Over the course of my consulting career, I have met many sales and buying managers who possessed some very good technical skills, however what they lacked was a more rounded view of business, and this often held them back from realising their full potential. I call this the degree to which someone is “commercial”. A broad commercial awareness is going to be especially critical in the next few years, as the Brexit negotiation plays out and its outcomes unfold. There are going to be changes to the economic and trading environment of many businesses, and the need to be aware of these changes and realise the threats and opportunities that these bring is going to be vital.
So, how can we define “commercial”?
First of all, being commercial requires an end-to-end knowledge of the business. How does the business make money – what are the biggest sources of revenue, what are the biggest costs? How can these be reduced or increased? What is the impact of the global market place on them? How does my role fit into this?
It also means having an intimate knowledge of your suppliers and your competitors – how do they make money? What are their big costs and sources of revenues? The answer to this may not always be as obvious as it seems. Lucasfilm made more money off Star Wars toys than the movies themselves. Restaurants make the majority of their profits from their alcohol sales, rather than from food.
If you are a buyer, consider – how do your suppliers make money? You might be able to help them make more money at relatively low cost, and in turn they might be able to help you. You need to be creative. Do you know where your suppliers source their raw materials or packaging? How is the global business environment affecting them? Are there any opportunities or threats you should consider?
If you are a seller, do you have an intimate knowledge of your company’s supply chain, and what happens to your products from the moment they are delivered to your customers’ warehouses? How well do you understand your customer’s needs and problems? Are these changing? What could you be doing about it?
Understanding the economics of the business is essential, but it’s not enough. A business cannot be driven by efficiencies and cost-effectiveness alone. The commercial manager also understands what is truly valuable to the business and that of its main stakeholders – tangible or intangible Value. Issues such as stability, security, exclusivity, may have intrinsic value – depending on the business model. This means that from time to time, there may be conflicting objectives, and the commercial manager needs to take everything into account and be able to deal with the ambiguity that all the factors may bring. Sometimes, for example, it may be appropriate to over-invest in a particular supplier or customer, because your instinct tells you this is a business that will be able to add value to yours in the longer term.
To summarise, we are talking about someone who has a 360 degree, end-to-end view of the business. Here is a 5-point plan to consider:
1. Understand your company’s business model: how does it make money? What is its strategy, its vision and what makes it tick – how does your role fit into the wider model? Where can you make a difference?
2. Keep up to date with what is happening in the economic environment which your business operates in – trends in technology, raw material and energy prices and exchange rates.
3. Stay close to your customers, their changing needs and wants, and the socio-economic circumstances which affect what matters to them.
4. Understand your company’s suppliers, their markets and the issues which affect them.
5. Follow your competitors, their business models and their SWOT. Be objective!
We have developed a proprietary assessment tool to measure the degree of commercial awareness and capability based on six key competencies – if you would like to discuss how it might help you or your team, please get in touch. firstname.lastname@example.org .