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Commercial awareness: the skill all graduates must show
Commercial awareness is the skill of always facing the reality of how a company succeeds in the environment around it and then applying this skill to decisions made in and about the business.
The varnished reality versus the economic truth
Every organisation has a varnished exterior they show to you: this could be on their careers page or in the smiles of the people who present at a careers fair or anywhere else. It says: we’re successful and we’re here to stay.
Every company has a glossy exterior, but it’s important to remember that the real ‘heart’ of the health of an organisation is its ability to compete economically within a particular market. Good employees protect and strengthen this ability as part of their jobs.
Of course, there are many important things to a successful business and decisions have to take into account things like culture, work-life balance and societal benefit. But when organisations start making decisions that don’t respect the realities of the marketplace, they’re in trouble.
Commercial awareness from an employer’s viewpoint
Imagine you owned a business and had to recruit someone. You’d look for someone with passion, vision and great enthusiasm but you’d really want someone who also understood the boundaries of decision-making within the organisation: the realities of what you had to deal with as a business. This is commercial awareness.
When an employer thinks you have commercial awareness, they trust you to make decisions that do not threaten the organisation’s current and future ability to make money, such as by alienating customers, increasing costs too high, or changing a product for the worse.
Commercial reality puts boundaries on decision-making: you show commercial awareness when you sense check potential courses of actions against these boundaries.
11 ways you show an employer you lack commercial awareness
- Not knowing what makes the business stand out from competitors
- Not knowing who the main clients are and where offices are located
- Being unaware what the key products and services are
- Not knowing the exterior forces changing the organisation’s market and customers
On the job
- Chasing perfection, rather than ‘done’
- Implementing Ideas that are ‘feel good’ rather than appropriate
- Misunderstanding the business model
- Failing to understand the customer and why they spend money with you
- Being unable to explain how ideas benefit the business
- Misunderstanding or failing to take notice of market changes and external forces
- Not effectively using or respecting cashflow, profit and loss and budgeting
Seven ways to build commercial awareness
- Read widely: what goes on in the world affects businesses. Problems in the oil supply will affect all transport companies, for example. Have a good knowledge of how the world is being shaped and try to apply it to the organisation’s marketplace
- Talk to industry insiders: context is key in commercial awareness. By talking to industry insiders who have lots of experience in how organisations in that industry develop, grow, struggle, you will be better able to spot commercial problems or opportunities that are relevant to your job and organisation. LinkedIn is a great place to start finding relevant contacts.
- Hone your financial language: finance is a language. Using numbers you can describe a huge amount about a business, including its relative health, its prospects for the future and whether it will be able to pay its debts. Take an online MOOC or read the Financial Times to learn more about how you can ‘read’ financial numbers and how to talk about business finances to others.
- Read a trade publication: if you’re looking to work in the food industry, browse The Grocer. If it’s a retail job you’re after, check out Retail Week. Trade publications offer insight into how the industry is changing and how people talk about specific issues, which will help you feel - and act - like an insider
- Read company reports: any incorporated business must file their accounts with Companies House and these accounts are free to view for anyone. You can search online for a company name and find their reports quickly. Start reading them, researching any terms you don’t know, and working towards drawing financial conclusions about the organisation.
- Look at whole sectors, not just organisations: try to research and understand relevant industries, such as the legal sector, the FMCG sector, or publishing. It helps you work out why certain organisations do well, how they are different to competitors, why they’re growing while others are shrinking, and generally what opportunities and threats are available.
- Become comfortable with critiquing situations for value: organisations need to generate value from their relationships with other organisations, from customers, from processes and from employees. Commercial awareness requires you to evaluate these situations to see how much they are benefiting the organisation. There could be lots of benefit, or a little (which requires corrective action), or no benefit in which case an alternative arrangement would be necessary. There are lots of tools available to help you here, such as the 10Cs of supplier evaluation or cost-benefit analysis.