There’s a common experience when leading or observing groups of learners from non-finance roles participating in a business acumen simulation. Typically, you’ll ask the group to rate their current comfort with financial know-how using questions such as:
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“Who here feels like a pro on this subject, ready to get up on stage and lead the class?” (A couple of hands will tentatively raise.)
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“Who knows enough? That is, you’re conversationally comfortable but not yet fluent?” (A few more hands will raise.)
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“Who feels like they have a lot to learn and are intimidated by the acronyms and equations?” (The large majority of hands sheepishly go up.)
This is something I’ve seen time and time again. Throughout such engagements, I’m always surprised to see that many participants do know business acumen in some way, shape, or form. Many have sold a house or a car and understand concepts like equity, financing, and profit or loss.
Understanding the Business Ecosystem
What many do not understand, however, are two more abstract concepts that make up the Business Ecosystem:
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The macro-, meso-, and micro-implications of their decisions: For example, consider the decision to sell a used car in 2023. From a micro perspective, will they make money on the car? Will they generate enough money to replace the car? From a meso perspective, how does this decision impact their immediate financial situation? And from a macro perspective, how will the sale of their car impact the supply and demand for cars in local and national marketplaces?
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The combinations of decisions that impact the bottom line: This includes all the necessary functions and externalities that must work in conjunction to determine the bottom line of the car’s value (both to them and the marketplace). Factors like the price of steel and gas, the cost of servicing a car, the local car market, and the car’s age and mileage all impact the selling price.
The Role of Employees in the Business Ecosystem
Many employees across all levels of seniority struggle to understand how their role plays a part in a larger Business Ecosystem. When leaders are unable to convey to their employees that a business relies on all moving parts working in conjunction, they miss the opportunity to instill ownership in their employees.
Great leaders are instead able to break down the entirety of the Business Ecosystem, clearly conveying how each employee must understand:
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Their Micro Role: Their function.
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Their Meso Role: Their contribution to the success of their branch or domain.
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Their Macro Role: Their contribution to the success of the larger organization.
Engaging Employees in the Business Ecosystem
Once employees can see how their work drives both personal and organizational success, they are more likely to engage in fiscally conscious behaviors. From here, it becomes easier for employees to understand, for example, how sales and marketing depend on supply chain and manufacturing all working together to drive shareholder value.
Business Simulations as a Learning Tool
Simulations are particularly effective in driving the two levels of business conscientiousness described above. By immersing participants in a simulated environment, they can easily see the complete picture, what our facilitators often refer to, borrowing from Ronald Heifetz and Marty Linsky's leadership metaphor, as the “the dance floor from the balcony.” (Learn more about this in our balcony video.)
In one recent example, a group of Insight Experience Business Acumen program participants struggled with the urge to discount their products: “When we need to meet our sales numbers,” they decided, “the easiest way to do this is by offering discounts.” Only after playing through a simulation of their unique business did they begin to understand their Business Ecosystem. The impact of quickly discounting their product had indeed increased their market share, but it also drove down their margins and attracted a percentage of business they did not want: customers unwilling to pay full price.
Beyond Financial Transactions
This concept of interconnectedness extends beyond simple financial transactions. It includes understanding external economic indicators, industry trends, and global events that can influence local business decisions. For instance, fluctuations in international oil prices can affect the cost of transportation and manufacturing, which in turn impacts product pricing and profitability. By grasping these broader connections, employees and leaders alike can make more proactive and strategic decisions.
Cultivating a Business Ecosystem Mindset
Understanding the interconnectedness of the Business Ecosystem is crucial for developing robust business acumen. By recognizing the macro, meso, and micro implications of their decisions and the various factors that influence the bottom line, employees can make more informed strategic choices. Leaders who effectively communicate this ecosystem perspective not only empower their teams to see beyond their immediate roles but also foster a culture of ownership and fiscal responsibility.
Through practical simulations and a holistic approach to business education, organizations can cultivate a workforce that is better equipped to navigate the complexities of today's economic landscape, driving both personal and organizational success. Embrace the ecosystem mindset and watch your business acumen flourish.
To learn more about how Insight Experience can elevate the business acumen of your team, let’s connect.
