- Business acumen is important to have across individuals at all levels of an organization to drive successful strategy execution.
- Business acumen can be built upon by having a deep understanding of yourself, your organization, and leveraging business resources around you.
- The key to having strong business acumen is being curious about your organization and interested in learning from all different aspects of it.
- There are many skills required for strong business acumen including hard skills like financial knowledge and soft skills like leadership capabilities.
As a common buzzword in the corporate world, business acumen often comes up when thinking of must-have skills in the workplace. This is because it is one of the most important capabilities to possess. Business acumen is a key driver of success in every aspect of an organization, from strategic decision-making to hiring new employees.
In this article, you’ll learn what exactly business acumen is, why it’s so important, how you can become proficient in it, and the specific skills you’ll need in order to grow.
What is business acumen?
Business acumen is defined as having a fundamental understanding of how a business operates, then using that knowledge effectively to make logical business decisions. Business acumen is a portfolio of knowledge, technical skills, and soft skills, used to positively impact an organization and its employees.
Having strong business acumen can help you answer these fundamental questions regarding your organization:
- How does your organization make a profit?
- What are your organization’s goals and objectives (and how will they be achieved)?
- How does your organization deliver shareholder value?
- How do all the various functions within your organization work (both individually and together)?
Why is business acumen so important to have?
Whether you are a new entrepreneur, an executive-level manager, or a summer intern, having business acumen affects your performance directly. Solid business acumen is the foundation of any organization – it is necessary to build strong teams, navigate problems, and execute strategies.
Moreover, business leaders also want employees to understand the various dimensions of an organization. This is so they can better inform decision-making, especially when it comes to strategy. Thus, it is important to have so that you can contribute to the goals of the organization and guide your career trajectory within one.
Organizations with people who have strong business acumen are more likely to be industry leaders in terms of growth, profitability, and market share. A study done by the Economist Intelligence Unit reported that 65% of leaders believed a lack of business acumen limited their organization’s ability to successfully reach strategic goals. This emphasizes just how important business acumen is to the well-being of an organization. Further, with a constantly changing business world, people at all levels need to comprehend, value, and contribute to situations that impact a firm’s operations.
3 Reasons why you might lack business acumen
If you feel that you lack business acumen, don’t worry. There are simple changes in your mindset that you can implement to put yourself on the right path. Here are three key mistakes to avoid in your learning journey that can hinder your learning of business acumen.
1. Not having an interest in the business (or in business at all)
In order to want to learn, you have to be interested in what you’re learning. Thus, if you don’t have an interest in your business, your customers, or your industry, this can affect your development of business acumen.
Combat this by making learning fun. Try to think about some aspects of your organization – or any organization – that interest you and start there. Your learning does not necessarily need to start with what’s happening in your function, as many aspects of an organization are interrelated. You may be pleasantly surprised at what exciting things you discover that can apply to your own role.
2. Lacking curiosity
Building on the last point, you must be curious as an individual and an employee. The more curious you are, the better your results will be, whether that be in learning processes or in problem-solving. Being curious is the first step in innovation.
3. Only focusing on your role within an organization
When you are only focused on your role, you will miss seeing the bigger picture of your organization as a whole. By learning more about all the functions in your company, you build stronger business acumen.
You can easily change this by implementing small things into your daily routine. For example, ask a peer in a different function out to coffee to learn about their role or sit in on a town hall you wouldn’t normally go to.
Overall, addressing these mistakes will allow you to better develop business acumen and succeed in your role.
How can you become proficient in business acumen?
Building business acumen is not a task that has a clear start and finish – it is a never-ending learning process. However, the following steps will help guide you and your organization down the right path.
1. Have a thorough understanding of yourself and how you think
To begin, you must first examine your own personality and tendencies, in and out of the workplace. As building business acumen is based on strong thinking and analytical skills, it is crucial to understand your own abilities when it comes to these capabilities.
By first examining your personality, you will learn how you best learn or behave in certain situations. Here are some popular personality tests you can take to get started:
Myers-Briggs Type Indicator (MBTI): The MBTI is designed to identify your personality type, strengths, and preferences. These are examined along the four categories of introversion/extraversion, sensing/intuition, thinking/feeling, and judging/perceiving.
