Learning to run a business is a challenging endeavor. Even working a corporate job doesn’t automatically translate into knowledge that leads to business success. In fact, people work for years at a position without career advancement. So how can you obtain skills that lead to success?
A powerful means of growing your business or advancing your career is to demonstrate business acumen. This isn’t about ephemeral ideas like gut instincts or having good business sense, but rather, a set of concrete skills and an approach to business that increases your chances of achieving your goals.
Anyone can learn the skills to obtain strong business acumen.
Overview: What is business acumen?
Let’s first clarify: what is business acumen? It’s the ability to make sound business decisions by combining a number of factors to arrive at the best outcome for a given situation.
Developing your business acumen competency isn’t just for those in leadership positions. The skill can extend to everyday scenarios, such as improving your efficiency at your job or being able to solve challenging problems at work.
An added benefit is that building up your business acumen generally leads to success in your career.
It’s no wonder people recognized for having good business acumen are considered exceptional talents, and even revered in their field. Examples of business acumen in action can be seen in business leaders such as Lee Iacocca and Steve Jobs.
Examples of business acumen skills
Someone with strong business acumen exhibits specific qualities that allow them to make good business decisions. Here are examples of these skills.
1. Ability to focus
In order to drive success for your team and your business, you must be able to sort through noise to focus on the items that make a difference to your business.
This is a challenging skill to master because every business is inundated with distractions. For example, if your goal is to increase visitors to your website, you could get caught up on the layout and design of your site rather than concentrate on factors that actually impact the number of visitors like your site’s search engine optimization (SEO).
The ability to focus also allows you to achieve more on a daily basis because you prevent your time from being sapped by work that isn’t driving success for your business.
2. Understanding of the consequences
A key part of honing your business acumen is to understand the consequences of the decisions you make. There’s usually a trade-off to every solution, which is why making decisions can be difficult.
These decisions become easier when you can weigh the potential outcomes of each choice so you can pick the path that delivers the most benefit with the least downside.
3. Affinity for problem solving
Another skill related to business acumen is applying your knowledge to solve business problems. You do this by collecting relevant information about a situation to assess available solutions, then apply your understanding of the consequences to choose a course of action that has the highest likelihood to achieve your objectives.
If things don’t go according to plan, you’re able to make the necessary adjustments to adapt quickly to the new circumstances.
4. Recognizing stakeholder needs
Every business has a number of stakeholders. Customers are implicit stakeholders in your company’s business decisions. Depending on the nature of your business, other stakeholders can include employees, partners, or investors in the company. Balancing the needs of these various stakeholders can be tough.
Part of exercising business acumen is understanding the objectives of each of your organization’s stakeholders in order to factor that into your decision-making.
Strategies to strengthen your business acumen
Now that we’ve looked at some of the skills reflective of good business acumen, let’s examine specific strategies to help you build them up.
1. Understand the business model
A foundational component to developing strong business acumen is a deep knowledge of your company’s business model. This goes beyond a basic understanding of how the company makes money, and must dive into various aspects of the business such as how the company’s supply chain works and its business life cycle.
For instance, at its core, a dentist’s business model is to provide dentistry services to patients. But to develop business acumen in the dentistry field, you have to dig into details such as how the insurance process plays a role.
Another piece of the business model is understanding the importance of talent acquisition and the types of proficiencies that make a person excel at their job.
This amounts to a kind of HR business acumen that you apply to ensure team members brought into the company exhibit the skills that can make them successful. In fact, some HR software will scan resumes to flag candidates with the required skills as well as help with workforce planning.
The marketing component of a business is also a key part of the business model that should be studied. Understanding the company’s marketing objectives as well as key marketing concepts like positioning strategy, customer segmentation, and the four marketing principles will build up your marketing acumen.
The deeper you can go into understanding the business factors that affect your company’s ability to generate revenue, the more it helps with all areas of developing your business acumen, such as understanding the business consequences of your decisions.
Tips for understanding the business model:
It’s not easy to gauge if knowledge of a company’s business model is deep enough. Here are some tips to help.
- Learn unfamiliar areas: Strive to gain comprehensive knowledge of the business. This means learning about areas that you may not have much exposure to, such as the factors adding to the production costs of delivering products and services. You don’t have to know every small detail, but you should possess a general understanding, and go deeper in specific areas that are fundamental to how the business generates revenue and manages costs.
