Newsletter
We understand our jobs. The big picture, on the other hand, seems so complex.
Complexity is an underlying challenge in any business, regardless of size, industry, or stage of development. Large companies, especially, have many moving parts—departments and divisions (always reorganizing), product lines (always changing), layers of management, unclear decision-making processes, shifting budgets, new strategies. A small problem within any single element might produce a ripple effect throughout the organization, requiring major repairs. But without knowing the true source of the difficulty (not always readily identifiable), we might “tinker” and fix the wrong thing.
Developing business acumen helps us cut through this complexity, get a bird’s eye view of a business, and understand our specialized roles within it. Simplifying complexity and broadening our understanding of our business better enables us to fix present problems, prevent new ones, and take advantage of opportunities to grow.
How do we simplify the complex? By looking at the key drivers that make all the parts run. When you break down even the largest, most complex multinational company—like Exxon Mobil or Boeing—into its most fundamental elements, you’ll find the same drivers that power your business, or any business. What are those drivers?
How did we distill it down to these five? We used the core financial statements—the income statement (profit), the balance sheet (assets), and the statement of cash flows (cash)—as the foundation. These are the statements every company uses to judge its current strength and its future prospects. The fourth driver—growth—is reflected in all of these statements and for public companies is an important objective for shareholders. And the fifth driver is quite simple—without good employees and vendors providing value to paying customers, the other four drivers cease to exist.
Like the twenty-six characters of the English alphabet, the 5 Key Drivers combine in a multitude of ways to form the foundation of organization, products, market position, financing, human resource decisions, and every other strategy or decision in a company. Leaders must set and achieve goals and obtain results in these five areas in order to achieve the most important objective for any company: long-term, sustainable profitability.
The 5 Key Drivers will help you to understand and visualize how even the most complicated business can be analyzed and improved. And to learn how you can better contribute to your company’s success, to become more visible and valuable.
You’ve probably heard of these essential elements, but you may not really understand their full importance and interdependence in creating sustainable financial success. While each driver is unique, it is also completely dependent on all of the other drivers. You cannot affect one without influencing performance of another. Leaders have to take the connections between the drivers into account as they make their decisions, or they risk becoming overly focused on one driver and leading a business into the ground.
Your ability to understand these relationships and affect these drivers through your decisions and actions can increase your own ability to contribute to the long-term profitability and growth of your company. But to do this, you need to understand how people communicate about these drivers.
The language of business is finance. And finance means numbers. And numbers intimidate many people. But if you think of financial statements like you would a health report from your doctor, you may not be as intimidated. You don’t need to understand every number or how it was calculated, but recognizing a critical few pieces of information—those that reflect the 5 Key Drivers—will help you understand the health of any company.
If you want to be more visible and valued, then demonstrate that you understand how your department or unit fits into the big picture of the overall business.
If you want to influence the thinking and decisions of your supervisor or manager, address the topics that senior leaders, including your boss, are concerned about. Communicate your ideas and proposals in language that he or she understands.
If you want to be seen as a major contributor, show that you understand the relationships among the key drivers of your overall business—not just how your department works.
If you want to be a more effective leader, better able to engage your team, link your team’s actions with the overall needs and strategic goals of the company identified by senior management.
Keep in mind, even your manager might not be as knowledgeable in some of these areas as you think. But I encourage you to ask questions and be willing to act on the answers. You’ll be recognized as a contributor—somebody who demonstrates business acumen through savvy questions and effective actions. In short, you'll be acknowledged as someone who sees the big picture.