WHAT IS BUSINESS ACUMEN?
By Kevin Cope
BUSINESS ACUMEN DEFINITION
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Business acumen is keen, fundamental, street-smart insight into how your business operates and how it makes money and sustains profitable growth, now and in the future.
HAVE YOU EVER FOUND YOURSELF IN ONE OF THESE SITUATIONS?​
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You’re talking with a senior leader of your company and wish you could say something really insightful to show your knowledge of the business, but your brain goes numb and you can’t come up with anything meaningful.
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You’re attending a meeting with managers or financial types and as they start reviewing financial statements, you get lost. You hope no one discovers the smile on your face or the nod of your head hides the gap in your knowledge. You can’t see what the numbers have to do with what you have to get done today or this week.
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Your CEO wants everyone to work harder to meet the company’s overall financial objectives. Your manager asks for ideas from the team, but you’re struggling to see how improving your job performance will impact the company’s revenue or stock price.
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You’ve got a great idea for a weekend business that you and a friend or your spouse could start up to bring in some extra money, but you don’t know how much money you would need to get started or how to handle financial matters once you do. You just don’t want to be like all those other start-ups that flop.
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If you’ve experienced moments like these, you certainly are not alone. In fact, you’re a member of a fairly large group—businesspeople who struggle to understand how the moving parts of a company work together to make it successful and how financial metrics like profit margin, cash flow, and stock price reflect how well each of those moving parts is doing its job.
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The solution to your confusion is developing your business acumen — your ability to see the big picture.
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DEFINING BUSINESS ACUMEN WITHIN YOUR CAREER
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Years ago a colleague of mine was consulting with a group of senior NASA managers at Cape
Canaveral. He tried to explain, in simple terms, an organizational change strategy. The managers seemed confused. In an effort to clarify, he said, “Please don’t make this more complicated than it is. It’s not rocket science.” To which they sincerely answered, “We wish it were. We’d understand it better!”
Many people, even those with jobs that others think of as incredibly complex, view their business much like rocket science: a lot of complexity, hard-to-understand data and formulas, communications in a language that barely resembles English. Yet most of them wish they could more clearly understand the business of their business and how to help their companies perform better. What they are wishing for is business acumen.
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Business acumen is keen, fundamental, street-smart insight into how your business operates and how it makes money and sustains profitable growth, now and in the future.
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In 2002, after ten years as an executive with FranklinCovey, consulting with and teaching for dozens of organizational clients, I founded my own training and consulting firm, Acumen Learning. We created and began delivering the Building Business Acumen® seminar. Over the last ten years, we have expanded and deepened the initial course. Our focus became the practical application of business acumen training to help people—at all levels, in any company, in any industry—become more effective in their current jobs and more successful in their future careers.
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After working with more than one hundred thousand participants in more than thirty countries, including many clients in the Fortune 500 and eighteen of the Fortune 50, the primary lesson we’ve learned is that businesspeople want to become more effective and valuable, to secure their seat at the table and influence decisions, to impact company performance. They want to use their full potential to help their business make money and sustain profitable growth.
LEARN MORE ABOUT BUSINESS ACUMEN
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If employees don’t know how their companies make money (and research suggests that most don't), how can they be trusted to set the right priorities and implement the right initiatives? They can’t! New York Times best-selling authors Kevin Cope and Stephen M. R. Covey founded the world’s leading business acumen training organization, Acumen Learning, to teach professionals about the business of their businesses. Since 2002, more than 500,000 business leaders in more than 35 countries and 23 of the Fortune 50 have counted on Acumen Learning to drive their business results through customized trainings.
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SEEING THE BIG PICTURE: BUSINESS ACUMEN TO BUILD YOUR CREDIBILITY, CAREER, AND COMPANY
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Robert was an excellent call center supervisor… or so he thought. He was dedicated to saving the company money because he was worried that they would outsource the call center to an overseas operation. He rarely recommended employees for recognition or raises. If his team presented ideas about new software or equipment that could improve productivity, he would listen but never take them to management for consideration. And he constantly harped on the importance of getting through calls as quickly as possible and up-selling customers as much as possible. He was fanatical about doing his job well.
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Robert didn’t realize that his narrow focus on cost control and “doing his job well” ignored the big picture of how his company made money and sustained profitability. He wasn’t connecting the dots between his efforts, customer relations, and future sales revenue. Or the huge cost of employee turnover the company was incurring every time one of his employees left to go somewhere with better pay and a stronger focus on serving customers. He failed to consider the impact he had on efficiency, profits, and morale by refusing to raise his team’s ideas with management.
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Ultimately, Robert was viewed by senior management as “a serviceable supervisor in need of development; not likely management material.” While he wasn’t let go, his performance reviews were never stellar and he could tell that he was being sidelined, but he didn’t understand why. Robert missed out on seeing the big picture of his main job: to contribute to building a company experiencing long-term, sustainable, profitable growth.
