If you were a fly on the wall at a meeting and listening to the CEO and CFO voice concerns to the CHRO, you might hear something like this: “Our people need to be more commercially aware;” “Our people need better commercial acumen;” “Why don’t our people think more commercially?”
But what does this mean, exactly? What is commercial awareness? And what does commercial acumen look like in our organization?
With all due respect to the CEO and CFO, I am sure that most individuals think of themselves as already having good commercial acumen. And this gap shows the disconnect between business leaders and individuals. And that chasm never seems to close; it just gets deeper.
The textbook gets us fairly close when it says that good business acumen is understanding how an organization works in order to recognize opportunities and make good decisions. You can demonstrate this skill with evidence of: market awareness, understanding the needs of individuals, business, and the community in relation to a particular sector or product.
But you will see it’s personal. It can’t be generalized. It varies from one organization to another. It is an essential part of any successful business’s DNA, but its personal, and the depth and breadth of commercial acumen within the work force possibly represents the competitive position of any organisation.
Let’s take two businesses, Traditional Company and Ambitious Company. Both are large, global players, and along with three others, they dominate the global market. Traditional Company is perceived as old fashioned, risk adverse, and has been performing poorly. On the other hand, Ambitious Company is seen as innovative, progressive, and has made bold commercial decisions such as being the first to move into selling products online through a variety of distribution channels. It is currently outperforming its rivals.
Leaders of Ambitious Company are recognized in the industry for their astute business decisions. They are generally accepted to be at the forefront of new ideas and innovation in the industry. Their business leaders and the wider employee population are recognized as having strong commercial acumen. Managers in the business are now being headhunted by competitors, presumably for the poachers to try to capture some of their magical skills.
If we look at the culture of these two businesses, they are very different. While Traditional Company is perceived as a “good place to work,” it is very risk adverse. A deeper dive into the business reveals that that the business has a rigid hierarchy and a ponderous and tightly confined decision-making framework which means potential new initiatives may be stifled by process. Managers often feel it is pointless bringing new ideas to the board as invariably they will be rejected. Instead, they are encouraged to concentrate on the core business and to continually improve its success. Even simple day-to-day decisions (such as supplier negotiations) require sign off by the next management tier, slowing down progress.
Can a business change its culture and awaken the intrapreneurial spirit in its people?
On the other hand, Ambitious Company has a much flatter management structure. Managers talk about “being intrapreneurial” and are encouraged to take measured risks. In fact, it is seen as career advancement if a manager is seconded to the innovation hub for a period. There is an open culture where failure isn’t seen as negative, but rather is openly discussed in order to capture the learnings. Managers have autonomy over their business units so that decision-making is rapid and effective. Everyone, regardless of seniority or role, is encouraged to understand the market, the numbers, the products, and the organizational landscape—learning on the job, on their own and through mentoring and structured development programs.
The fact that these two businesses have such differing cultures isn’t unexpected and could almost be inferred from their different business models. But if commercial acumen could be measured, then the “scores” would be very, very different.
Traditional Company managers may feel as if they can’t take risks or adopt an intrapreneurial style in case things do go wrong. Hand in hand, the workforce probably lacks confidence due to individuals limiting their commercial acumen to “business-as-usual” decisions and not thinking about the bigger picture or longer-term success in the broadest commercial environment. Ultimately, this will lead to commercial sloth and missed opportunities as rivals like Ambitious Company have both the people with an intrapreneurial mindset and culture to allow it to flourish.
Recent years have shown us what can happen when there is a lack of creative culture and associated commercial awareness is weak. One only need think of the causes of many of these failures to see there is no room for complacency, after all no business wants to have a “Kodak Moment.”
So what if Traditional Company decides it would like to become more like Ambitious Company? Is this possible? Can a business change its culture and awaken the intrapreneurial spirit in its people?
Of course, a move like this will require a change transformation program and will have to start from the top. Flatter structures will need to be put in place, there will need to be changes in authority levels, and new decision-making frameworks will need to be implemented. They may even wish to consider setting up innovation hubs. But all of this is just infrastructure; it needs to be brought alive.
The first step in breathing commercial life into a company begins with the organization defining what commercial acumen means to them—determining what the drivers of commercial success for the business as a whole are before assigning work to individual business units. Once the definition and drivers have been agreed upon, scenarios can be written and a digital tool can be built using a confidence base diagnostic framework. The organization can then identify:
- Which employees understand, do not understand, and misunderstand?
- How confident are employees in what they think they understand?
- Which employees will apply what is commercially right by the business’s definition?
- Which of the employees will apply what is commercially wrong by the business’s definition?
At this point, individuals, teams, business units and functions can be benchmarked and heat maps created that will allow you to diagnose the hot spots that need attention. Learning experts can help to identify what is lacking and what needs to be developed in order to move the middle.