Where Business Acumen Counts Most?

Street vendors in villages around the world use business acumen every day. They have to -- their next meal often depends on it.

In companies, business acumen is crucial when the external world changes and there's a need to reposition the business.

Like when Hollywood studios started selling videocassettes directly to the public at the same time it sold them to video rental companies. That's when Blockbuster's rental business started to slide.

People wanted to buy movies, not just rent them, so Blockbuster started selling them. But the moneymaking was completely different.

Blockbuster was used to buying videocassettes on credit and making payments with the cash from renting them. Returns were high.

Selling videocassettes meant laying out the cash up front, holding lots of inventory, and waiting for the cash to come in when the videocassettes were sold. Cash flow, velocity, and return were all adversely affected.