Commercial Awareness and Business Acumen: The Most Definitive Guide

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Building Commercial Awareness and Business Acumen

Commercial Awareness also referred to as Business Acumen is your ability to take a ‘big picture’ view of your business, to weigh up situations quickly, make logical, sound decisions confidently, and influence others to agree with you in order to have a positive impact towards achieving the objectives of the organisation.

Consider the following case where Natalie’s commercial awareness lands her a big promotion:

Natalie wins the promotion

Natalie is a successful HR manager, and she has just applied to become Head of Department. There are many competitors for the open position, but Natalie manages to impress the board during her interview.

She demonstrates an in-depth understanding of how the organization works, and she outlines how HR can help strengthen their market position. She explains how she’s negotiated with recruitment agencies to bring their fees down from 12 percent to 9 percent, and how she plans to keep the rates competitive.

She also outlines several important trends that she has noticed in competitors’ hiring practices, and she details her plan to take advantage of this information, so that the organization can recruit top talent.

These insights are news to the board. But they also show that Natalie is focused on the bottom line, that she cares about the organization, and that she’s interested in how the HR department can improve the company as a whole and strengthen its Employee Value Proposition.

Natalie wins the promotion because she has demonstrated commercial awareness also called business acumen in this context.

She saved money where she sensibly could, she knew what was happening with competitors and within the wider industry, and she used this information to help her organization succeed.

Commercial awareness, or business acumen, can make an enormous difference in your career, whether you’re just starting out or you’re an experienced professional. With it, you’ll make sensible, well-informed decisions. Without it, your decisions will be naïve, and people will quickly lose confidence in you.

In this article, we’ll discuss what commercial awareness is, and look at how you can build commercial awareness and business acumen to fast-track your career.

Defining Commercial Awareness and Business Acumen?

The Cambridge Business English Dictionary defines commercial awareness as, “the knowledge of how businesses make money, what customers want, and what problems there are in a particular area of business.”

In other words, commercial awareness or business acumen is an understanding of what your company needs to do to be profitable, be successful, and serve its customers well.

With strong commercial awareness and sharp business acumen , you know your organization’s core values, biggest competitors, key stakeholders, and current business challenges.

You also know the organization’s strengths and weaknesses, and you can apply that information to make sensible decisions.

The Importance of Strong Commercial Awareness and Sharp Business Acumen

Many companies see commercial awareness and business acumen as a key requirement in potential recruits, especially in higher management and leadership roles.

People who take the time to understand how the organization operates and makes a profit – as well as how the industry as a whole works – are the sort of people who then demonstrate a high level of motivation, interest, and focus on the bottom line.

This awareness helps new hires “hit the ground running” and make informed decisions, right from the start.

Commercial awareness and business acumen can also improve your performance in your current role.

When you understand the industry that you work in, and know how your role helps your organization compete, you make better decisions, manage risks more effectively, get good prices from suppliers, strengthen your reputation as an expert, and increase your chances of promotion. Also, you’re more capable of meeting your clients’ needs.

No matter what role or industry you work in, commercial awareness and contextual business acumen is extremely useful and often the career differentiator.

Even professionals in nonprofits and the government will benefit from building it – in fact, commercial awareness can be a key personal advantage if you want to get ahead in your career in these sectors.

Cultivating commercial awareness and business acumen are becoming increasing important because of –

The increasingly extreme and unpredictable nature of changes in the external and internal environment.
The necessity to react and make decisions quickly often with limited and incomplete information and at lower levels in the organisation.
Organisational structures becoming increasingly complex, with outsourcing models and elongated supply chains becoming more complex too.
And finally, we hear more and more companies say that success is more directly linked to an individual relying not just on technical skills, but on the ability to understand the wider organisational context.

Is it Possible to Learn Business Acumen?

Yes! It actually comes down to the following knowledge and skills –

Financial literacy – The ability to understand how an organisation uses its resources to achieve its desired outcome. In a commercial context this is often measured in terms of profit or revenue, in other organisations the key measure for success might be improved capacity or measurable social benefits.
Organisational knowledge – Knowledge about the organisation in which the individual works. What are the relevant procedures and processes? How can they get things done?
Ability to deal with ambiguity – In many cases it is impossible to know everything relevant to a situation. Each individual must decide when the information available is sufficient to move forward.
Ability to link cause and effect – Both in a financial sense (e.g. 10% discount means we will not make a profit) and in a personal sense (e.g. if we don’t complete this forecast accurately, our boss will not secure the resources we need next year.)
Self awareness – How will an individual’s actions and decisions impact on the organisation and the other people in it?
Stakeholder awareness – What are the stakeholders interests and needs, and how do decisions made within the organisation impact upon them?
Contextual knowledge – The ability to relate what happens outside an individual’s immediate environment to situations in the work place. Forsenior managers this will involve looking at the wider external landscape.

The Process of Building Commercial Awareness and Sharpening Your Business Acumen

It takes a lot of work to build commercial awareness and sharpen your business acumen.

You can’t develop deep understanding overnight; and cultivating business acumen should form part of your ongoing professional development goals.

You should continuously strive to learn more about your organization, your market, and your industry.

As such, developing commercial awareness and sharpening business acumen involve the following steps –

Understanding your organization
Understanding your resources and suppliers
Understanding your customers and competitors
Understanding the market and industry
Evaluating and prioritizing projects

Commercial Awareness and Business Acumen – Understanding the Organization

The foundation of commercial awareness and business acumen lies in developing a deep understanding of your organization, including how it works, how it makes money, and what it cares about most.

There are many tools and resources are available to help you uncover this information, and an understanding and ability to use these tools is imperative in the process of building the commercial awareness and developing business acumen.

You need to tune into what your organization’s leaders say is important about the business, and how it works? And what metrics do they use to illustrate this? Then look at the financial results – is the business profitable, and where does it make and spend its money? This highlights key areas of attention.

Even if you do not have a finance background, it is essential you understand basics of finance and how to read an organization’s annual report, profit and loss statement, the balance sheet and key financial ratios.

Next, analyze the organization’s mission and vision statements, core values, key result areas, and expressed goals.

How does the organization make these come to life? (Once you understand these goals, you can use Deming’s System of Organizational Knowledge to deepen your knowledge of the organization.)

The final step in understanding your organization and its context would be to perform a SWOT Analysis to learn about your organizations strengths, weaknesses, opportunities and threats.

Mission and Vision

People can be genuinely inspired if their organization has a compelling vision and a clear, meaningful mission; and these can be powerfully expressed in well-crafted mission and vision statements.

