“Any fool can know. The point is to understand.”– Albert Einstein.
You don’t have to spend a long time within the world of business before you inevitably hear the magic two-word phrase ‘commercial awareness’. It’s becoming an increasingly sought-after skill for candidates in banking, legal and other client-focused sectors. A quick search of the term online returns hundreds of articles talking about the importance of commercial awareness, but what actually is it? How do you get it? Most importantly, how do you use it? I’ve done my best to address these common questions below.
What is commercial awareness?
Depending on who you ask and where you search, commercial awareness can have several varying definitions and interpretations:
As you can see, there is no clear one definition of what commercial awareness is, but it certainly encompasses all of the elements outlined above. To help grasp it as a concept, I think it’s really useful to think of commercial awareness as being made up of two complementary components – ‘externally’-focused and ‘internally’-focused commercial awareness.
External Commercial Awareness
‘External’ commercial awareness is more traditionally understood and emphasised among aspiring solicitors – focusing on how the firm’s clients and responsible parties are going to be affected by any changes in the business world.
It’s clear that lawyers need to be able to do more than just know what the letter of the law is – they need to be able to use that knowledge effectively and apply it to a situation. A change in the economic, technological, political or geopolitical landscape can be as transformative a development for a client’s problem as a regulatory-legal one. Economic crashes, breakdowns of trade agreements and referendum results (let’s not get too into that one…) can have rippling effects on a client’s budget, willingness to take risk, access to capital and more. As their lawyer, a client is coming to you so that you can assist them in achieving their business needs – a merger, sale, franchising etc. – so it is up to you to be able to accommodate those legal needs within the shifting broader framework of the business world.
Internal Commercial Awareness
Conversely, ‘internal’ commercial awareness is primarily focused on the inner running of the firm as a business on both a short and long-term basis. It is important to realise that firms are ultimately businesses and as such will look to innovate their business practices, invest in their long-term goals and diversify themselves from their competitors. I spoke with Christopher Stoakes, an expert and leading author on commercial awareness, whilst I was at University. The key thing he stressed is that a firm is like any other business in so many ways – they need to keep an eye on their bottom line, profitability, assets and cash flow.
When it comes to the innovation of business practices, firms can aim to do so in many ways. Many are already turning to AI-based solutions for administrative tasks, with a view to incorporate them fully into their business practices as the technology develops. Some are improving their flexibility to client needs with an array of consultant lawyers at hand for when they need them. Or, perhaps, they’re opening new dedicated departments in emerging markets, such as video game, cryptocurrency, or space law.
Understanding how your role as a trainee fits within this business practice is also critically important. There are a number of dependency relationships that exist throughout a business regardless of how senior or junior your role is. Who you receive work from, who you give it to once you have added value to it and the general broader network of the business’ stakeholders are all dependent on your efficiency and effectiveness to succeed. A good way of visualising this value of your work, in order to analyse it, is to think about what would happen to the workings of the business if your role did not exist – who would address the role’s needs? Who else’s work might be affected as a result? How does it affect the commercial profitability of the business? Having an understanding of these elements can demonstrate to a firm that you know how you contribute to the commerciality of the business, as well as the potential options for career progression, mentoring and adding your own innovative ideas to the system.
What is it not?
Given the difficulties in giving it a single definition, there are a number of misconceptions as to how one should develop their commercial awareness. Below are some of those misconceptions, including those I used to believe myself!
“I need to know one article really, really well”
In the initial application stages for a Training Contract, lots of firms like to ask candidates to discuss a recent news article that they are both interested in and believe has commercial importance to the firm and its clients. These sorts of questions are giving you an opportunity to demonstrate your commercially-aware mindset and understand the implications of a storyline. It can be tempting to meticulously study one article and memorise an in-depth answer in order to answer the application question, or discuss it should it be brought up at a later interview stage. Whilst this may seem effective in the short-term, it will only get you so far – firms will look to asses a candidate’s all-round commercial awareness capabilities continuously at the later stages of an application, often looking for it within case-study, group-based and written assessments.
