What Does it Mean to “Be Commercial”?

This article was originally published by Procurious in 2015.

Once upon a time in a meeting with a former manager where I was urged to be more “commercial” in my outlook. When I asked for a definition, the answer I got was along the lines of “just be more commercial…”.

This was in stark contrast to an episode from earlier in my career where I was said to be “too commercial” in my outlook. The word ‘commercial’ gets thrown around with careless abandon, but do we truly know what it means to be commercial?

From adopting a commercial approach, to being more commercially oriented in procurement to be across contracts and costs. There are those in organisations who need to be more commercially aware, and there are even people with the word in their job title who do completely different roles.

What Does Commercial Mean?

The word ‘Commercial’ is defined as follows:

• Concerned with or engaged in commerce: “a commercial agreement”.
• Making or intended to make a profit: “commercial products”.
• Having profit rather than artistic or other value as a primary aim: “their work is too commercial”.
• (Of television or radio) Funded by the revenue from broadcast advertisements.
• (Of chemicals) Supplied in bulk and not of the highest purity.

Ignoring the last 2 (for purposes of this article), the more applicable definitions are concerned with commerce (or the notion of supply and demand in a supply market) and making a profit. However, this doesn’t really bring us any closer to an understanding of what it means to be ‘Commercial’ as a person, or give us actionable items to consider.

If commerce is the act of buying and selling, then in order to be commercial we need to have:

• An understanding of our business and the wider environment in which it sits.
• Familiarity with the end product or service that we buy or manage.
• How this fits into the service provision and Value Proposition of the organisation.
• The activities of the organisation and how the role of the individual impacts this.

In addition to this, we need to have an understanding of the wider marketplace and be able to:

• Know how the major players are performing at present.
• Find out who is dealing with whom, and which companies have won important contracts.
• Consider future prospects for the organisation and what it means to you and the area you manage.

Profit is central to any business, irrespective if they are a profit-making enterprise, or a non-profit business (which needs to make money to ensure it stays in business). Understanding how organisation make profit should be central to any procurement strategy that will be sustainable in the long-term. This includes an understanding of suppliers and which ones will be around in the short and medium term future, what the sources of profit are and how changes in the global market will impact all of this.

With this in mind, Commercial Awareness could be summed up as:

• An interest in business and an understanding of the wider environment in which an organisation operates: its customers, competitors and suppliers.
• Understanding the economics of the business and from both the organisation’s and the customer’s perspectives.
• The need for efficiency, cost-effectiveness, customer care and knowledge of the marketplace in which the company operates.

How Do We Become Commercially Aware?

Being commercially aware is important for a number of reasons, but which ones are applicable to you will depend on the stage of your career. For example, commercial awareness is frequently seen as one of the key skill shortages for graduates, while studies on the future of procurement talk about the need for greater commercial awareness in professionals and future leaders.

How do we become more aware? Consider the 5 point plan below and ask how you could apply it in your role 

1. Keep up to date with factors that will impact your organisation and its external environment. Check your organisation’s business plan and strategic vision for clues on this.
2. Understand the nature and structure of external supply markets, list out the things that affect them, and keep track of when they occur.
3. Understand historical patterns that will help predict future trends. It’s particularly useful to be aware of cyclical patterns, such as the impact of financial year end and budgets, and how they impact specific industries.
4. Understand and map out key strategic supplier relationships. What is their strategic vision? Where do you feature? Gather data on suppliers and markets and pay attention to the trends.
5. For any piece of analysis you do, remember to ask SO WHAT! What is the purpose of the analysis and what are you aiming to do with the data? If you can’t answer these questions, you probably don’t need to be doing it.

Do this and (hopefully) the next time your manager asks you to be more (or less) commercial you’ll at least have a handle on where to start!