- Know the strategies: It’s also important to understand the company’s current business objectives. What are the company’s growth strategies? How will it evolve its products and services? Why is the business choosing to pursue some revenue opportunities but not others? Understanding the strategies and the purpose behind each helps fill out a complete picture of your company’s business model.
2. Learn the financials
Every business involves financial metrics. You’ve got to understand the key numbers and the financial mechanics that affect your company’s economic health to develop business acumen.
That’s because these data points help you focus on what’s important, and serve as a means to measure the success of your decisions.
For instance, when I worked at an advertising company, a key data point was traffic acquisition cost (TAC), which represented the amount of money spent to deliver consumer online traffic to a client’s website.
Still others may be relevant only to a specific department. Sales analytics, for example, is a set of metrics that are specific to the sales team, like average deal size. By learning these metrics, you can understand the implications to your business.
Tips for learning the financials:
If you don’t already have a background in finance, it can be challenging to learn your company’s financials. Here are suggestions to assist in acquiring this knowledge.
- Track key stats: Identify the important financial metrics for your company and track them over time. This gives you quantifiable data to make informed decisions and a way of measuring the outcome to learn from the experience. One approach is to dig into the company’s business intelligence to gain insight into the kinds of data and the related analysis that your organization focuses on.
- Find help: If you don’t understand the meaning of metrics used by your business, you can acquire knowledge of common business financials from a website like Fool.com, or for company-specific metrics, ask colleagues who are knowledgeable about those data points. Another great way to improve understanding of company financials is to find a mentor in the organization.
3. Seek education
Education plays a role in developing business acumen. The reality is that you can’t always acquire the necessary skills on the job, and if you’re an entrepreneur, there isn’t a larger organization from which to collect learnings.
You’ve got to seek out knowledge on your own. The common ways to acquire that knowledge is to sign up for a business class related to your industry or occupation, and to read business books like John Doerr’s Measure What Matters.
Your level of business acumen will determine the kind of education to pursue. If you’re just developing the skill, it’s good to look into classes or books that provide general business management guidance.
If you’re past that point, you can focus on education related to your specific industry, or target particular skills that require more growth.
Tips for seeking education:
Here are some ideas to get you started down the path of acquiring business acumen through education.
- Stay informed: An easy way to build up knowledge important to business acumen is to pay attention to business news, especially for events that occur within your industry. This allows you to stay updated on happenings that can affect your business, and learn from how other companies navigate the same challenges as your company. You can also sign up for industry newsletters or visit industry websites to stay up to date.
- Follow business leaders: Another way to grow your business knowledge is to follow prominent business leaders in your industry. Find their blogs or follow them on social media to read up on their insights and learn from their thought processes.
4. Listen to customers
The last item on this list is the most important. Find out from your customers what motivates them to buy from your business. You want to understand their challenges so that you can assess how your company’s offerings provide a solution.
The more you learn about your customers, the better you can identify the path for your company to deliver compelling products and services.
This is key to advancing business acumen since you’re gaining insight into the most important stakeholder, and it helps with all other business acumen skills such as focusing on the items that matter most to your customers.
For instance, Steve Jobs focused obsessively on the customer experience for each of the technology products produced by his company, Apple. By knowing what makes a great solution for his customers, Jobs was able to deliver iconic products like the Mac, iPod, and iPhone.
Tips for listening to customers:
When it comes to collecting insights from customers, there are two ways to go. I recommend doing both.
- Qualitative research: Talk directly to your customers to gain their perspective on your business offerings. There are a couple of challenges with this approach. You have to talk to a fair number of customers to collect a significant sample size. Also, customers provide feedback that is relevant to their current situation and whatever’s top of mind. These two factors can skew the results of your research, so you’ll want to layer this approach with quantitative research.
- Quantitative research: Collect data about your customers. One of the best ways to do that is by using CRM software. Data has two advantages that offset the disadvantages of qualitative research. It provides you with a wider customer sample set, and it’s unbiased. If a customer tells you they don’t like a particular product but your data shows it’s a top seller, then you know the customer you spoke to isn’t representative of the majority, and so, you need to talk to others.
A final word about business acumen
Developing your business acumen takes time, but as soon as you start down the path of building it up, you can immediately start to apply your knowledge. Over time you’ll be a master of key business concepts like pricing strategies and business development.
You’ll know you’re on the right track when your decision-making is faster, you’re able to pivot effectively when things don’t go according to plan, and the results of your decisions are frequently spot-on.
So tackle your personal development with the goal of building a disciplined, consistent approach to analyzing business problems and making informed decisions, and you’ll gain strong business acumen.