These statements are what leaders use to explain an organization’s purpose and direction. When expressed clearly and concisely, they can motivate your team, or the organization as a whole, with an inspiring vision of the future.

Purpose

Mission statements define the organization’s purpose and primary objectives. These statements are set in the present tense, and they explain why you exist as a business, both to members of the organization and to people outside it. Mission statements tend to be short, clear and powerful.

Vision statements also define your organization’s purpose, but they focus on its goals and aspirations.

These statements are designed to be uplifting and inspiring. They’re also timeless: even if the organization changes its strategy, the purpose will often stay the same.

Creating a Mission Statement

Your mission or purpose statement needs to be concise, focused and inspiring.

Do everything you can to make your statements similarly succinct – long, rambling statements can show that managers haven’t made tough but necessary decisions.

To develop your mission statement, follow the steps below.

Step 1: Develop Your Winning Idea

First, identify your organization’s “winning idea,” or unique selling proposition (USP). This is the idea or approach that makes your organization stand out from its competitors, and it is the reason that customers come to you and not your competitors.

Developing a “winning idea” is a core goal of business strategy and it can take a lot of effort to find, shape, test, and refine it.

Some of the tools that will enable this process and further strengthen commercial awareness and sharpen your business acumen are – USP Analysis, SWOT Analysis and Core Competence Analysis. We will look at these in detail shortly.

Step 2: Clarify Your Goal

Next, make a short list of the most important measures of success for this idea.

For instance, if your winning idea is to create cutting-edge products in a particular industry, how will you know when you’ve accomplished this goal? If your idea is to provide excellent customer service in an area, what key performance indicators will let you know that your customers are truly satisfied?

You don’t have to include exact figures here, but it’s important to have a general idea of what success looks like, so that you know when you’ve achieved it.

Combine your winning idea and success measures into a general, but measurable goal. Refine the words until you have a concise statement that expresses your ideas, measures and a desired result.

Keep this statement in the present tense, and make sure it is short, simple, clear, and free of jargon.

Yes, the language needs to be inspiring, but don’t include adjectives just so it “sounds better.”

Creating a Vision and Identifying Values

The following steps will allow you to create a meaningful vision and distill into values.

Step 1: Find the Human Value in Your Work

First, identify your organization’s mission. Then uncover the real, human value in that mission. For example, how does your organization improve people’s lives? How do you make the world a better place?

Step 2: Distill Into Values

Next, identify what you, your customers and other stakeholders value the most about how your organization will achieve this mission. Distill these into values that your organization has, or should have.

Some examples of values include excellence, integrity, teamwork, originality, equality, honesty, freedom, service, and strength.

If you have a hard time identifying your organization’s values, talk to your colleagues and team members. What values do they think the organization stands for, or that it should stand for?

Usually, people write these statements for an organization, or for an organizational unit or a team. You can also create statements to define the goals of long-term projects or initiatives. Some examples of purpose/mission statements are shown below:

Bristol-Myers Squibb Company (pharmaceuticals) – “To discover, develop, and deliver innovative medicines that help patients prevail over serious diseases.”
Walgreens (drugstores) – “Champion the health and well-being of every community in America.”
Nike (athletics) – “To bring inspiration and innovation to every athlete in the world.”
The Dow Chemical Company (chemicals) – “Become the most innovative, customer-centric, inclusive and sustainable Materials Science Company in the world.”

Some examples of vision statements are shown below:

Amazon (online retail) – “Our vision is to be earth’s most customer-centric company where customers can find and discover anything they might want to buy online… at the lowest possible prices.”
PepsiCo (retail) – “Be the global leader in convenient foods and beverages by winning with purpose.”
Amnesty International (nonprofit) – “Our vision is a world in which every person enjoys all of the human rights enshrined in the Universal Declaration of Human Rights and other international human rights standards.”
Ikea (retail) – “To create a better everyday life for the many people.”
The American Society for the Prevention of Cruelty to Animals (ASPCA) (nonprofit) – “The vision of the ASPCA is that the United States is a humane community in which all animals are treated with respect and kindness.”

SWOT Analysis

Probably the most common tool and a starting point for strategic planning and cultivating commercial awareness and developing business acumen related to your organization, is the SWOT tool.

The drawing up of a SWOT Analysis always starts with a desired final situation or desirable objectives. Partly because this, it could therefore be an excellent tool that forms part of the strategic planning. The preparation of a strategic planning, including a SWOT analysis, requires a lot of research and can be effort-intensive.

Strengths

These are the strengths of a project or organization that can contribute to achieving the intended objectives. To determine what they are, the following questions could be asked:

What advantages do you offer your customers?
What do you do better than your competitors?
Why do customers choose you over your competitors?
What are our Unique Selling Points (USPs)?
Which factors have a significant influence on the buying behaviour of your customers?

When formulating the strengths, it is important to approach these from an internal perspective as well as from the perspectives of the customer and the market. It is necessary to remain realistic in order to prevent that the organization or the project from being positioned too highly with respect to the market and the competition. For example, if your competitor delivers a high quality product to the market, good ingredients and sound workmanship are of the utmost importance.

Weakness

These are weaknesses of a project or organization that may have a negative effect on achieving the intended objectives.

To determine what these weaknesses are, the following questions could be asked:

What could be improved by the organization?
What should especially be avoided within the organization or project?
What are customers likely to see as our weaknesses?
What factors make us lose customers or market share?

These are difficult questions to answer and the answers may be quite confronting. Have especially other and external people assess your weaknesses so that you can work on these.

Opportunities

These are the opportunities that present themselves for the organization or project. To determine what these opportunities are, the following questions could be asked:

What interesting trends could the organization or project respond to?
What are the opportunities for the organization or project?

To answer the questions above, the following matters might be of influence: technological developments, policy developments from the government, changes within the target group, new suppliers, etcetera.

Threats

These could be possible obstacles that can negatively influence the project or organization from the market. To determine what these threats are, the following questions could be asked:

What possible obstacles or external risk can be identified for the organization or project?
What is the financial situation of the project or organization?
Can new technologies pose a threat to the organization or project?
Do the identified weaknesses pose a threat for the project or organization?
How can we meet the quality requirements of the market and how can we compete with other suppliers?

The SWOT Analysis is a serious method. Make sure that when you get to work on this, there is commitment from the interested parties, the decision makers and the influencers. This is crucial to the follow-up of the development of the strategic planning. See to it that the intended objectives are realistic and achievable so that people can still support them afterwards in terms of decisions and policies.

