The need for analysts to have improved commercial awareness
I have mentioned before that analysts benefit from stronger commercial awareness. But what do I mean by this term?
The easiest way to explain is to set it in context. A lack of commercial awareness is normally shown when an analyst presents their findings. The impression they leave with internal customers is that they are commercial naïve & irrelevant.
I’ve written before that this too often happens to otherwise very technically capable analysts. Their work may be based on high quality, well prepared data. Their analysts may be statistically robust & perhaps even presenting using engaging data visualisation.
But, if it ignores commercial priorities or constraints for the business, or recommendation would actually destroy value, it is doomed. Other problems can be ignorance of competitor behaviour, agreed strategy or even how the business makes money.
As someone who works with a number of the UK’s largest businesses, I regularly see the need for this skill. Clients request training or mentoring to hone this skill. So, in this post, I will seek to draw back the curtain on what is meant by this term.
Commercial Awareness 1: Understanding Finances
This might sounds like a Captain Obvious statement, but most analysts & Data Scientists have no background in Finance.
Yet much of their work requires a good understanding of how the business they serve makes money. It can often also require an awareness of current financial performance in order to understand priorities.
Having worked with a number of Finance professionals in the past, as well as a Bank & an Insurer, I’ve had plenty of opportunities. Any yet, I found that much training or comms on this topic assumes too much in terms of people’s understanding of the basics.
The single best sources I have found is a great book called “Naked Finance” by Dr. Dave Meckin.
I had the pleasure of being on one of Dave’s training courses many years ago & he really bought the subject to life. In this book he helps explain key topics including:
- Understanding profit & drivers of profit
- Reading the 3 main financial statements
- Understanding how companies are valued
- Drivers of share price movements
- How to compare value of potential projects (NPV)
If you recognise the need to better understand the basics of business finance, then I highly recommend Dave’s book.
Commercial Awareness 2: Strategic Alignment
Another way analysts can get it wrong is failing to understand the context of not just current performance but also future plans. In a previous post I recommended that Customer Insight Strategies need to influence & be aligned to the Business Strategy.
Analysts will benefit from understanding not just the final communication of the Business Strategy but also the rationale. What does their brand stand for? How is it different from competitors? How does this play to strengths or opportunities? What participation decisions have been made with regards to markets, products, channels & segments.
Understanding more clearly the unique identity of their business will help analysts. Take time to read strategy documents, to understand more clearly threats, opportunities & relevant profit levers.
A great tactic here can be job shares/swaps/shadowing. Giving analysts the opportunity to work with the Finance or Strategy teams charged with strategic reviews. It will help develop an appreciation of priorities & which potential insights actually align with bigger picture. Another way of avoiding coming across as a naive analyst.
Commercial Awareness 3: Market & Competitor Intelligence
Peter Lavers has shared before on the need for B2B businesses to have market and competitor insights. The same is true for Business-To-Consumer firms.
Failing to understand the dynamics and trends in a market can result in inappropriate recommendations. Not knowing what competitors are doing and what has worked in the past can result in “insights” that sound just like copycat or too late recommendations.
I shared before the advantages of a broader holistic definition of Customer Insight. Within that approach there are advantages to including Market & Competitor intelligence teams. Too often these fine people are kept separate from other data analysts or market researchers. Often they report into Finance or Strategy lines.
However, the regular analysis of market & competitor behaviour often allows them to develop crucial domain knowledge. Expertise that prove crucial to analysts & modellers, for example when developing econometric models.
Some of these teams also develop models of market behaviour that are very useful for scenario modelling & stress testing strategies. At the most basic, analysts need to know if apparent strong performance by their firm or a competitor is truly out-performing the market (or just “a rising tide lifts all boats“).
How do you develop Commercial Awareness?
I would encourage you to invest in developing the commerciality of your analysts. It can pay you back in spades, in terms of their confidence & impact on other stakeholders. Feel free to get in touch if you’d like to know more about my training courses to develop these skills.
- Getting Agile really working outside of IT requires culture change - February 13, 2020
- The need for analysts to have improved commercial awareness - January 8, 2020
- Don’t Neglect the Political Dimension of Applying Analytics or Insight - May 17, 2019