DiSC Assessment: The DiSC assessment is designed to measure your personality and behaviour style, outlining how tend you react to certain scenarios.
In addition to taking personality tests, think about your past and current experiences. Ask yourself questions such as:
- How would you tackle a tough problem?
- How do you stay organized?
- What are your working habits?
Reflecting upon these questions (and others) will help further your understanding of your own tendencies and what they mean.
Once you have a firm grasp of your thinking patterns, you will be able to assess your own strengths and behaviours, using them to your advantage to better inform your decision-making processes.
2. Cultivate a deeper understanding of your organization’s business model
Next, it is important to examine your organization’s business model thoroughly. The four key areas to understand are the:
- Organizational strategy and execution
- Financial acumen
- Marketing concepts, tools, and skills
- Operations (i.e., supply chain, manufacturing, and people)
To do so, start by ensuring you have a high-level understanding of your organization. Think about what value your organization brings to stakeholders and how it does so. This will serve as a foundation that you can build upon. Then, you can start diving deeper into the different functions.
Next, it’s crucial to familiarize yourself with unfamiliar areas. For example, if you work in accounting, you can talk to your colleagues in marketing and see what’s happening in the organization from their perspective. From a managerial standpoint, you can encourage this by ensuring effective communication across functions so employees can stay informed. You can also encourage this by having cross-training opportunities that employees can take part in. With cross-training, employees get first-hand knowledge of different roles within the organization.
Further, understanding your business model can be informed by understanding the greater industry your organization is in. You can do this by staying informed with news in the industry, with your organization’s competitors, and with prominent business leaders in the industry. Resources for this include business magazines such as Forbes or Business Insider as well as news from competitors you can find online.
Stay tuned to what your customers are saying as well – What do they think of your organization? What trends are they following? Being in tune with your customers will help you see how your organization brings value to them.
By staying up to date on these areas, you’ll no doubt have a deeper understanding of how and where your organization fits.
3. Leverage the resources around you
As mentioned before, building business acumen is a continuous learning process. Thus, leveraging all of the resources surrounding you is beneficial to your journey.
Books are a fantastic business resource as you can learn from many different perspectives and reinforce your understanding. They can help build a solid foundation of business fundamentals that will help you in the workplace while introducing you to new ideas. Here are a few recommendations to get you started:
- Seeing the Big Picture: Business Acumen to Build Your Credibility, Career, and Company by Kevin Cope
- What The CEO Wants You to Know: How Your Company Really Works by Ram Charan
- Traction: Get a Grip on Your Business by Gino Wickman
- The Great Game of Business: The Only Sensible Way to Run a Company by Jack Stack (Read our synopsis here!)
- The Hard Things About Hard Things: Building a Business When There Are No Easy Answers by Ben Horowitz
Magazines such as Business Insider, Forbes, and Entrepreneur are great resources as well, especially for staying on top of industry news. Additionally, check out courses on learning websites like Udemy and LinkedIn Learning for lessons on specific topics you want to know more about.
Networking and mentorship
And lastly, one of the best resources for you may be to learn from others, either through networking or from a business mentor.
Attending events within your industry or even just within your company will allow you to meet new people that can offer you new insights to inform your business acumen.
When it comes to mentorship, identify someone within your company or industry whom you admire and use them as a resource. Ask them about their role, how they got there, how they fit into the company’s strategy, and other questions to support your learning journey.
11 core skills you need to build your business acumen.
Now that you know what you should and should not do, the next step is understanding that business acumen is not a single skill, but rather a combination of several different hard and soft skills.
Let’s take a look at some of the specific skills that are necessary to develop business acumen. Depending on your role and how intensive of a business acumen you want to have, the order of these skills may vary.
1. Soft skills
The most important and often overlooked skills that increase your business acumen are soft skills! Managers get paid more than employees and the number one way to increase your odds of getting promoted is to improve your soft skills. These include character traits and interpersonal skills that affect your relationships with others in the workplace. Leadership skills, problem-solving, and communication are all-important soft skills to have.
At Professional Leadership Institute, we specialize in helping people master leadership skills in the workplace. Start improving your soft skills today for free with our Personal Annual Plan course. Having a good plan is the first step in your leadership journey to improve your business acumen.
