Most employees simply focus on their work and assume that business acumen is for entrepreneurs or businesspeople. Yet, to do well in any profit or non-profit organization, you must understand how your company truly works. This book by Ram Charan helps you to develop business acumen and learn the universal language of business. It allows you to become better at any job, feel more engaged and fulfilled with your work, and make a bigger impact. In this free version of What the CEO Wants You to Know summary, you’ll learn the 4 business fundamentals, and how to apply them in the real world.
What the CEO Wants You to Know: An Overview
Every business has the same fundamentals. This is true for a roadside stall or a Fortune 500 company, a profit or non-profit organization. Great CEOs (i) possess great business acumen and (ii) help everyone in the company to understand these fundamentals.
The insights in this book are relevant for business leaders and anyone who wishes to make a bigger impact in their work. They’re especially helpful for 2 groups:
- Millennials born between 1982-2000 who will be propelling the digital revolution and holding key leadership positions in the coming decades; and
- Business-to-business (B2B) salespeople who must understand their clients’ businesses in order to prove that they bring real value.
Mastering the Universal Language of Business
All businesses—regardless of size, type or industry—have the same 4 building blocks: customers, cash generation, return on invested capital, and growth. Operating a public-listed company is more complex than running a street stall. Yet, the fundamentals are the same. The street vendor merely juggles all 4 building blocks in his mind while a large corporation must do it on a much bigger scale. They must:
- Satisfy customers better than competitors;
- Generate enough cash to stay in business;
- Produce a good return on the money invested in the business; and
- Grow the business profitably.
To do well, a business must master all 4 fundamentals and integrate them.
- Most employees see their work through their specializations or silos, e.g. engineering, sales, accounting.
- Once they can see the big picture, trade-offs and inter-dependencies across functions, they’ll be in a better position to help the business to grow and thrive. In the process, they’ll feel more connected to their work and company, are able to identify opportunities, make better suggestions, create a greater impact and accelerate their career progression.
In our full version of the What the CEO Wants You to Know summary we’ll explain each of the 4 fundamentals in detail. Here’s a short overview:
Customers
You can’t have a business without customers, and a company can only thrive if it has satisfied customers. So, your CEO wants you to know your customers (the people who buy your products) as well as your consumers (the people who use your products).
Cash Generation
Any business needs cash to operate and grow. Cash generation refers to the difference between cash that flows into the business and cash that flows out of it, in a given period of time. This is also known as “cash flow.” In our complete summary, you’ll learn the sources of cash inflow vs outflow, the difference between cash and income, receivables and payables, the role of Gross Margin (revenue minus cost of goods sold) and how any employee may contribute to cash contribution.
Return on Invested Capital (ROIC)
Every business uses money or capital. This may be its own money (profits accumulated from previous years) and/or someone else’s money (e.g. money from banks and shareholders). The Return on Invested Capital (ROIC) shows how well you’re using the money. The bigger the number, the better. Your CEO wants you to understand ROIC, and to know how to influence it by addressing margins and velocity (or inventory turns) in your business.
Growth
Growth is essential for any individual or organization to thrive and prosper. A company that doesn’t grow cannot stay ahead of its competitors, meet evolving market needs, or retain great talents.
However, bad growth can actually hurt a company, so the key is to focus on good growth that improves both your top line (revenue) and bottom line (profit). Know the 4 criteria of good growth and use the growth box to find good growth opportunities:
Putting It Together: Understanding the Whole Business
Business acumen is about understanding all 4 building blocks and combining them to see the full picture of how an organization is doing.
In our full version of What the CEO Wants You to Know summary, we’ll (i) explain how to examine 6 areas to start understanding your company’s health, and (ii) look at a short case study of Amazon’s annual reports to link the concepts to real-world numbers.
Applying Business Acumen in the Real World
Theoretical knowledge alone isn’t enough. You need to apply your new-found insights in real life to truly gain business acumen. In particular, Ram Charan discusses how to:
- Cut through real-world complexities by identifying the 3-4 top priorities that will affect the 4 moneymaking fundamentals;
- Generate wealth for shareholders (including employees who own company stocks) by improving the price-earnings ratio (“P/E” for short);
- Achieve superior execution to translate knowledge into results; and
- Synchronize people’s efforts so they move in sync toward a common goal and with minimum friction. This expands the company’s capacity.
Get our full 14-page summary for more details on each of these areas!
Getting the Most from What the CEO Wants You to Know
Ready to start thinking like a businessperson and making a bigger impact at work? Do check out the our full book summary bundle that includes an infographic, 14-page text summary, and a 27-minute audio summary.
This is a clear and easy-to-read book. Ram Charan illustrated the key ideas in this summary using detailed examples and case studies of companies such as Netflix, Starbucks, Ford, Amazon, etc. You can purchase the book here or visit ram-charan.com for more details.
Learn how to make a greater impact at work with our Impact Players summary or get more perspectives on business fundamentals in Simple Numbers Straight Talk Big Profits .
About the Author of What the CEO Wants You to Know
What the CEO Wants You to Know: Using Business Acumen to Understand How Your Company Really Works is written by Ram Charan–an Indian American business consultant, speaker, and author. He was formerly a Harvard Business School professor, and has consulted with leading companies like GE, Bank of America, Verizon, Coca-Cola, 3M, Merck, Aditya Birla Group and Tata Group. He has authored and co-authored several books on business strategy, execution, corporate boards and building a high performance organization.
What the CEO Wants You to Know Quotes
“Business is always changing, but the basics remain the same.”
“If you don’t have a customer, you don’t have a business.”
“Return is nothing more than profit margin multiplied by velocity. This is a universal law of business.”
“Either you are growing or you are dying.”
“If you and your company are going to succeed, you need to truly understand the business.”
“The world has complexity but leaders provide clarity.”
“Every business needs the right people in the right jobs.”
“Today, you have to be not only a team player, in the truest sense of the word, but you have to be an integrator as well.”
Click here to download What the CEO Wants You to Know summary & infographic