Commercial Awareness and Business Acumen – Understanding Resources and Suppliers

Every organization depends on resources and suppliers to operate effectively, and it’s important to use resources effectively and get the best price for goods and services.

First, conduct a VRIO Analysis to understand the relative importance of your organization’s current resources. This will help you determine which of these you will need to use particularly carefully, and whether access to these is helping or holding back your organization’s success.

VRIO Analysis

VRIO Analysis was developed by Jay Barney, as reported in his article, “Firm Resources and Sustained Competitive Advantage.”

Barney used the terms “Value,” “Rareness,” “Inimitability,” and “Substitutability” but, in later writings, he changed “Substitutability” to “Organization,” leading to the acronym we know today: VRIO.

According to Barney, the resources and assets that are valuable, rare and inimitable, and that you are organized to use effectively, will likely contribute most to delivering your organization’s mission.

Therefore, you need to make sure that you make the fullest use of such resources, and take care to protect them. But what do these terms mean in this context? Let’s explore each one in detail*.

Value

In the VRIO model, “valuable” resources are those that impact your financial bottom line. They help you to reduce costs, to increase revenue, or – ideally – to do both.

Depending on your specific situation, the following questions may help you to determine which of your resources bring – or could bring – the greatest returns to your organization.

Do you have resources that improve the efficiency of an important process?
Do you have resources that help you to meet changing customer tastes and expectations?
Do you have access to valuable raw materials and how likely is that to continue?
Have you invested in machinery, IT systems, or other physical assets that allow you to create value?
Do you have products, services or a brand to which customers have a strong loyalty?
Do the benefits of the resource outweigh the cost of maintaining it?

Rarity

You would consider a resource to be “rare” if no one else – or very few others – has access to it.

Examples might include: a team member with exceptional expertise, experience or networks; a supplier that you have an exclusive arrangement with; a product or brand to which your customers are especially loyal; or a location for your office or store that draws higher-quality recruits or customers to your business.

How rare are the assets that you identified as valuable? Again, the way in which you measure this will depend on your situation, but the following questions may help:

How long will the resource remain special or unique?
Is the resource available to your competitors, too?
Will your competitors be able to obtain the resource soon?

Inimitability

This quality takes the concept of rarity one step further. It means that your rare resources cannot be imitated or copied easily, and that there are few substitutes for them.

It can be difficult to assess inimitability because, in reality, most successful products are eventually copied to some extent.

Someone takes an idea, and develops it into a better-quality, more convenient, or lower-cost product through research and innovation. The new product then competes with, and gradually replaces, the original.

Patents and copyrights can prevent copying for a certain number of years, and licenses can give you exclusive access to a resource for a period of time. For a while, therefore, your original product may provide key benefits to your company.

However, you’ll likely find it difficult to hold a unique market position for very long, particularly once this intellectual property protection has expired.

Take your list of valuable resources that are also rare, and determine which are inimitable. Use these questions to help you:

Is it easy for your competitors to duplicate the resource?
Does the resource have an easily available substitute that competitors can use?
If substitutes are available, can they provide the same level of customer satisfaction and loyalty?
Is it likely that new entrants to the market will be able to develop better or cheaper products that can replace your product?

Organization

You’ll waste your valuable, rare or inimitable resources if you can’t use them to their full potential – or “organize,” in VRIO terms.

So, focus your internal management control systems, your business processes, and your people’s time and energy on exploiting these resources to maximize their benefit to your organization as a whole. But be sure to think long-term, too, so that you can protect and improve your key resources for the future.

You can determine whether you’ve structured your team or organization appropriately to exploit your valuable, rare and inimitable resources by asking yourself questions such as:

Do you have the right kind of workforce to make the most of your assets?
Can you attract and retain the kind of people you need?
Are your management structures appropriate? For example, if you rely on innovation to create rarity, do you have a system that allows new ideas to get to market quickly?
Are your finance systems and website able to support your key resources?

Next, examine the cost of these resources. Is your organization purchasing strategically ? Are you getting the best prices? And are you putting enough effort into negotiating costs and contracts?

Also, are your suppliers giving you the service and support you need? Use the following 10Cs of Supplier Evaluation to analyze your organization’s suppliers and make sure that they’re giving you the right level of service.

The 10 Cs Model for Supplier Evaluation

It’s worth putting a lot of effort into supplier evaluation for business-critical resources, for situations where you will be spending a lot of money, or where you want a long-term relationship with a supplier.

When you research a supplier, prepare probing questions that will reveal the level of detail that you need to make an informed decision. Where possible, talk to existing customers as well as the suppliers themselves.

In the following sections, we look at how you can apply Carter’s 10 Cs model to find the supplier that will best fit your organization’s needs and values.

1. Competency

First, look at how competent the supplier is. Make a thorough assessment of their capabilities, and measure them against your needs. Then look at what other customers think. How happy are they with the supplier? Have they encountered any problems? And find out why former customers changed supplier.

Look for customers whose needs and values are similar to yours, to ensure that the information you gather is relevant to your organization.

2. Capacity

The supplier needs to have enough capacity to handle your company’s requirements. So, ask how quickly they will be able to respond to your needs, and to market and supply fluctuations.

Look at the supplier’s resources, too. Do they have the means to meet your orders, taking into account their commitments to other clients? (These resources could include staff, equipment, storage, and available materials.)

3. Commitment

Your supplier needs to provide evidence that they are committed to high quality standards. Where appropriate, look for quality initiatives within the organization, such as ISO 9001 or Six Sigma

The supplier must also show they will be committed to you, as a customer, throughout the time that you expect to work together. (This is particularly important if you’re planning a long-term relationship with them.)

Look for evidence of their ongoing commitment to fulfilling your requirements, whatever the needs of their other customers.

4. Control

Ask how much control this supplier has over their policies, processes, procedures, and supply chain. How will they ensure that they deliver consistently and reliably, especially if they rely on scarce resources, and if these resources are controlled by another organization.

It is also vital to ask about their compliance with the General Data Protection Regulation (GDPR), which is essential for any organization that works in, or has partners in, the European Union (EU).

5. Cash

Your supplier should be in good financial health. Cash-positive firms are in a much better position to weather economic ups and downs.

So, does this supplier have plenty of cash at hand, or are they overextended financially? And what information can the supplier offer to demonstrate their ongoing financial strength?

6. Cost

Look at the cost of the product or service that this supplier provides. How does it compare with the other options that you’re considering?

Most people consider cost to be a key factor when choosing a supplier. However, cost is in the middle of the 10 Cs list for a reason. Other factors, such as a commitment to quality and financial health, can potentially affect your business much more than cost alone, particularly if you plan to rely on the supplier long-term.

