The headline notification from WSJ pushed through to my phone, and my spidey-sense immediately tingled. “Netflix says first-quarter domestic subscriber growth slowed while profit and revenue rose, as it gears up to face new Hollywood competition.”
That sentence is an amazing example of Business Acumen in action. I asked a few friends – smart friends with good jobs at reputable, successful companies – what that headline immediately told them about the business. They answered with varying degrees of insight. A few cited examples of the levers in play, a few struggled to come up with some insight, and one replied, “dude, leave me alone, I’m watching Game of Thrones.”
Business Acumen is described many different ways, but at its essence, it is simply understanding the different levers that make a business successful. And the amount of it your team possesses has tremendous influence on the quality of their business decisions.
There are three main levers at play in the simple headline: price, expenses, and creative top line growth. By the way, our Business Acumen 1 or 2-day simulation explores all three…
- PRICE – The foremost reason Netflix was still able to post growth in both top and bottom line was an ability to pass through a price increase to customers without weakening its subscriber base. The most immediate “fall-through” to the bottom line is a price increase without taking on additional expenses. Of course, price increases can be fraught with difficulty, as Netflix knows well after its 2011 kerfuffle…
- EXPENSES – The second successful lever is to gain efficiency (i.e. “cut costs”) – preferably coupled with at least moderate top line growth. Netflix knows competition is getting ready to mobilize. It’s a good time to lean up a bit and make sure all expenses are justified.
- CREATIVE TOP LINE GROWTH – Domestic subscription growth might have slowed, but overseas expansion clearly filled in the gap and allowed the machine to keep on churning. Businesses that depend on a single vertical often find they live short lives.
At some point in any business, everything is a math problem. The better your team understands the numbers; where they come from, what they mean, and most importantly, HOW they can impact them, the better the results.
To get your team’s Business Acumen accelerated, let’s CONNECT.
