Recently, I was reflecting on the dissimilarities of working with MBA learners and employees brought together for a simulation activity as part of a wider development initiative in a $12bn firm. In many respects, there was much to favourably compare. On an individual level participants were committed, bright and capable. They attacked the activity with gusto and were unfailingly interrogative, both with respect to the technology and the underpinning concepts it sought to elucidate. Yet, the absence of context – the specifics of the organisation – make for two very different experiences. In an MBA there is the luxury of time removed from the structured bedlam of organisational life, albeit replaced by an assault course of assessments and reading which can be equally demanding. But any learning taking place within the auspices of a firm immediately demands an anchoring, a fundamental requirement that everything be considered in relation to the context of the company. This is as it should be. The wider application of concepts to multiple contexts in an MBA warrants an appreciation of the generalisability of much research work, whereas, the specificity of encountering concepts in the crucible of a particular market demands focus on their application.
In many respects, both sets of learners are expected to discern the same ultimate goal: the acquisition of (improved) business acumen. Before beginning to look at the term in more detail here are a couple of definitions:
Oxford defines acumen as: The ability to make good judgements and take quick decisions. From Latin, ‘sharpness, point’, from acuere ‘sharpen’.
The Financial Times defines it as: Business acumen is keenness and speed in understanding and deciding on a business situation.
Interestingly the FT goes into considerable depth regarding the use of business acumen in practice with a notable observation:
Business acumen is learned, not innate. A person develops business acumen through some combination of business experience and formal training. Such personal development requires an understanding and application of the management processes to ensure a disciplined and consistent approach to analysis and decision making.
Of course, from the standpoint of an educator I am bound to endorse the premise that business acumen is a learned phenomena. Yet that is not always how it is represented. And it has led me to the belief that not only is ‘business acumen’ as a phrase misunderstood, it also appears in contexts which completely confuse the currency of the term as I understand it. To the extent that I would now argue the term needs not only redefined, but also reclaimed. For it has come to be synonymous with a range of perspectives which are unhelpfully taken as one. Confused, and just as often misinterpreted.
Let me cover them here.
Functional Perspective
In many cases this is the most common of all perspectives. Business acumen training and development is largely concerned with introducing the main principles associated with different functional disciplines that individuals may not have explored previously. This encompasses programmes such as ‘Finance for Non-finance Managers’, introduction to marketing concepts such as segmentation or the four ‘P’s’, and economic principles of demand and supply curves, price elasticities and more. In each case the goal is to ensure the individual gains critical insight into the workings of the organisation and is therefore better placed to interact with colleagues in multi-functional teams.
Industry Perspective
In other cases business acumen is taken to mean a deep appreciation and understanding of the workings of a particular industry, the competitive behaviours which shape it and the trends which define both its history but also its present and near future. Here the emphasis is on data analytics and competitor analysis, typically.
Business Perspective
This can be contrasted with a focus on the business itself where it is the ability to demonstrate superior product and/or technical knowledge which is viewed as evidence of business acumen. In an applied sense it translates as the capacity to leverage core competence and identifying the unique value proposition which distinguishes a business from its rivals.
Behavioural Aspects
For others, business acumen refers to an intangible ability which can be decoupled from knowledge driven approaches which emphasise specific functions, industries or technical expertise. Instead, business acumen is described as an intuitive ability to make decisions which are superior and which variously demonstrate a capacity across functional disciplines, product knowledge and industry awareness. It is the ability to focus on the necessary, to eliminate valueless activity and interrogate data with precision. Where the manager is able to cope with ambiguity and display courage in their decision making. This perspective values the manager’s singularity above all.
Process Perspective
The final approach views business acumen from a process perspective rather than being content based. It highlights the managerial role as that of the individual who must link objectives and deliver on strategic objectives through the effective alignment of people, products and resources. Their skill in this domain is demonstrable by their ability to make the organisation function harmoniously.
These five approaches are distinct and each, undoubtedly, has their own value. Yet they fail in numerous ways to explain what managers actually require within their job roles. It is increasingly clear to me that these perspectives do not help managers fully understand how their organisations work, the culture which drives performance and defines how the company secures success in the marketplace. A fundamental principle of business acumen when applied to any business must include the capacity to identify how it operates on both a macro and micro level.
Moreover, even the totality of these perspectives neglect at least three vital components:
1. The need to understand how your own company works
2. The need to view creativity and innovation as inherent to this collective ideal
3. The need for empathy with customers
Let me expand. A functional approach can certainly help managers recognise the activities and pressures which influence the organisation at a functional level but this is distinct from grasping how exactly the company operates, how it captures value and leverages its capacities. There is a holistic, business model aspect to this which is frequently ignored where business acumen development is concerned. More obviously there is no room in any of these approaches for creativity or innovation, the ability to become a conduit for these value-based activities rather than just the source. And, finally, where is the customer in these approaches? It would no doubt be argued that they are present in all – most typically in the industry and business perspectives – but this usually translates as a conflation between the mechanics of the organisation’s activities versus a genuine customer orientation. Here business acumen is proxy for knowing what makes a business a success in a particular industry which presumes a detailed knowledge of customer needs. How else would anyone have been successful? Although there is some unavoidable truth in this statement you have to look for it. The reality is that it is not ‘front and centre’.
Business Acumen Redefined
A new approach to business acumen would encompass each of the three components which I’ve outlined. No doubt there will be sound arguments for others but I introduced the ones which seemed immediately pressing to me. Which leads to an alternative perspective on business acumen. A (hopefully) more dynamic and purposive explication of its true meaning, founded on three descriptive principles from which the concept can be progressed.
In my view, business acumen develops individuals who are:
1. Master Curators: the organisers of accumulated knowledge across numerous distinct yet inter-related fields; they are collectors, inquisitive, dynamic, perceptive and knowledgeable.
2. Active Practitioners: business acumen is only ever acknowledged by action; intervention and subsequent outcomes define the level of acumen any individual displays; they make active use of the material they curate.
3. Social Collaborators: marshalling expertise in a business context is fundamentally linked to behaviours in groups, either formal or informal, and equally as participants or leaders; creating and nurturing networks is their hallmark.
These qualities need exploration and, as with the majority of work in any discipline, we stand on the shoulders of those who have brought us to this point. To paraphrase Sugata Mitra, it is not that the concept of business acumen is broken, just that it is no longer needed in its current form. It is time for it to evolve.
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