7. Consistency

How will this supplier ensure that they consistently provide high quality goods or services? Do they have a strong track record, or are they an industry newcomer with an innovative approach?

No one can be perfect all the time. However, the supplier should have processes or procedures in place to ensure consistency. Ask potential suppliers about their approach, and, if possible, get a demonstration and a test product.

8. Culture

The best business relationships are based on closely matching workplace values. This is why looking at the supplier’s business culture is important. For example, what if your organization’s most important value is quality, and your main supplier cares more about meeting deadlines? This mismatch could mean that they are willing to cut corners in a way that could be unacceptable to you.

9. Clean

This refers to the supplier’s commitment to sustainability, and their adherence to environmental laws and best practices. What are they doing to reduce their environmental footprint? Ask to see evidence of any green accolades or credentials they have earned.

Also, does this supplier treat their people – and the people around them – well? Do they have a reputation for Corporate Social Responsibility, and for doing business ethically?

10. Communication

Find out how the supplier plans to keep in touch with you. Will their proposed communication approaches align with your preferred methods? And who will be your contact at this firm?

It’s also important to find out how the supplier will handle communications in the event of a crisis. How quickly will they notify you if there’s a supply disruption? How will that communication take place? And will you be able to reach senior people, if you need to?

Communication is particularly important if you’re managing day-to-day functions that you outsource, or if you’re dealing with freelancers, or consultants who provide core services.

Commercial Awareness and Business Acumen – Understanding Your Customers, Competitors and the Market

To build commercial awareness, you need to know about your organization’s customers, competitors and the market you operate in.

Deep understanding of your customer’s world is the heartbeat of any business strategy and the most crucial step in cultivating business acumen.

You can use the Customer Journey Mapping tool to understand your customer better.

Next you need sound understanding of your competition. Competition makes or breaks your enterprise. First, make a list of your competitors. What are their strengths and weaknesses? How are they performing, compared with your organization? The most popular tool to evaluate your competition landscape is the Porter’s 5 Forces.

Further you can perform a USP Analysis, and a PEST Analysis to ascertain how does your organization stand with respect to its competitors? What are the Political, Economical, Social and Technological aspects at play within your target market.

Customer Journey Mapping

Customer journey mapping is a way to record, plot and analyze the interactions – or “touchpoints” – that a customer has with your organization.

It covers every interaction from initial contact to post-sale follow-up. It can pinpoint problems or build on successes in your customers’ experiences, and so improve customer retention.

You’ll often hear customer journey mapping used interchangeably with another term, customer experience mapping, but the two are subtly different.

Customer journey mapping focuses on specific interactions that a customer has with a vendor or supplier. Whereas customer experience mapping tends to take a wider view of the customer experience as a whole.

Follow these eight steps to map out the customer experience of your organization:

1. Define Your Objectives

First, work out exactly what you want to achieve. This will help you to decide which touchpoints you need to map.

If you have a broad objective, such as, “To increase customer satisfaction levels by improving company-wide customer service processes,” you’ll likely need to map out the entire customer experience from start to finish. This may involve several different journey maps.

However, if your objective is, “To reduce complaints about late deliveries by half,” for example, you can concentrate on specific areas of your organization, like the warehouse, delivery and customer service departments.

2. Gather Information

Next, identify why your customers want to engage with your organization. What do they want from it? How do they interact with you? When do they do this, and for how long?

Answer these questions by gathering information about your customers and their behavior. This might include market research, focus groups, surveys and analytics, or even ethnographic studies.

Remember, when your customers choose a product or service from your company, they are also buying into the “experience” that you deliver, so it’s important that what you’re offering reflects their expectations.

Use what you learn to develop personas for your customers. This will help you to understand exactly what your customers want, how you can most effectively meet their needs, and how to empathize with them.

Research within your organization is important, too. Talk to the people that interact with customers directly. You could form a cross-functional team that includes frontline customer service staff, marketers and social media managers, for example.

This enables you to gain a deeper understanding of the routes that your customers take to engage with your organization, and the level of service that they receive when they do.

3. Identify Your Customer “Touchpoints”

Customers interact with your organization using a variety of “touchpoints.” These may include in-store activity, online searches, telephone calls, blogs, help desks, email campaigns, online chat services, conferences, product demonstrations, or sales calls.

Once you’ve identified your organization’s touchpoints, think about how they affect your customers. Who do they contact if there is a problem? Where can they find information about delivery? Is it easy for them to get your contact details?

You might have a brilliant customer service team, eager to deal with inquiries, but, if your website or sales team are giving out misleading or conflicting information, then the customer experience will be one of confusion, rather than of great service.

4. Outline the Key Stages of Your Customer Experience

Now, with the knowledge that you gathered in the previous steps, identify the sequence of events that your customers experience when they interact with your company.

These events can vary significantly by customer, product line or service, so you may need to describe more than one journey. The journey taken by a customer looking to buy industrial machinery wholesale, for instance, would be very different from the journey of someone ordering fast food on an impulse.

5. Start Mapping!

There are many different ways to create a customer journey map.

A good method is to use swim lane diagrams. You can use these to map your customers’ journey from the initial stages of interaction right through to the support that they receive after purchasing your product or service. You’ll then be able to pinpoint any places where the service or information that you provide is inconsistent or incorrect.

There are many great ways to present your Customer Journey Map: yours could be a simple timeline, a circular representation of the journey, an affinity diagram, or a whiteboard sketch. It could even be a video or an interactive chart.

There are also several online digital mapping tools that you can use to create customer experience maps, like Smaply™, UXPressia™ and Touchpoint Dashboard™.

6. Validate Your Results

You’ll need to validate your map, to be sure that it is as accurate as possible. You can do this by asking for feedback from a focus group, a customer forum, other departments in your organization, or your team members.

This will help you to gauge how well your map reflects the reality of the customer experience.

7. Analyze Your Map

To analyze your customer experience map, refer back to the objectives that you identified in Step 1. Are you trying to solve a particular problem, or do you want to enhance the entire customer experience?

Listed below are some common issues that might help you with your analysis. You can supplement these with more specific questions related to your business and its objectives.

Are you bombarding the customer with too much information, or providing too little?
Think about whether your customers have access to the right information at the right time, and know who to contact to get help or information they need. For example, can they easily get acknowledgment of orders, complaints, and so on?
Look at the touchpoints in your company. They should work as you intend them to work, and flow in a way that’s logical and easy to follow. If they don’t, think about how you can change them to deliver the quality of user experience you want.
Your internal organization must be clear and effective. It should not confuse customers by involving too many people or departments, for example. Make sure that you have clear objectives regarding the level of service that you provide, and that your team members know how to meet them.

