What do effective leaders at high-performing companies, such as Amazon, Samsung and Apple have in common? Customers rave about their offerings, competitors endlessly try to emulate them, and their profits are sky-high. To be sure, these leaders have tremendous skills in creating visionary products, attracting and retaining top talent, and forging strong partnerships. None of them, however, would be in their current place without solid business acumen.
Understanding the interconnected internal and external dynamics that drive financial success, as well as the ability to formulate and execute clever strategies, has been vital for these companies’ success and, crucially, for their profitability.
What is business acumen?
If business acumen is so important, what exactly is it, and how can we get more of it? The first thing to bear in mind is that business acumen is essentially an umbrella term for a set of distinct but interlinked skills.
Business acumen is financial skills
Firstly, financial acumen is key. It is not just the CFO who needs to have a clear understanding of what drives an organization’s cash flow and profits. From frontline managers all the way up to the CEO, a good understanding of how the company makes its money will allow employees at every level to make decisions designed not only to bring value to the customer, but also to ensure a healthy return for the organization. At the leadership level, solid financial skills are necessary in order to effectively manage portfolios, optimally allocate scarce resources, and set result-driven strategies.
Business acumen is knowing your market
As well as understanding the internal dynamics of what drives performance, business acumen entails a thorough understanding of the market and other external factors. Knowing one’s customers and how to create value for them is essential. Business savvy managers must also develop an unbiased and clear understanding of competitive offerings and the ways in which they differ to their own. However, in the VUCA (Volatile, Uncertain, Complex and Ambiguous) world in which many organizations operate today, customer and competitor insights may not be enough. Leaders must also be able to effectively analyse wider social, political and economic trends and disruptions and act decisively to secure their organization’s success.
Business acumen is a connecting strategy
The final core aspect of business acumen relates to strategy. Business savvy managers need to step away from narrow functional silos to focus on a big picture view of their organization. Understanding the complex interrelations and mutual dependence of different functions or business units is vital in developing a clear, decisive and result-driven strategy. Connecting that strategy to tactical execution is, of course, the final prerequisite for developing excellent business acumen.
Creating business acumen within your organization
Fortunately, this vital competency is something that can be learned. One of the most effective ways to create strong business acumen among a cadre of managers is through experiential learning. Business simulations, such as those offered by StratX, are an ideal way to develop this skill in a true-to-market yet risk-free environment.
To learn more about the benefits of using experiential learning to develop business acumen, download our free Experiential Learning User’s Guide today.