“Browsing headlines tells me everything I need to know”
Most headlines nowadays will often include the most eye-catching part of a story to try and grab your attention, but there is a lot of useful information that goes amiss contained throughout the article too. Quotes from important individuals, or editorial speculations as to how the story may develop in future, are two examples of important information that go beyond the surface-level statement of a headline. You need to understand the deeper implications of the change taking place – which specific clients or industries will it affect? Will this change still be in place 10 years from now? How does it affect the firm? Is it linked with any other recent news events? Exploring these types of questions will give you a more cohesive understanding of business developments beyond what most people will know about them.
“I need to be able to predict the future of what happens next”
Whilst solicitors are expected to be able to combine their experience and the current commercial climate to try and prepare for their clients’ needs, you are not a fortune-teller. It is a very high-level skill to be able to make arguments, based on evidence, as to how a specific theoretical scenario might develop. It is outright supernatural ability (and foolishness given the liability it raises) to unequivocally guarantee an outcome for a client just because something similar happened before.
“I need to be a specialist who knows every industry term and detail”
Specialist knowledge can certainly be useful if you’re applying for a specialist role/firm, or if you’re enthusing about a certain seat you want to get more experience in during your Training Contract. Generally, however, it is much more preferable in an interview situation to be able to be well-rounded and a jack-of-all-trades when it comes to your commercial knowledge. You have no control about how a firm will look to test your commerciality, so being flexible with what you know and how you can apply it is by far your best approach. Use your specialist knowledge to demonstrate your enthusiasm for a certain sector and its clients, but be equally ready to be able to explain another sector with enough detail to satisfy what a recruiter is looking for. Balance your approach to your preparation, so that you can discuss your passions and interest in detail, whilst still being able to formulate a reasonable and compact answer on another topic should you need to. Keep your commerciality broad and focused on the key elements outside of your specialist areas, rather than learning every quasi-business headline from the last 7 days – you simply won’t have the time!
“I did some reading a few weeks ago, so I’ll be fine”
Commercial awareness is not a one and done skill like riding a bike which will stay with you for a long time. Instead, it is much more accurate to think of commercial awareness as a positive habit you want to enforce, like going to the gym or getting enough sleep. What you might have learned in two weeks of intensive reading and study a few months ago might already be heavily outdated. Absorb information so that you can have it at your disposal, whilst also continuing to frequently update it with any changes that happen.
How can I develop commercial awareness?
To develop your commercial awareness, it is useful to have a think about how you generally learn about the latest news updates and then adapt it to have a commercial element. I personally started off by subscribing to topic-based notification alerts on my phone as well as the LinkedIn Daily Rundown, which both integrated really well with how I was fed information on a day-to-day basis. For instance, you could:
- Follow news sites, with alerts on a Business, Finance, Legal or Economic category.
- Use social media effectively, perhaps with an alternate account on more informal sites such as Facebook, or getting engaged with a professionally-oriented platform e.g. LinkedIn daily rundown.
- Subscription to magazines/newspapers – delivered straight to your door, or phone, so you don’t have to hassle! You can also subscribe to their mailing lists which is generally a cheaper and quicker alternative.
- Watching/listening to the news – even 15 minutes a day can be incredibly informative whilst you eat your breakfast, so long as you commit to paying attention and learning from it.
- Podcast learning – platforms like Spotify and Apple Music now offer an incredible range of podcasts, episodic releases and interviews that are really informative.
If you’re looking for more specific examples and recommendations of the best commercial awareness sources, you can check out my resource list at https://hclark.law.blog/2019/08/28/commercial-awareness-resource-list/.
How do I demonstrate my ability to use commercial awareness to employers?
Taking everything above into account, you will be expected to demonstrate your commercial awareness to your employers – both in the application process and continually throughout your career to demonstrate your willingness to learn and enthusiasm. From an assessment perspective, role-play or interviews will often ask open leading questions that can prompt an opportunity for you to demonstrate your commercial awareness. Similarly, if a mock scenario given to you reminds you of a similar event that happened recently, talk about it to the depth most applicable to the situation. This happened to me in my Baker McKenzie interview, where I was able to compare the share pricing issue at hand with the economic and legal reaction to Tesla’s Elon Musk share price ‘fiasco’ last year (see here https://tinyurl.com/elon18).
Do your best to keep your response logical and structured so that your potential employer can see your thought process clearly. Be ready for counter-questions regardless of however clearly you explain something, as you need to be able to evidence your ability to think on your feet. Summarise what you know in your own words rather than repeating everything verbatim and speak with confidence as best you can!