8. Treat Your Map as a Living Document

It’s a good idea to revisit and update your map regularly, particularly if your organization introduces any significant changes – adding or removing a touchpoint, for instance.

This way you can keep your customers and their needs at the front and center of thinking across your organization, and make sure that you offer a consistently high quality of service.

Porter’s 5 Forces

The purpose of Porter’s Five Forces Model is to determine the profit potential of a market i.e. business sector. According to Michael Porter each business sector is potentially influenced by five factors that he refers to as forces.

The combined power of Porters Five Forces determines the eventual profit potential of the business sector.

The five forces are:

Supplier power
Buyer power
Threat of substitutes and complementary goods
Threat of new entrants on the market
Competitive rivalry

Supplier Power

Suppliers, first of Porter’s Five Forces Model, can exercise more power by threatening with increased prices or a deterioration of quality. Supplier power depends on the following six factors:

The number of suppliers – When there are more suppliers, an organization can switch to another supplier in case of threats.

The number of substitutes that are available – Substitutes provide alternatives in case the supplier makes threats. Because of these substitutes, an organization is less dependent on one supplier.

The importance of the business sector for the suppliers – If a supplier creates a lot of profit from a certain business sector, it is crucial to maintain their buyers.

Switching costs – The higher the switching costs, the less inclined an organization will be to choose another supplier. The supplier can therefore exercise more power because the buyer will not easily choose another supplier.

Product standardization – When products are standardised on account of advantages related to money, time and efficiency, a buyer will be less inclined to change suppliers. Think for example of Microsoft: because everyone uses Windows, users will not easily opt for another operating program.

Vertical integration – The possibility of vertical integration determines how easy it is for suppliers themselves to produce certain products with a high demand within a business sector. The consequences could be that the present organization loses customers because they are served by the new organization. The organization will then probably have to find another supplier.

Buyer Power

The second of Porter’s Five Forces Model is buyer power. When buyers have much power, they can put pressure on the price by playing off the competitors against each other.

The power of customers depends on:

The part of the total market turnover that is purchased per buyer
The importance of the product for the buyer
The degree of product standardization
The switching costs and the profits of the buyers
The threat of vertical integration
The importance of the products within the business sector and the quality for the buyer
The degree in which buyers are informed about demand, market prices and costs within the business sector

Threat of Substitutes

All companies compete in a broad sense with other business sectors where substitutes are produced. These substitutes, third of the Porter’s Five Forces Model, limit the potential revenue for a business sector. The DVD has supplanted the VHS videotape, for example. Substitutes can also be looked for ‘further away’. A family wants to go on a holiday or buy a new car, for example.

The first product has nothing to do with the other but it can still displace the other. This is the third force of Porter’s five forces is buyer power. Complementary goods display a positive correlation with the market. For example when DVDs are becoming much more attractive for consumers (e.g. declining prices) this will have a positive effect on the DVD player market.

Marketing will therefore respond to this effect by means of cross-selling. A good example is a large basket filled with reading glasses that are on sale and which are placed next to the magazines and books.

Potential Entrants

Organizations entering a business sector are striving for market share. As a consequence, prices of products or services could decline or the costs of the current organizations (competitors) could be higher.

Both effects have a negative effect on the profitability within a business sector because the reward will have to be shared with more people. The probability of new entrants entering the market depends on the existing entry barriers and the reaction of existing competitors to the new entrants.

Competition in the Business Sector

This is the fifth force within the Five Forces Model.

When the internal competition (competition between existing firms in the market) is high, for example because of high exit barriers, major strategic risks (there is a lot at stake), little differentiation and low switching costs, high fixed costs and storage costs, low growth or equivalent competitors, the margins can be severely affected by downward pressure.

This creates a low profitability and organizations can react strongly to potential new entrants in such markets. In an industry where homogeneity prevails, such as mobile telephony, the internal competition is very fierce. Companies cannot differentiate so much with respect to the product and therefore they must try and drive away the competitor from the market by means of price wars, for example. As a consequence, the battle for market share will be very fierce and aggressive.

Positioning

The core of formulating a competitive strategy lies in the positioning of the organization in the business sector.

Proper positioning is one strategy from which an organization can defend itself against the Porter’s Five Forces Model or they can make it work in favour of the organization. The possibilities and strategies that need to be implemented in order to achieve this position are largely influenced by the structure of the business sector in which an organization operates.

USP Analysis

Your USP is the unique thing that you can offer that your competitors can’t. It’s your “Competitive Edge.” It’s the reason why customers buy from you, and you alone.

USPs have helped many companies succeed. And they can help you too when you’re marketing yourself (when seeking a promotion, finding a new job, or just making sure that you get the recognition you deserve.) If you don’t have a USP, you’re condemned to a struggle for survival – that way lies hard work and little reward.

Now look at your organization’s target market. Who are these people? What do they care about? How does your organization segment the market , or create entirely new market? And what does this information tell you about the way you should work?

Understand the Characteristics That Customers Value

First, brainstorm what customers value about your product or services, and about those of your competitors. Move beyond the basics that are common to all suppliers in the industry, and look at the criteria that customers use to decide which product or service to buy.

As with all brainstorming, by involving knowledgeable people in the process, you’ll improve the range of characteristics you’ll identify. So talk to salespeople, customer service teams and, most importantly, to customers themselves.

Rank Yourself and Your Competitors by These Criteria

Now, identify your top competitors. Being as objective as you can, score yourself and each of your competitors out of 10 for each characteristic. Where possible, base your scores on objective data. Where this isn’t possible, do your best to see things from a customer’s perspective and then make your best guess.

Identify Where You Rank Well

Plot these points on a graph. This helps you spot different competitors’ strengths and weaknesses.

And, from this, develop a simple, easily communicated statement of your USP.

Preserve Your USP (and use it!)

The final step is to make sure that you can defend your USP. You can be sure that as soon as you start to promote a USP, your competitors will do what they can to neutralize it. For example, if you’ve got the best website, they’ll bring in a better web designer. Or if you’ve got a great new feature in your product, you’ll see it in theirs next year.

If you’ve established a USP, it makes sense to invest to defend it – that way, competitors will struggle to keep up: by the time they’ve improved, you’ve already moved on to the next stage.

And once you’ve established a USP, make sure that the market knows about it!