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So many of us fall into the same trap. Like Robert, over time, we tend to become more specialized and get very good at focusing on the specific parts of our jobs, so much so that we fail to see the big picture – how what we do fits into the overall picture of helping the company make money, achieve its strategic objectives, and be profitable.
Some of us decide to get degrees in management, hoping to get that big-picture perspective. But while management education provides excellent training in areas such as accounting, marketing, or finance, students can graduate without an overall knowledge of how a business runs successfully.
Their knowledge of the key drivers of business and how they work together can be fragmented, disjointed from the reality of daily operations. And as with Robert’s managers, many leaders assume that their teams have a much stronger grasp of the big picture of how their companies grow profitably—greater business acumen—than they actually do, so few take the time to do on-the-job training to deepen that knowledge.
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Do you think you’re better off than Robert? That you wouldn’t have made the same mistakes? Now’s your chance to prove it. Take the Big Picture Quick Quiz shown here. The questions were not picked at random; they are the result of research and interviews with hundreds of executives and CEOs from dozens of different industries. They reflect the areas of performance that senior leaders have on their minds and want employees to have on theirs.
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BIG PICTURE QUIZ
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We’ve administered the Big Picture Quick Quiz to over sixty thousand people. On average, people
know the answer to fewer than two of the questions.
These questions focus on the overall business, not the operations of your department or division. I suspect that you might be more familiar with some of the performance measures for your immediate team. But your senior management team wants the entire business to be profitable, not just a single unit. They want all employees to understand and better contribute to how the entire company makes money.
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The problem is that while we understand our jobs, the big picture seems too complex to grasp. Complexity is an underlying challenge in any business, regardless of size, industry, or stage of development. Large companies, especially, have many moving parts—departments and divisions (always reorganizing), product lines (always changing), layers of management, competitive realities, unclear decision-making processes, regulatory pressure, shifting budgets, new strategies. A small problem within any single element might produce a ripple effect throughout the organization, requiring major repairs. But without knowing the true source of the difficulty (which is not always readily identifiable), we might “fix” the wrong thing as we tinker with the business.
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Developing business acumen helps us cut through this complexity, get a bird’s eye view of a business, and understand our specialized roles within it. Simplifying complexity and broadening our understanding of the business enables us to fix present problems, prevent new ones, and take advantage of opportunities to grow.
How do we simplify the complex? By looking at the key drivers that make all the parts of a business run.
The 5 Key Drivers of Any Business
When you break down even the largest, most complex multinational company—like Walmart, Apple, Toyota, or Boeing—into its most fundamental elements, you’ll find the same drivers that power your business, or any business. What are those drivers?
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Cash
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Profit
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Assets
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Growth
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People
How did we distill it down to these five? We we used the core financial statements—the statement of cash flows (cash), the income statement (profit), and the balance sheet (assets)—as the foundation. These are the statements every company uses to judge its current strength and its future prospects. The fourth driver, growth, is reflected in all of these statements and for public companies is an important objective for shareholders. And the fifth driver is quite simple: Without good employees providing value to paying customers, the other four drivers cease to exist.
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The 5 Key Drivers will help you understand and visualize how even the most complicated business can be analyzed and improved. Like the 26 characters of the English alphabet, the 5 Key Drivers combine in a multitude of ways to form the foundation of organization, products, market position, financing, human resources, and every other strategy or decision in a company. Leaders must set and achieve goals and obtain results in these five areas in order to achieve the most important objective for any company: long-term, sustainable profitability to support its mission.
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You’ve probably heard of these essential elements, but you may not really understand their full importance and interdependence in creating success. While each driver is unique, it is also completely dependent on all of the other drivers. You cannot affect one without influencing the performance of another. Leaders have to take the connections between the drivers into account as they make their decisions, or they risk becoming overly focused on one driver and running an idea into the ground.
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Your ability to understand these relationships and affect these drivers through your decisions and actions can increase your own ability to contribute to the long-term profitability and growth of your company.
LEARN MORE ABOUT BUSINESS ACUMEN TRAINING FOR YOUR CAREER
If you want to be more visible and valued, demonstrate that you understand how your department or unit fits into the big picture of the overall business.
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If you want to influence the thinking and decisions of your supervisor or manager, address the topics that senior leaders, including your boss, are concerned about. Communicate your ideas and proposals in language that he or she understands. If you want to be seen as a major contributor, show that you understand the relationships among the key drivers of your overall business—not just how your department works.
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If you want to be a more effective leader, better able to engage your team, link your team’s actions
with the overall needs and strategic goals of the company.
Keep in mind, even your managers might not be as knowledgeable in some of these areas as you think. While they may be functionally brilliant, they may not see the big picture. But I encourage you to ask questions and be willing to act on the answers. You’ll be recognized as a contributor, somebody who demonstrates business acumen through savvy questions and effective actions.
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If you are an individual looking to build your business acumen, check out our best selling book and interactive online learning course. If you are interested company-wide training, check out our customized business acumen training programs.