2. Hard skills
Hard skills can be learned through various resources, such as books or mentors. These are skills that have practical applications and can be demonstrated in a measured way. Important ones in this category as it pertains to business acumen are financial skills, strategic planning, analytical skills, and marketing skills.
3. Financial Skills
At the core of any organization is the ability to generate profit, which is why financial acumen is essential to have. You must possess the ability to understand the basics of what drives cash in and out of your organization. You should also understand the financial effects of certain business actions and subsequently, how to make decisions that maximize profits and decrease losses.
In particular, the following technical skills will help you build your financial comprehension of any organization:
- Basic financial report analysis
- Basic financial statement analysis
- Financial modelling
- Understanding key financial performance metrics (i.e., gross profit margin and EBITDA)
- Preparing and implementing a budget
4. Strategic Planning and Prioritization
Strategic thinking is the ability to solve complex problems using critical thinking skills. You’ll want to be able to understand your current resources to develop an action plan for the future. Practical examples include knowing the different planning frameworks or analytical models required to ideate new solutions. These skills are necessary to the strategic planning and prioritization of an organization, and thus necessary to understand your business on a deeper level.
5. Analytical Skills
Data is important in any organization. Whether it is looking at sales forecasts or customer consumption habits, data analysis skills will be crucial in any role. These are some analytical skills that will be useful to add to your proficiency:
- Gathering, collecting, and analyzing data
- Technical analysis (i.e., Excel functions)
- Attention to detail
6. Marketing Skills
Lastly, for a strong basis of hard skills, marketing is key. Marketing skills encompass the ability to analyze a target audience to best pivot your products and services towards them. In addition to understanding the fundamentals of marketing, knowing the following concepts can better inform decision making and learning:
- Search engine optimization
- Various content marketing formats
- Marketing channels
- Email marketing
- Technology skills
7. Interpersonal Skills
Interpersonal skills are crucial for communicating and working with groups. This skill is necessary as being a part of or running an organization involves understanding how to work with others. Read more about interpersonal skills in our article here. A great example of an interpersonal skill is empathy. It may seem like empathy isn’t a business skill—but actually, it really is! Being empathetic will help you understand business decisions from other people’s perspectives—and understand business situations as a whole. A great way to increase your empathy is by understanding the different personality types that exist and how to get the most out of them.
In this course you will learn how to:
- Understand how your brain works
- Communicate effectively with other people based on their personality style and place them in roles that take advantage of their strengths
- Understand the foundational principles of the DISC personality assessment and the 4 dimensions of personality
- Identify how much of each personality dimension you have in your psychological make-up
It’s not just managers who need leadership skills, they are beneficial to employees of all levels. Strong leadership skills allow you to work effectively with others in a business setting, creating a strong workplace environment. Some examples of good leadership skills include:
- Time management
- Ability to delegate
- Strong integrity
- Conflict resolution
(You can read more about what makes a great leader by checking out our article ‘The Character Traits That Make a Great Leader’.)
To develop these leadership skills, take initiative and think about different tasks or projects you can tackle that will allow you to practice these traits.
We’ve talked about problem-solving and decision-making a lot in this article because they are the core of strong business acumen. Having the ability to make sound decisions about problems goes a long way. Developing problem-solving skills is all about your experience – think about difficult situations you’ve encountered in the past and the learnings you can take away for the future.
10. Creative thinking
Creativity is a valuable skill as it is what drives new ideas, increasing efficiency, and coming up with solutions to complicated problems. This skill can be learned and developed over time, by doing several things that help you think differently about certain situations. Examples of ways to foster creativity include asking questions, networking with new people, taking on tasks you wouldn’t normally take on, and experimenting with different ideas.
Good communication skills are beneficial in any situation and building business acumen is no outlier. These are the abilities that help you retrieve and provide information in any setting. Communication skills can be verbal, nonverbal, and visual, encompassing the ability to listen, speak, observe, empathize, read, and write.
Here are some tips for developing strong communication skills:
- Actively listen to those around you – listening is just as important as speaking when it comes to effective communication
- Make note of non-verbal cues such as body language and facial expression in professional settings
- When it comes to public speaking or writing, practice is key
- Ask your peers for feedback or advice