PEST Analysis

The PEST Analysis is an external analysis in which “P” represents Politics, ‘E’ for Economic, ‘S’ for social and ‘T’ for Technology. The PEST Analysis describes a framework of macro environmental factors that are important for strategic management. It is a useful strategic tool for understanding market growth or decline, business position, opportunities and direction for the possibly required actions.

Political factors

Political factors indicate to what extent the Government influences in the economy. These factors are of crucial importance for strategic management. Political factors include areas such as fiscal policy, labour law, environmental law, trade restrictions, rates and political stability.

Political factors may also include goods and services the Government wants to provide or does not want to provide or be provided (for instance subsidies). The Government also has great influence on the healthcare, education and infrastructure of a country or nation.

Economic factors

Economic factors include growth, interest rates and the inflation rate of an economy. These factors have a major impact on how businesses operate and make decisions.

For example, interest rates may influence an enterprise’s cost of capital and therefore they may influence to what extent a company grows and expands. Exchange rates may affect the costs of export goods and the supply and prices of imported goods.

Social factors

Social factors are, among other things, cultural aspects and include health consciousness, population growth, age structure, careers and an emphasis on safety. These social factors influence the demand for the products and services of an organization and how this organization responds to this demand.

An ageing population, for example, may imply a smaller and less flexible staff resulting in higher labour costs. Based on social factors, organizations may change their management strategies to adapt to these developments for example by recruiting older staff on account of a shortage of knowledge workers.

Technological factors

Technological factors include ecological and environmental aspects as well as aspects of research and development (R&D) and automation. Technological factors influence entry barriers, minimum efficient production levels and in-sourcing and outsourcing considerations.

In addition, technological factors affect the costs and the quality of products and services and often lead to innovation.

Commercial Awareness and Business Acumen – Understanding Your Industry

Keeping up-to-date on your industry is part of developing commercial awareness and sharpening your business acumen.

To keep up with news and developments in your industry, the first thing you need to do is identify the best sources to use.

We’ve listed traditional and online sources below: choose the most appropriate sources depending on your industry and the type of work that you do.

Find a Mentor

A great starting point is to find a mentor within your organization. Not only can mentors help you solve career issues and develop your career, but they can also provide you with a wealth of insider knowledge, help you build your commercial awareness and business acumen, and offer you the insight needed to understand it.

Trade Organizations, Trade Shows and Conferences

Your industry may have one or more trade organizations that you can join. These are useful, because they can help to keep you informed with their newsletters and publications, and they provide networking opportunities with meetings and conferences.

Trade shows and conferences are great for learning about competitors, new products, and industry trends; and they can provide ample networking opportunities leading to strong commercial awareness and sharp business acumen.

Face-To-Face Networking

Face-to-face networking can be one of the most rewarding ways to stay on top of industry news and trends. Often, professional relationships can develop into deep friendships, especially when you meet on a regular basis.

Keep in mind that you have a wide pool of people you can network with. People directly related to your industry are an obvious choice, but so are industry suppliers, customers, and people working in related fields when it comes to cultivating commercial awareness and the desired business acumen.

Blogs

Blogs aren’t just for personal journaling anymore. Many bloggers are respected for their high-quality work and honest opinion.

Do a web search for keywords that are commonly used in your industry – it might take a bit of time, but you may find some high-quality blogs relevant to your job and your industry.

Once you’ve found several you like, you can sign up to receive posts through RSS, or subscribe to the bloggers’ Twitter profiles for regular updates. This simple method will put you on the fast track when it comes to building commercial awareness and developing business acumen.

Twitter, LinkedIn Google and Alerts

Twitter can be a great place to find industry leaders and organizations, and to stay on top of relevant news and trends.

Use it to find people in your industry who are in-the-know, by searching Twitter for relevant keywords. (You may get more out of Twitter if you start a dialogue with those who you’re following.)

Using LinkedIn is a wonderful way to connect with colleagues, trade groups, and industry leaders. You can join industry-specific groups and get the latest updates from individuals and organizations.

The Google Alerts service notifies you when resources featuring certain words are indexed by Google’s search engine.

For instance, if you’re a pharmaceutical rep, you might want to get notified about articles containing the words “pharmaceutical industry,” or the names of your clients, your organization and your competitors.

You can be notified once a day or once a week. Links can be contained in one email, or you can get updates via an RSS feed.

The advantage to using Google Alerts is that you no longer have to surf the web looking for industry news.

However, you might find that you simply get too much information this way – if this happens, tweak your settings or use a longer keyword-string. Also, be aware that not every new resource will be indexed by Google – this is especially true for subscription-only content.

Forums and Trade Journals

Trade forums and trade journal might appear fairly expensive ways for developing commercial awareness, but most certainly are a sure shot means.

Membership sites and discussion forums can be full of insider-information tailored around specific topics or industries; and talking with other professionals in your industry can help you network, grow your skills, and generate commercial awareness especially if you’re in a technology field.

If you’re unsure of which forums to use, ask colleagues, have a browse online, or ask your Twitter or LinkedIn connections for recommendations.

Also, keep up to date on more general business developments by subscribing to an appropriate business publication or website. Or watch a reputable business news program that not only reports the news, but that also offers an objective analysis of what the news means. This will help you understand current events and trends on a deeper level, as well as appreciating what those events might mean for your industry or sector.

The Wall Street Journal, in the US, and The Economist, in the UK, are good examples of business publications that you can read to develop your commercial awareness.

Remember, one of the advantages of developing commercial awareness is that it helps you form robust opinions, which are informed by the factors, influences, and trends that you see around you. When you get your information from reliable, objective sources, or from professionals that you trust, you help to ensure that your judgment is sound.

Commercial Awareness and Business Acumen – Evaluating and Prioritizing Projects

Another part of developing commercial awareness is learning to evaluate and prioritize projects, so that you can ensure that your ideas are good before you try to sell them .

It’s important to make sure that you prioritize projects that fit with your organization’s strategy, and that you sense-check them to make sure that the idea is practical – a tool like Mullins’ Seven Domains Model can help here.

To help you decide whether projects are likely to benefit your organization financially, carry out a Cost-Benefit Analysis, and use Net Present Values and Internal Rates of Return to decide whether to invest in projects. (Where appropriate, ask for help from your finance department to ensure that your calculations are robust.)

Prioritization Tools

While these simple approaches to prioritization suit many situations, there are plenty of special cases where you’ll need other prioritization and time management tools if you’re going to be truly effective. We look at some of these prioritization tools that will sharpen your business acumen and lead to commercial awareness below:

Paired Comparison Analysis

Paired Comparison Analysis is most useful where decision criteria are vague, subjective or inconsistent. It helps you prioritize options by asking you to compare each item on a list with all other items on the list individually.

