leaders must increase their exposure, build relationships, and collaborate across companies and industries. It is vital for business leaders and managers to have a deep understanding of the broader industry value chains and ecosystems. Understanding these can help them navigate the uncertainty and unpredictability that the market may present these days.
Traditionally, innovation has been more associated with the R&D department of a company rather than business acumen. It is no longer so. Innovation is an important aspect of business acumen these days. Innovation can be led by business leaders and managers alike. Innovation can happen at all levels- product, process and business model.
To maintain a competitive edge in today’s market, it is important for a business leader to foster the spirit of co-creation among managers. Your managers and leaders must involve customers and other partners in developing future strategies. They all must be capable of protecting and growing the existing business while launching new businesses successfully. Business acumen and innovation skills go hand-in-hand in sustaining growth and creating profitability for both company and its customers.
Business acumen for business leaders of today, is to think differently about what is needed to compete and win. It is a must-have skill for business leaders to lead their companies on the path of sustainable growth and profitability. Developing business acumen will help improve business decision-making and increase focus on markets and customers. It will help business leaders understand how to minimise risks and embrace innovation. To be an effective business leader, you must have a foundation of business acumen.
Business leadership is not a one-man show. It is a team sport. Successful teams understand the market and their position in it. They understand financial metrics and use financial reports to measure their performance and make adjustments. They understand how their decisions impact the overall business- growth and profitability included. Developing all the competencies involved in business acumen is important to deepen your skillset. It takes courage to be a great business leader because out there, it is indeed, the survival of the fittest.