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What drives profitability for your company? What metrics are top-of-mind for your company leaders? What is going to make or break the success of this quarter for your team or department? How does your manager set priorities?
Depending on the type of work you do, you might not know all the answers. But maybe these questions ring a bell.
For instance, maybe you remember hearing something similar at an all-hands meeting. Or maybe you’ve never even thought about them.
The answers to these questions are examples of business acumen. And anyone who wants to be a leader in an organization has to get comfortable with these types of concerns.
Let’s explore what business acumen really means, what skills are required to have it, and how you can begin to develop business acumen today.
What is business acumen, and why is it important?
Business acumen is someone’s ability to understand business issues. It is the collection of both general and organization-specific knowledge about how things get done and why. It is a key characteristic for leadership and shows up in the questions someone asks and the decisions they make.
However, business acumen isn’t just understanding business issues in general. It also involves understanding your particular business and making decisions that create a positive impact in your organization.
Having business acumen will improve your business instincts. When you’re empowered to make decisions or experiment with different approaches, business acumen allows you to guide your team to where they can have the most impact. You help them focus on the things that matter most for the company.
When a company’s business acumen is improved, everyone in the organization receives the benefits.
People tend to think of business acumen as a desirable attribute in employees who are more technically aligned, or with a specialized skill set. For example, a software engineer with business acumen has different opportunities than one who lacks an understanding of the business, even if they possess similar technical skills.
Business acumen typically addresses questions such as:
- How does your organization make a profit?
- What drives the decisions behind the business strategy?
- How do companies budget and plan?
- Which of your potential projects is most likely to be a priority beyond your department?
- How do you garner buy-in?
Developing business acumen can help give you the knowledge you need to have a long and successful career.
Having this knowledge is even more important when companies are:
- Becoming more agile
- Utilizing distributed leadership
- Making crucial decisions
- Experimenting and taking risks to gain useful information
At a bare minimum, a team leader should have some business acumen. Otherwise, it is unlikely employees will feel empowered. Without acumen, a leader doesn’t have the necessary tools to help move the organization forward in a good direction.
Business acumen is currently in high demand. According to a study by Cisco, 93% of IT and business executives have a talent gap that prevents business transformation. 42% say business acumen is their biggest skill gap. No other skill gap reaches those numbers.
Business acumen skills
What skills can help leaders build business acumen?
It’s more than just business knowledge. Here are eight skills that contribute to someone’s business acumen.
1. Strategic thinking and problem-solving
Coming up with effective plans designed to reach company goals is a key component of business acumen. Strategic planning and problem-solving contribute to this ability.
You also need to know how to prioritize according to a variety of situations. Not all priorities will be the same at all times. Leaders need to use their strategic thinking to figure it out on the go.
They must also be able to adapt and solve problems creatively. Adapting to change is necessary for an organization to thrive in any market. Previous solutions may not always get a team the same results. But someone with business acumen can think on their feet.
Someone with business acumen should also possess strong leadership skills and characteristics. They can inspire others to meet the needs of the organization.
A capable leader can prioritize and adapt those priorities to keep the focus on what matters most, even amid change.
3. Comfort with the numbers
It’s important to understand processes and financial metrics like budgeting, forecasting, profit and loss, and reporting, just to name a few. Being comfortable with these numbers helps someone take the pulse of an organization.
It’s also important to know the basics of reading a P&L, balance sheet, and cash flow statement.
Other important number factors to know about include:
- How a company drives its cash flow
- The basics of operations in your company and which parts are the biggest levers of performance and growth
- What is unique about your operations
- What affects the bottom line
4. Communication and influence
Communication is a crucial skill that makes up business acumen. It’s important to know how to communicate effectively with others to help everyone function more effectively.
Someone with business acumen also understands what matters to different audiences and stakeholders. They know how to communicate a compelling vision and explain the why behind it.
These communication skills can be used to develop relationships in your project or team to create better outcomes.
Someone with business savvy knows their target audience. But they should also understand how to discover who that target audience is.
They also know how to come up with key marketing angles to attract that audience. In addition, they need to know KPIs to track and measure growth.
This doesn’t mean you need to be a marketing expert to have business acumen. But having a grasp on the basics is part of building acumen skills.
6. Analytical capabilities
Analytical capabilities are key to business acumen. These can include:
- Collecting and analyzing information
- Connecting the dots between data points
- Understand a problem from different angles
- Understanding what information is rare and valuable and the limitations of what is available
7. Understanding the market
Understanding your market is not the same as having marketing skills.
