Ram Charan is a true business thought leader who has been advising CEOs and boards of companies around the world for decades. translator “How does your company really operate?This book is one of the earliest books by this prolific author, yet it remains relevant today. It is part “textbook,” Explain the basics of business and basics of business financeand an advisory part, addressing How to activate sound business and leadership practices. To align with this ramification, I’ve segmented this summary according to the book’s sections.
Section I – Business Acumen: The Universal Language of Business
Charan feels that the best CEOs are like the best mentor I’ve ever had and that they “are able to remove the complexity and ambiguity of a business by focusing on the essentials.” The most successful business leaders focus on the essentials and have a keen sense of how a business can make money.
Everything in the business comes down to cash generation, margin, return on assets, growth, and customers; A true business acumen requires understanding these basic building blocks of making money. Charan goes on to tackle these and other concepts (such as inventory turnover, investment capital, fixed and physical assets, profit margin, and cost of capital), providing a nice overview of these business basics using real-world examples.
Section two – business acumen in the real world
Once business leaders understand the above basics, they should be able to apply them in the real world. Sharan writes that “The world is complex, but leaders provide clarity.” This business acumen helps the CEO select three or four business priorities that will retain customers and achieve all important money-making goals. Action Priority determines the most important actions to take at a given time, as well as the appropriate response to the unexpected… whether it be a crisis or an opportunity. Charan contends that many business leaders falter because they become confused or indecisive. Some do not set clear priorities or lose focus, especially if their judgments are being questioned. If a leader fails to set priorities, keeps changing his mind, or communicates those priorities poorly, the entire organization loses energy.. On the other hand, if you set and communicate work priorities clearly and frequently, people will have a better sense of what needs to be done. If she chooses the “right” set of business priorities, business will thrive.
Section Three – Getting Things Done
CEOs know that in business, Charan writes, there are quarterly phases but no bottom lines. Leaders must deliver results day in and day out, relentlessly and consistently over a long period of time. Achieving results is what gives an organization energy, builds confidence, and generates the resources to move forward. So once the CEO has identified three or four business priorities, how are they going to actually get the work done? Charan suggests that a good leader will harness the efforts of others, expand their personal capabilities, and organize their efforts to achieve results. Leaders who consistently deliver results recognize what people do best (their skills, attitudes, and abilities), connect business needs to people’s natural talents, and take the time and effort to put people where their strengths can have the greatest impact. CEOs have a lot of insight into the people and the organization to gain power alignment.
Charan knows that business excellence alone is not enough. The CEO must first think like an entrepreneur, with a perspective that extends beyond the functional or managerial point of view to the overall business view. So, as a CEO, how deeply do you understand business fundamentals and how well do you apply them? How well do you prioritize business goals so that resources and talent are put to best use? What is complex in your company? And how can you, as CEO, help provide clarity and focus in navigating complexity to achieve key business goals? These are just a few of the questions Charan challenges CEOs to ask themselves.