By deciding in each case which of the two is most important, you can consolidate results to get a prioritized list.

Decision Matrix Analysis

Decision Matrix Analysis helps you prioritize a list of tasks where you need to take many different factors into consideration.

Decision Matrix Analysis helps you to decide between several options, where you need to take many different factors into account.

To use the tool, lay out your options as rows on a table. Set up the columns to show the factors you need to consider. Score each choice for each factor using numbers from 0 (poor) to 5 (very good), and then allocate weights to show the importance of each of these factors.

Multiply each score by the weight of the factor, to show its contribution to the overall selection. Finally add up the total scores for each option. The highest scoring option will be the best option.

The Action Priority Matrix

This quick and simple diagramming technique asks you to plot the value of the task against the effort it will consume.

By doing this you can quickly spot the “quick wins” which will give you the greatest rewards in the shortest possible time, and avoid the “hard slogs” which soak up time for little eventual reward. This is an ingenious approach for making highly efficient prioritization decisions.

he Action Priority Matrix is a simple tool that helps you choose which activities to prioritize, and which activities to delegate or eliminate. This helps you make best use of the opportunities available to you.

The matrix has four quadrants:

Quick wins.
Major projects.
Fill ins.
Thankless tasks.

To use the matrix, make a list of your ongoing activities and goals. Score each task on impact and effort, using a 0 to 10 scale. Next, plot your activities on the matrix, and then prioritize, delegate, or drop activities appropriately.

Eisenhower Urgent/Important Principle

Similar to the Action Priority Matrix, this technique asks you to think about whether tasks are urgent or important.

Frequently, seemingly urgent tasks actually aren’t that important. And often, really important activities (like working towards your life goals) just aren’t that urgent. This approach helps you cut through this.

Eisenhower’s Urgent/Important Principle helps you quickly identify the activities that you should focus on, as well as the ones you should ignore.

When you use this tool to prioritize your time, you can deal with truly urgent issues, at the same time as you work towards important, longer-term goals.

To use the tool, list all of your tasks and activities, and put each into one of the following categories:

Important and urgent.
Important but not urgent.
Not important but urgent.
Not important and not urgent.

Then schedule tasks and activities based on their importance and urgency.

The Ansoff Matrix

These give you quick “rules of thumb” for prioritizing the opportunities open to you.

The Ansoff Matrix helps you evaluate and prioritize opportunities by risk.

The Matrix outlines four possible avenues for growth, which vary in risk:

Market penetration.
Product development.
Market development.
Diversification.

To use the Matrix, plot your options into the appropriate quadrant. Next, look at the risks associated with each one, and develop a contingency plan to address the most likely risks. This will help you make the best choice for your organization.

The Boston Matrix

The Boston Matrix does a similar job, helping you to prioritize opportunities based on the attractiveness of a market and your ability to take advantage of it.

The Boston Matrix helps you to classify your organization’s business units, product lines or products, based on their market growth and market share. In turn, this helps you to determine which products warrant future investment and which you might need to abandon or sell.

With its straightforward classification of products into Dogs, Cash Cows, Question Marks, and Stars, the matrix helps you screen the opportunities open to you and to identify where to invest money, time and, effort.

However, the tool does have limitations, so you should always conduct a careful analysis and use your best judgment.

Pareto Analysis

Where you’re facing a flurry of problems that you need to solve, Pareto Analysis helps you identify the most important changes to make.

It firstly asks you to group together the different types of problem you face, and then asks you to count the number of cases of each type of problem. By prioritizing the most common type of problem, you can focus your efforts on resolving it. This clears time to focus on the next set of problems, and so on.

Pareto Analysis is a simple decision-making technique that can help you to assess and prioritize different problems or tasks by comparing the benefit that solving each one will provide.

It’s based on the Pareto Principle (also known as the 80/20 Rule) – the idea that 80 percent of problems may be the result of as little as 20 percent of causes.

To use Pareto Analysis, you first need to identify and list the problems that you face, and their root causes. Then, score each problem according to its impact (the scoring system that you use will depend on the types of problems that you are attempting to fix).

Group the problems together by cause and add up scores for each group. This will allow you to identify the problems that will have the biggest benefits if resolved.

Finally, use your findings to prioritize your workload, so that your efforts can be directed toward issues that are the most impactful, and away from problems that are less impactful.

The Modified Borda Count

The Modified Borda Count is a useful technique for prioritizing issues and projects within a group, giving everyone fair input into the prioritization process. This is particularly useful where consensus is important, and where a robust group decision needs to be made.

Using this tool, each group of participant “nominates” his or her priority issues, and then ranks them on a scale, of say 1 to 10. The score for each issue is then added up, with issues then prioritized based on scores. The obvious fairness of this approach makes it particularly useful where prioritization is based on subjective criteria, and where people’s “buy in” to the prioritization decision is needed.

The Modified Borda Count is a voting system based on participants ranking their preferred solutions, and it’s often used in group decision making. By asking team members to rank first, second and subsequent choices in a vote, it helps them to make a decision based on common consensus.

Because this process is transparent and fair, it helps people buy into the final decision, even if they don’t fully agree with it.

Mullin’s Seven Domains Model

Let’s look at the seven domains, and explore how you can use them to analyze your potential venture.

Market Domain/Macro Level: Market Attractiveness

This domain looks at market attractiveness from a macro (large-scale) perspective.

Look at the whole market. How big is it, in terms of the number of customers, the value of sales, and the quantity of units sold? Then, look at trends within the market. Has it grown in recent years? If so, is this growth likely to continue?

What you’re doing here is checking that the market is big enough to give you the growth you want, and that it’s growing healthily – after all, it’s much easier to grow a business in a growing market than it is in a declining one.

Market Domain/Micro Level: Sector Market Benefits and Attractiveness

Realistically, it’s unlikely that your venture will meet the needs of everyone in the market. You’ll be more successful if you target your idea at one market sector or segment, and aim to meet its needs fully.

To identify this segment, look at the market on a micro level. Think about the following questions:

Which segment of the overall market is most likely to benefit from your venture?
How is your venture or product different from others already servicing this segment?
What trends is this segment showing? Is it growing, and, if so, is this growth set to continue?
What other market segments could you access if you’re successful in this one?

Look for qualitative and quantitative data. Talk to prospective customers to gather feedback on their needs, and to find out how well competitors are meeting these. Then, look for data on the sector you’re targeting, for example, by reading analysts’ reports and market research reports.

Industry Domain/Macro Level: Industry Attractiveness

It’s now time to look at how attractive your industry is on a macro level.

