Business Strategy: Many Leaders Lack Skills to Execute It

Case studies, business simulations seen as cutting-edge teaching tools that impart business acumen

By Steve Bates Mar 29, 2013
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Most companies don’t have the business intelligence they need to execute their business strategies successfully, according to a global survey sponsored by BTS, a strategy-implementation consulting firm.

The survey of more than 330 senior leaders, conducted by the Economist Intelligence Unit, found that key employees at all levels simply lack essential knowledge about how their company makes money. However, the report concluded that the highest-performing organizations got that way and stay that way in large part because they have taken steps to ensure they have the business acumen they need among managers and senior leaders.

The report, Skills Mismatch: Business Acumen and Strategy Execution, released March 13, 2013, is based on a survey of companies with annual revenue from $100 million to more than $10 billion. Respondents represent 16 industries and 13 business functions; 47 percent are within the C-suite.

Senior leaders ranked the business-skills shortage as second only to economic uncertainty among the challenges they face and ahead of such problems as global competition, regulatory constraints and political uncertainty.

Business acumen is defined in the report as “an intuitive and applicable understanding of how a company makes money” and features a strategic perspective, including trade-offs of business decisions; financial acumen, including the drivers of cash flow and profits; and market orientation, including the ability to analyze industry data.

‘Powerful Finding’

Almost two-thirds of respondents said a lack of business acumen in their organization significantly limits their ability to accomplish strategic goals.

“That’s a very, very powerful finding,” Rommin Adl, executive vice president and head of global marketing at BTS, told SHRM Online.

Senior managers identified critical business-acumen skills as:

  • Setting and maintaining a clear vision and direction for the organization.
  • Demonstrating an understanding of the marketplace and competition.
  • Demonstrating timely and disciplined decision-making.

Managers identified key skills as:

  • Taking action to reach targets and meet commitments.
  • Setting high standards for customer relations.
  • Demonstrating timely and disciplined decision-making.

Adl said the research shows that at the senior levels, “There really is a big emphasis on deep industry knowledge and deep company knowledge. In the lower ranks there is probably a greater emphasis placed on foundational knowledge.”

“As we have done interviews with our clients,” he said, “we have found that if they put somebody out there who doesn’t have good decision-making skills, they will make mistakes” that can put the organization at risk.

Adl pointed out that the survey data revealed few significant variations among regions of the globe and among organizations of various sizes.

To bridge the business-acumen gap, companies have been focusing on attracting talent through aggressive recruitment. However, that will change, the report noted. Instead of buying talent, most companies plan to build it.

The way that they plan to develop high-potential employees is changing, too, according to survey results. The classic approach of letting workers accumulate on-the-job experience is expected to fall by the wayside.

“It’s too trial and error,” said Adl.

Expert-led lectures, a common teaching method, also are forecast to decline. They just don’t stick with today’s managers and future executives, Adl said.

Case Studies, Business Simulations

Case studies and business simulations are the cutting-edge teaching tools that will impart the business acumen that will help organizations rise above the competition, the BTS report finds.

“Customized business simulations are projected to grow at a far faster rate than all other formal learning methods,” the report states. “Eleven percent of senior leaders indicate that business simulations are used within their organization today, and 26 percent anticipate that this approach will be used in five years’ time—a 140 percent increase.”

Adl said companies should regularly assess their managers’ and senior leaders’ business acumen, identify gaps and take action to fill those gaps—just like they do with leadership capabilities.

Steve Bates is a freelance writer in the Washington, D.C., area and a former writer and editor for SHRM. His website is www.stevebateswriter.com.

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