It involves understanding the industry you work in and what the marketplace looks like. For instance, someone who understands the market knows how to do a competitive analysis, how to track and follow industry trends, and ultimately how to pivot when the market demands.
8. Context and situational awareness
Someone with business acumen knows how their actions affect the organization they work for in a variety of situations. They have the emotional intelligence to understand how team members feel about a given situation and are equipped to handle it accordingly.
This is a form of self-awareness. It’s difficult to understand how your actions affect an organization without any self-awareness to begin with.
How to develop business acumen
Because business acumen is in high demand in the workforce, people who have it can make a big difference for their organization.
Here is how someone in your organization can develop business acumen and become an asset for their team and the company at large.
1. Dig into the financial side of the business
It’s important to become financially literate in the business sense. But this doesn’t happen on its own.
Even someone who is naturally good with numbers won’t automatically understand a company’s financial side without digging into it.
Some examples of how someone can improve their financial literacy in an organization include:
- Tracking important metrics over time
- Getting insight from business intelligence data
- Looking at financial statements
- Asking for help if there are metrics you don’t understand
2. Get a mentor
Anyone who wants to grow their skills in a given industry should find someone willing to mentor them.
This person should have the strong business acumen skills you want to develop.
Mentors can provide a much-needed perspective that someone on their own cannot access. Their deeper knowledge and experience in the organization give them an advantage that they can pass on to their mentee. However, with reverse mentoring, the mentor is not always the senior member in this exchange. Young employees have a valuable perspective and set of experiences they can convey to their older peers.
3. Study the business model
Studying the company’s business model can help an employee learn about areas of business they don’t know much about yet.
It can also help them understand growth strategies used by the business.
For instance, how does the supply chain work? How does the company handle its human resource management?
Understanding the business model can help someone see the big picture.
4. Stay up to date with industry trends
Business acumen isn’t an evergreen skill. Anyone who wants to develop and upkeep business acumen should stay up to date with industry trends.
Some ways to do this include:
- Following business leaders on social media
- Subscribing to newsletters in your industry
- Keeping up with business news
If you want to build more business acumen, start doing your research and make a habit of it. Those who want to encourage others in their organization to develop business acumen can encourage them to develop this habit, as well.
5. Understand the customers
Anyone who wants to know more about a business should talk to customers when they can.
Talking directly to customers is the best way to get their perspective on the organization you work for. It’s also a great way to collect their feedback and improve business performance.
Study customer satisfaction with your organization’s Net Promoter Score (NPS) and Customer Satisfaction Score (CSAT). Customer data doesn’t give you the customer’s unique perspective, but it does provide the big picture of who the customers are.
6. Sign up for a business class
Taking a business class can be a more structured way to develop competencies that help improve business acumen.
Reading a quick overview book like The 10-Day MBA can also help people jumpstart the process of building business acumen.
Do you want to support business acumen development in your organization? Make sure to invest in professional development courses for your employees. When building business acumen, self-driven learning is key.
7. Become more comfortable taking calculated risks
Practicing business acumen requires taking risks. No risk means no reward.
It can feel uncomfortable at first to take risks. Encourage people in your organization to take smaller risks first if this scares them.
8. Learn how to fail
If you want to achieve success, you’ll have to encounter failure along the way.
Learn how to make “good failures.” Good failures aren’t based on sloppiness or failing to ask for help. Instead, they’re designed to help you and others learn as much as possible.
Learn how to pick yourself up after your failures. If you can learn from them and move on, you’re already steps ahead.
9. Invest in coaching
A coach can help people speed up the process of developing their business acumen.
Should someone get a coach if they already have a mentor? You can benefit from getting both.
Consider bringing in skilled coaches to help people in your organization build their business acumen, even if there’s already a healthy culture of mentorship.
How to showcase your business acumen skills
If you’re someone who’s developed business acumen skills over the years, how you showcase them matters almost just as much as how you use them. Showcasing your business acumen can help organizations understand your worth.
This is true whether you’re planning your career in the same organization or if you’re looking for opportunities elsewhere.
Include specific skills in your resume. For example, add analytical skills if you have them.
Give examples of how you’ve used those skills in the past to succeed in a previous position.
You should also be prepared to talk about business considerations (of your former employer and your prospective one) relative to the role you want. For example, if you’re trying to join a SaaS company as a marketer, be ready to talk about how content and demand might drive users.
Develop business acumen and become an asset to your organization
If you see yourself evolving as a leader in an organization, it’s crucial that you develop business acumen sooner rather than later.
But you don’t have to figure it out alone. Coaches at BetterUp can help you awaken your potential and become the leader with the necessary business acumen to make transformational decisions. Try out a custom demo to get started.