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Reality Check: Is Your Business Strategy Ready for 2011?

01/07/2011 04:37 pm ET | Updated May 25, 2011

Here's a sobering thought for the new year: most business strategies are woefully incomplete.

So reveals a new survey from McKinsey Quarterly. The publication polled 2,135 executives about their business strategies to determine how many could pass a stress test of 10 questions. The survey asked about granularity, uncertainty and flexibility, among other things. In the end, the majority of executives polled said their strategies could not pass four of the survey's simple tests. This means many leaders are basically winging it in several important areas.

But you don't have to.

With the new year just beginning, it's not too late to put your own business strategy to the test. The one featured in the McKinsey Quarterly is excellent. If you're pressed for time, here are five questions from me worth considering:

1. How differentiated is your strategy? When you drive to work or browse the Internet, do you come across companies doing pretty much the same thing as your organization? If so, does your strategy include specific ideas for out-maneuvering them? You'd be surprised how many business strategies do not. One reason is because many business leaders have difficulty accepting that their ideas are not unique. They tend to downplay imitators or ignore potential disrupters. It's a common mistake. The truth is originality is like gold -- extremely valuable and very rare. If your business plan is based on some sense of exceptionalism, then it must be truly different to prevail. If other organizations offer goods or services at similar price points, you must rethink you value proposition.

2. Does your strategy depend on macro-economic growth? Though we are a mere few days into 2011, economic indicators look better than a year ago. Already, stocks are trending up and manufacturing is showing signs of life. This positive information comes on the heels of sales for the holiday shopping season, which increased 5.5 percent over 2009. But let's not get ahead of ourselves. The new 112th Congress was just sworn in on Wednesday. It is likely to make steep cuts in many areas. It must also resolve a huge dispute about the national debt ceiling. Considering how much of the nation's GDP is tied to government spending, the outcome will likely have far-reaching effects. In other words, it's anybody's guess how strong the 2011 economy will be. Most experts forecast GDP growth in the United States to be between 3 percent to 3.5 percent. But what if it turns out to be half that due to unforeseen circumstances? Will your strategy still work? The fact is most business leaders don't have a Plan B. Their strategies for staffing, acquisitions, business development and more are almost always based on strong economic growth. When results don't meet expectations, however, companies get lost. Take Hillcrest Bank of Kansas City. It bet big on real estate lending and failed last fall. Had it devised a business strategy that could work in all kinds of weather, it might not be out in the cold today.

3. Will your strategy work if you or any of your company's other leaders leave? Most businesses have recalibrated parts of their strategies since the recession save, perhaps, for one important area: talent retention. In the past few years, voluntary turnover has been rare. With fewer jobs available, even top performers stayed put during the downturn. But with key sectors of the economy springing to life, employees are weighing their options. More are likely to change jobs if not careers in 2011. Is your organization prepared? By that I mean will your strategy work if any of your top leaders depart? Or is it dependent on their unique skills and capabilities? Also worth considering: can your business survive a sudden jolt in the form of demands for higher wages and better benefits? If hiring does improve as some experts forecast, then these questions will have to be factored into your business strategy this year.

4. Does your business strategy take into account things that are beyond your control? The past decade has been nothing short of a revolution in terms of technological advance. Just 10 years ago, the most popular navigation tool for drivers was a paper map and the most popular social meeting place was Starbucks. Now everyone uses MapQuest and Facebook instead. It's a different world today, of course, though you might not know by looking at some companies' business strategies. Blockbuster is in bankruptcy because it underestimated the impact new technology would have on its business. Similarly, other companies are struggling to cope with new regulations put in place after the collapse of the housing market and the tumult that followed in the financial sector. Congressman Darrell Issa, the incoming leader of the House Committee on Oversight and Government Reform, is trying to roll back rules that have hurt businesses. But it could be years before his efforts help your company -- if ever. Take time, thus, to thoroughly assess the impact that innovation and regulation could have on your organization this year.

5. Can your business strategy stretch as far as your opportunities? When you think of Amazon.com, you think of books, electronics and clothing for consumers. But advanced computing services for businesses? You might be surprised to learn that the online retailer is fast becoming a major player in cloud-based computing. (My company, Cisco, has certainly taken notice.) What Amazon is doing, however, is not uncommon. A lot of successful organizations started off in one industry and then expanded to another when the time was right. Phone giant Nokia? It stared off in the wood pulp business. Fashion purveyor Gucci? It was originally a saddle maker. The point is these organizations had flexible business strategies that allowed them to take advantage of opportunities and market transitions. What about your organization: Could it embrace a new business model without upending its existing one? It can't if your existing strategy is too restrictive and the minds of your leaders are too closed.

Hopefully the above will open the floor to some new discussion where you work. Meantime, Happy New Year. As John Lennon sang, let's hope it's a good one.

Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth. Author proceeds from sales of Doing Both go to charity. Follow Inder on Twitter at @indersidhu.