There’s not a business on the planet that doesn’t have a P & L, a balance sheet and a cash flow. Every business, it doesn’t matter whether you’re running BHP or a small start-up – every business anywhere in the world has those three elements.
Understanding how those financials work in complex business environments is crucial to business success and a core part of business acumen, a capability we help businesses grow at Lighthouse.
Having a grasp on the numbers is one thing, but business acumen is also about leadership and teamwork, particularly in the customer-centric world we operate in today. Breaking down silos through collaboration, holding individuals accountable to the end customer and having the agility to move quickly are essential skills for today’s leaders.
This is particularly important for leaders in industries facing disruption. The healthcare industry in Australia has remained relatively stable until now, but the rise of healthtech, regulatory reform and increasing consumer choice under a two-pronged health system is causing complexity.
By equipping key staff with the capability to understand what motivates their customers and to be able create superior go-to-market systems, CEO’s have the potential to bring enormous benefits to their organisation.
Three essential capabilities to create a high velocity value chain are business acumen, collaboration and agility.
Building Business Acumen
A Case Study from our partners Acumen Learning
How do you adapt when your business model shifts? Philips Healthcare faced a situation where the industry they operated in – supplying technical equipment to hospitals – moved from a volume of care model to a focus on patient outcomes. Philips needed to prove to doctors and department heads that they understood the business of hospitals and could help achieve more positive patient outcomes. To achieve this, adjustments were needed along the value chain. For their salespeople, already highly proficient at technical knowledge, that meant adopting a customer-centric mindset. Partnering with Acumen Learning, their salespeople undertook business acumen training to gain a greater understanding of healthcare economics and the financial challenges that hospitals face. This led to more productive conversations with clients, based squarely on the needs of the customer – and increased sales.
Along with a fundamental understanding of business, these are core behaviours where teams often lack capability, hindering their ability to adapt and grow.
Now more than ever, middle management and senior leaders need to make collaborative decisions. Marketing has to make decisions with sales or sales has to make decisions with supply chain. Every leader I speak to wants “more collaboration and less silo” behaviour.
The reason for this is that improved collaboration – both internal and external – has the ability to unlock the greatest opportunities for businesses, a belief supported by senior healthcare executives cited by McKinsey.
External collaboration means selecting preferred partners based on business alignment and working with them to solve joint problems.
Internally, senior leaders need to work on removing silos. Data across business units should be standardised and shared. A shared goal of maximum customer value at the least possible cost goes a long way to improving internal collaboration. How does each team contribute to the shared goal and where can improvements be made?
Traditional supply chain models are based on creating enough supply for predicted demand. But when the market is increasingly volatile, as it is today, such an approach comes with risks, particularly for industries with long lead times like pharmaceutical and medical devices.
Businesses must look to make their operations more agile at every level in order to be flexible and responsive to the market. With better predictive models, streamlined processes and flexible supply chain relationships (e.g. not based solely on volume) volatility of demand is less of a problem. Fast fashion brands like Zara, who have most of their supply chain in-house, removing complexity and allowing more control – get this right, and have a 14 day turnaround from design to in-store, thereby fulfilling their USP to deliver the latest trends to consumers quickly and inexpensively.
Similarly, your people need to adopt an agile mindset. That means hiring people who can adapt to change, work collaboratively and commit to continual improvement. Those who can’t – or won’t – adapt are likely to be blockers to innovation and may hinder your success.
With supply chain costs typically the second most expensive business cost after staffing, applying a business acumen lens to end-to-end operations is crucial to cost savings. Without the end-customer in mind, however, attempts at operational efficiency are risky, no more so than in the healthcare sector where lives are at stake.
By adopting an agile mindset and working collaboratively with multi-disciplinary teams and aligned partners, it’s possible to add value every step of the chain, from strategy through to design and delivery, thereby creating a valuable customer experience
I am Managing Director of Lighthouse, helping leaders deliver business outcomes through changing behaviour and improving capability. We bring international best practice programs (such as Building Business Acumen) exclusively to ANZ. If you are looking to develop your leaders and client engagement professionals with the core capabilities, mindsets and behaviours to be successful, please contact me on 1300 244 373. www.lighthousegroup.co