Tag Archives: Commercial Awareness

Competency Corner – Commercial Awareness

A Little Knowledge goes a Long Way

A significant part of business rests on the notion of credibility. Credibility then leads to trust which leads to deals and ends in riches. Although you will need to exercise some social aptitude in winning over your interviewer on a personal level, the main thrust of this article concerns itself with how to establish credibility through commercial acumen and how to tackle the often onerous task of research.

In recruitment parlance, this is the Commercial Awareness competency.

1-3 hours spent researching a company and current affairs is mandatory for interview success. But although this may seem like a fruitless and maybe even futile endeavour as there is simply too much to know, there are some guidelines which can be followed to make this genuinely effective and efficient.

The Company

  • Many consultancies have quite complex organisation structures. Know the main services offered. Simplify them and don’t bother drilling down into the numerous sub-divisions (unless you’re applying specifically to one specialism). A quick sketch will suffice to order your thoughts and make it stick.
  • Jot down some client names and client examples of projects – the detail is usually unnecessary. 5mins spent memorising 5 client names and project types (outsourcing/ shared services programme/ IT implementation etc.) will be very impressive when rapidly regurgitated. Make sure you know at least one project in some detail to cover if you’re asked to elaborate.
  • Find out how the company is doing, whether they have ambitious growth plans or have made any sales or acquisitions lately. Search for the firm in one of the news sites, BBC or Times Online etc. Also have a look at consulting news.

Current Affairs

  • Consultancies tend to have a couple current business concerns/ issues highlighted on their home page. Skim through these. You now have a good overview of the current commercial landscape. Use these as an anchor for your broader reading.
  • The Times Online is a wonderful resource. The ‘need to know’ heat map is quite useful too. Skim the titles to develop a broad picture and formulate some generic phrases to summarise eg. The Financial services sector, specifically retail banking is still quite volatile [insert headline – for eg. RBS is blah blah blah].
  • Make sure you know at least one major news story in detail. A merger or acquisition is usually a good candidate for healthy discussion in interviews where you’re asked to talk about this kind of thing, as you may then be asked to suggest how xyz consultancy could help.

You’ve spent a couple hours doing research, now try and group all the info and headings into themes or sectors or big issues. You’ll be surprised at how learned you come across when you produce the fruits of your research in an interview.

A couple news articles and some neat packaging is all you need to create a credible impression. Initially of course.

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The Zombie Economy

Same Game, New Rules

In a previous post, The Financial Crisis – A Dummies’ Guide, we looked at the causes of the meltdown. But looking beyond the plummeting house prices, the credit crunch and the recession, where does that leave us. After all, super-clever people have managed to prove that our economic system is fallible once again.

So business is clearly not as usual no matter how much we try to convince ourselves of a recovery and a positive year ahead. Naturally, that’s what we have to think. And perhaps it may be true for many. Things can only get better, right.

But clearly, the rules of the game have changed, and people need to learn to play again. Banks don’t want to do what they’re supposed to do, lend money. People don’t want to, or rather, can’t afford to buy, buy, buy anymore. Companies are going into administration, not just one-man-bands but big names like Woolworths and Borders! And Governments, yes even governments and whole countries are in trouble as debt mounts and credit continues to tighten out of fear (Times Online: Saving the Greek economy).  Everyone these days seems to be in need of some rescuing. So what kind of crazy world are we living in these days?!

Welcome to the Zombie Economy

According to PA Consulting Group’s new book ‘The zombie economy’, we have avoided an economic apocalypse and a form of recovery is perhaps imminent but we must prepare ourselves to live in a world dominated by powerful forces of half dead, half alive zombies.

Why a zombie economy?

The zombie economy is made up of half alive half dead banks, governments, consumers and companies staggering along, struggling to function in the new world.

  1. Zombie banks whose balance sheets are too weak to support sufficient lending
  2. Zombie governments whose finances are too stretched to sustain expansionary policies
  3. Zombie consumers whose wealth and spending power are too depleted to allow them to consume
  4. Zombie companies who are saddled with debt that they cannot comfortably service, impeding growth and investment

The impact of a zombie world on recovery

Business leaders are struggling to assess the impact of zombies on the economy, and it cannot be overstated. The zombies are set to create a vicious circle that prevents any rapid return to business as usual, and a recovery that feels more like a recession. Companies must prepare themselves to live in the zombie world and take radical action to reinvent their business models in order to survive.

The winners and losers in the zombie economy

The zombie economy will divide the business world into winners and losers.  The winners are highly liquid and either fairly or over-valued. The losers are companies who are not liquid and are fairly or over-valued. There are challenges and opportunities for both.

For organisations to succeed and thrive in this difficult new economic climate, their leaders must take action now. While few businesses will find the next few years easy, some will be better placed than others. There are fours steps to thriving in the zombie world:

  1. secure liquidity
  2. create a portfolio of potentially winning businesses
  3. remodel each business to ensure that it can perform strongly in the new world
  4. (subject to the success of the first three steps) take bold action to stake out a massively enhanced market position in the new world.

(Source: PA Consulting/ Zombie economy)

How’s that for something to whip out and impress in an interview! After all, everyone likes zombies.

The Financial Crisis – A Dummies’ Guide

With all the broo-ha-ha in the news about bankers’ bonuses and all the chatter concerning the recession, economic downturns, market volatility, global recovery etc. it’s safe to assume, consultancies will want to see some awareness of what’s been going on regarding the Financial Services industry, especially since a huge chunk of their work came directly and is still pouring out from the big banks. PwC for example, have netted £154 million in Lehmans-related fees according to recent court filings. Furthermore, it has had a profound effect on nearly every other industry sector. [I’ll talk more about this in another post perhaps].

But first! The recession is (technically) over; so before you lose the chance to gain a strong understanding of how it all started while it remains relevant today, here is an excellent post from the Wikijobs blog I stumbled across, using an inspired analogy graduates are sure to absorb:

The financial crisis explained in simple terms

Heidi is the proprietor of a bar in Berlin . In order to increase sales, she decides to allow her loyal customers – most of whom are unemployed alcoholics – to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around and as a result increasing numbers of customers flood into Heidi’s bar.

Taking advantage of her customers’ freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi’s borrowing limit.

He sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At the bank’s corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a risk manager (subsequently of course fired due his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi’s bar.

However they cannot pay back the debts.

Heidi cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %.

The suppliers of Heidi’s bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.

The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

In real terms…

Of course, the lending surrounded the sub-prime (super-risky) mortgage market in the US. Rising drinks prices = rising house prices. And when prices peaked in the US by mid 2006, and people started defaulting on payments – the s**t really hit the fan as the banks had backed multiple securities with these sub-prime mortages which were now rapidly disintegrating.

The hope of making some money by investing in a financial product that primarily relied on joe-public paying his mortgage sounds like an obviously silly idea, but as robust risk -management was considered a bit of a party-pooper in such prosperous times, investments became increasingly complex, convoluted and divorced from the truth. Capital and credit divebombed and the financial system exploded into a complete meltdown. The effects of which quickly became globally felt as these products were traded around the world.

For a more detailed explanation have a look at this genuinely fantastic video (MUST SEE):

(Source)

So where does that leave us…..what next? Welcome to the ‘Zombie economy’ (next post coming soon).