Business acumen is one of the skills you will see in job roles. It is also mentioned in the standards for professional projects management bodies. Project managers should possess business acumen, according to reports.
Business acumen is what I believe has contributed to my success in working with senior stakeholders and difficult projects. Equally, my failures in difficult projects and working with senior stakeholders are due to a lack of business acumen.
What is it all about? How do you know if it is?
Do you have business acumen?
Do you know how your company makes its money? I have done inductions for many new project managers, and they couldn’t tell how my company made money. My company made money. It’s okay. You don’t have to know everything from Day 1. However, you will need to get it done quickly.
Action: Talk to your boss about the income streams available to you. What are the main customer groups? How can you balance their needs?
Action: Read the company’s last annual report. Even if your company is not required to produce an annual report publically, it’s common for companies to do their own internal reports. Ask questions about the things that you don’t know.
Where does your business invest?
The company’s investment decisions determine the projects it undertakes.
Let’s take, for example, a leisure chain that owns several brands.
Cheerful Coffee shops generate a 46% return.
Happy Hotels have a 16% return.
Delicious Diners generate a 3% return.
Your company will continue to invest in Cheerful Coffee Shops until saturation of the market. Why? Because they’ll get the best return.
While the definition of ‘best return’ is different for different businesses, and different economic conditions; 10% above base interest rates is a good rate right now. This means that if you put your money in the bank, you would get the interest rate. Instead, you could make a project with the money and get a +10% return. This is more than what the bank would pay. It’s more risky.
The company might then consider projects to open more Happy Hotels if the market is saturated by Cheerful Coffee Shops. If bank interest rates are 3%, it’s unlikely they would bother to do any projects to open new Delicious Diners. It’s too much work and they’d get the exact same return by just shoving money in the bank.
However, this doesn’t mean that there won’t be any projects after all the coffee shops and hotel are built. The Board will be under pressure in order to find the next Cheerful Coffee. It is unlikely that shareholders will say, “No worries, just move along and do some projects with a 16% return.” They want the company’s next big thing to give them 40 percent+ returns on their investment.
Action: Determine if your market has become saturated. Check out the company’s strategy document or the 3 year plan (this may be included in the annual report). You need to understand where they are going.
Business Acumen is more than money
The money side of business matters a lot. There is more to business acumen that just financial decisions.
It also depends on the operational context of your work. This could be traditional business, start-up, charity, or any other sector.
Knowing this gives you ‘acumen’, the ability to make wise professional decisions and make good decisions.
Professional judgment doesn’t require years of experience. It is enough to have good project management skills, such as involving the right stakeholders and reading the landscape to make the best decisions.
It’s also about being able see the big picture, understand commercial reality, and then act accordingly.
Applying business acumen to your project
Stakeholders are most interested in the project cost and the time it will take to complete the work.