Mullins suggests using Porter’s Five Forces to assess which factors affect the profitability of your industry.

To do this, first define the industry that you will be competing in, and then ask yourself how easy it is to enter this industry. If it’s easy to get into, you can quickly be flooded with competitors if you are seen to make a success of your business.

Next, look at your competition. Is rivalry in this market fierce or civilized? Are organizations stealing ideas from others in the industry? Take time to gather intelligence about your potential competitors to see what they’re up to.

Last, look at buyers and suppliers. How much power do they have? Are they setting their own terms and conditions because of this power? If so, how will this affect your offering?

Industry Domain/Micro Level: Sustainable Advantage

Once you’ve looked at your industry from a macro level, it’s time to examine it close up.

Start with a USP Analysis. What can you do to build and sustain a USP? Next, explore the competencies that you’ll need, and think about how to develop and sustain these.

Then think about how easy it will be for your competitors to duplicate your product or service.

Also, what resources do you possess that your competitors don’t? Do a VRIO Analysis to answer this question, and then look at your competitors’ resources. What do they have that you don’t? This could include patents, established processes, and finances. How will these affect your ability to compete?

Team Domain: Mission, Aspirations, Propensity for Risk

In this domain, located in the center of the model, you’re going to analyze commitment – yours, and that of your team – to this idea.

Think about why you want to start this business. Are you passionate about this idea, and, if so, why? What do you want to do with this business – are you ambitious for it, or do you want it to be a “lifestyle business”? What are your personal goals and values, and how does this venture align with these? And are you prepared to take the risk and put in the hard work needed to build this business?

Explore the motivations of your team, too. What are they hoping to achieve, and why? Do their motivations align with yours? And are they prepared to work really hard to make the business a success?

Money and/or reputations could be at stake if the venture fails, so think about attitudes towards risk within the team. Our article “Cautious or Courageous?” can help you think about your approach to risk.

Team Domain: Ability to Execute on Critical Success Factors

You now need to identify the Critical Success Factors CSFs) for the business, and think realistically about whether your team can deliver on these.

Start doing this by thinking about these questions:

Which decisions or activities will harm the business significantly if you get them wrong, even when everything else is going right?
Which decisions or activities will deliver disproportionately high benefits or enhance performance, even if other things are going poorly?

Then look at the knowledge and skills of the team that you’ve put together. How certain are you that you and your team can deliver successfully on these CSFs? If you see a gap in skills or abilities, who can you bring on board to fill this gap?

Team Domain: Connectedness up, Down, Across Value Chain

This last domain is all about your connections and how important they are to the success of your business.

First, look at your suppliers and investors. Who do you know that can supply you with the resources you need to pursue this venture? How good are your relationships with these people?

Next, look at your potential customers and distributors. In what ways can you capitalize on your connections here?

Last, look across the value chain. Do you know any of your competitors personally? If so, how could this relationship help or hinder your venture? And could these people be partners if you thought about them differently?

Cost Benefit Analysis

As its name suggests, Cost-Benefit Analysis involves adding up the benefits of a course of action, and then comparing these with the costs associated with it.

The results of the analysis are often expressed as a payback period – this is the time it takes for benefits to repay costs. Many people who use it look for payback in less than a specific period – for example, three years.

You can use the technique in a wide variety of situations. For example, when you are:

Deciding whether to hire new team members.
Evaluating a new project or change initiative.
Determining the feasibility of a capital purchase.

However, bear in mind that it is best for making quick and simple financial decisions. More robust approaches are commonly used for more complex, business-critical or high cost decisions.

Follow these steps to do a Cost-Benefit Analysis.

Step One: Brainstorm Costs and Benefits

First, take time to brainstorm all of the costs associated with the project, and make a list of these. Then, do the same for all of the benefits of the project. Can you think of any unexpected costs? And are there benefits that you may not initially have anticipated?

When you come up with the costs and benefits, think about the lifetime of the project. What are the costs and benefits likely to be over time?

Step Two: Assign a Monetary Value to the Costs

Costs include the costs of physical resources needed, as well as the cost of the human effort involved in all phases of a project. Costs are often relatively easy to estimate (compared with revenues).

It’s important that you think about as many related costs as you can. For example, what will any training cost? Will there be a decrease in productivity while people are learning a new system or technology, and how much will this cost?

Remember to think about costs that will continue to be incurred once the project is finished. For example, consider whether you will need additional staff, if your team will need ongoing training, or if you’ll have increased overheads.

Step Three: Assign a Monetary Value to the Benefits

This step is less straightforward than step two! Firstly, it’s often very difficult to predict revenues accurately, especially for new products. Secondly, along with the financial benefits that you anticipate, there are often intangible, or soft, benefits that are important outcomes of the project.

For instance, what is the impact on the environment, employee satisfaction, or health and safety? What is the monetary value of that impact?

As an example, is preserving an ancient monument worth $500,000, or is it worth $5,000,000 because of its historical importance? Or, what is the value of stress-free travel to work in the morning? Here, it’s important to consult with other stakeholders and decide how you’ll value these intangible items.

Step Four: Compare Costs and Benefits

Finally, compare the value of your costs to the value of your benefits, and use this analysis to decide your course of action.

To do this, calculate your total costs and your total benefits, and compare the two values to determine whether your benefits outweigh your costs. At this stage it’s important to consider the payback time, to find out how long it will take for you to reach the break even point – the point in time at which the benefits have just repaid the costs.

For simple examples, where the same benefits are received each period, you can calculate the payback period by dividing the projected total cost of the project by the projected total revenues:

Total cost / total revenue (or benefits) = length of time (payback period).

Commercial Awareness and Business Acumen – Summary

Commercial awareness and the resulting business acumen involve the understanding of how your business – and your industry – operate and make money.

When you demonstrate commercial awareness, you’re focused on making money for your business and helping it achieve its aims.

Sharp business acumen means you have informed opinions on factors that affect its profitability or market share, and you understand its competitors and customers.

Commercial awareness is important when you’re applying for a job, looking for a promotion, or aspiring to make it to the top leadership.

Business acumen is necessary to have a strategic advantage and take your business to greater heights as a leader in an organization or as an entrepreneur.

Commercial awareness and the right business acumen also help you perform better in your current role, improve your decisions, strengthen your reputation, and increase your chances of winning a promotion.

To develop commercial awareness and sharpen your business acumen, learn about how your organization operates, the environment it operates in, and how it makes money.

Stay on top of industry news and events and use social-networking sites to reach out to other professionals in your sector, and to participate in groups and discussions.