Gap analysis is a tool used by businesses for tactical and strategic planning. It’s designed to outline a company’s ‘current position’, the ‘desired future position’, and the gap in between.
Gap Analysis is the process of comparing two things in order to determine the difference or gap that exists between them. Once the gap is understood, the steps required to bridge the gap can be determined. Most often gap analysis is used to compare two different states of something; the ‘current state’ and the ‘future state’. In business and economics, gap analysis is a tool that helps companies compare, ‘actual performance’ with ‘potential performance’.
At its core are two questions: Where are we? and Where do we want to be? According to Michael Asu; the basic reasons for business gaps can be analyzed by asking specific questions, such as: What exactly is the gap? What are the consequences of the gap? What is the timing? Who is responsible? What are the options? What are the costs? … Once all possible gap reasons are known, studied, and the root cause recognized, then suitable actions can be identified to either; remove, fill, or mitigate the gap.
Gap analysis is also called; need-gap analysis, needs analysis, and needs assessment. For example, it would be useful for companies to know the difference between customer expectation and actual customer experience in the delivery of a product/service. As such, gap analysis is used as a tool to narrow the difference between perceptions and reality, thus enhancing customer satisfaction.
Gap analysis is a broad concept, and it’s applicable to many aspect of business where performance improvements are desired, for example; the product quality gap could be measured by the difference between the quality level of products expected by customers and the actual delivered quality level.
Gap analysis can be used to address gaps in many areas, such as; human resource management, security management, energy conversation, competitive position, management skills… the list of applications for gap analysis is endless…
In the article “Transform Your Business – Gap Analysis and Gap Planning” by Uwe Hook writes: The gaps between what the organization ‘is now’ and ‘is doing’, and where it wants ‘to be’ and ‘to be doing’, expresses the challenge to be tackled by gap analysis and gap planning. Gap planning determines how the gaps are to be closed or reduced. Gaps can be filled by; adding things, eliminating unnecessary things or by changing things.
In planning the analysis, it’s essential to clarify what information is most relevant. This involves specifying intended outcomes, and possible unintended outcomes. When an individual or a group is confronted with a gap between ‘where they are’ and ‘where they most want to be’, they can respond in four different ways; absolution, resolution, solution, and dissolution. Learning and creativity are enhanced more by design (dissolution) than by research (solution), more by research than trial-and-error (resolution), and more by trial-and-error than by doing nothing (absolution).
The efficiency and effectiveness of gap planning is flexibility and innovation in the selection of gap fillers– consider not only the set of traditional gap fillers, but also those not previously implemented. In the highly competitive world, organizational business design must be creative in developing the vision for the future of the enterprise.
Therefore, the selection of gap fillers must be more a matter of creative design, thinking out of box, rather than business as usual. Gap planning and gap filling is a challenging process– gap fillers are rarely independent and their selection should take into account potential systematic interaction, especially those that might affect the enterprises’ overall performance…
In the article “About Gap Analysis” by Shane Thornton, writes: Gap analysis is a business assessment tool and method that focuses on the gap between a company’s ‘current performance’ and its ‘desired performance’. Gap analysis evaluates current, actual performance and the necessary improvement efforts to close the gap and reach the desired, future performance. The function of gap analysis is to ask upper management two basic questions about the organization: Where are we now? Where do we want to be in the future?
To make the move towards the future desired state, a company must develop and implement quantifiable and measurable success factors that reflect the difference between success and failure of the organization. If accomplished, a solid critical success factor should establish a competitive advantage over the competition in the marketplace. Gap analysis looks to improve inefficient business processes by optimizing allocation of all resources and inputs.
Many companies are performing below their potential because they either misuse resources or lack the correct investment in technology or capital. Gap analysis highlights these inefficiencies and offers options for improvement. Effective gap analysis should increase an organization’s production and performance, resulting in higher-quality products at a lower total cost.
Gap analysis also measures the amount of time, money and resources needed to fulfill an organization’s potential and reach the desired state. The fundamental requirement of gap analysis is– consistent, proactive, and effective management throughout the planning, implementation, and transformation stages of the analytical process. The planning stage and the extensive research required during this stage is the foundation for successful gap analysis.
Research needs to focus on both internal operations of the organization and external business environment, and provide the necessary knowledge about the current state of internal operations, and information about the external environment, such as; market trends, consumer demands, competition…
Benchmarking is a useful tool companies use to compare themselves to other similar companies. Benchmarking can provide useful information and guidelines, such as; ‘what is a realistic desired state for their business’... The two most popular types of gap analysis are product gap analysis and market usage gap analysis. Product gap analysis concentrates on internal improvements and growth limitations due to product or service characteristics. Market usage gap analysis focuses on the possibilities of growth by evaluating and comparing current market conditions to potential market conditions…
In the article “Gap Analysis Compared to Navigation” by Don Schwerzler writes: There are three distinct phases in Gap Analysis:
- Where Are We? One Side of the Gap! At its simplest, navigation is estimating ‘where you are’ by studying your position relative to known ‘guide-posts’ like the sun and other stars. Gap analysis estimates business performance in much the same way. Developing ‘guide posts’ and building a consensus among the company’s management for their implementation is critical for an effective gap analysis planning process..
- Where Are We Going? To The Other Side of the Gap! In navigation, we set a course from; ‘where we are’ to ‘where we want to arrive’. In gap analysis, similarly, we set a course from; ‘how things exist now’ to ‘how we want things to exist later’. Once there is an agreement among the key stakeholders on the specific ‘guide posts’– possibly, three to five issues that have impact and need improvement– then, you are ready to chart a new course of action and produce an action plan.
- Secret Revealed! Both in navigation and in gap analysis, the secret lies in the fact that both measure a changing situation. So the navigation ‘fix’ or business ‘gap’ that is taken at one point in time does not remain valid forever. The secret to using either effectively is to take another ‘fix’ or ‘gap’ at a later time and to compare them over time; i.e., before-and-after analysis. Navigation fixes might be every hour or so, whereas, business gap analyses might be every three or six months. Comparing them over time reveals the movement or progress you have made toward ‘the other side of the gap‘ and indicates whether course changes are needed.
Gap analysis is about evaluating and improving business performance. A gap is a space or opening– in management terms it’s the space between; ‘where you are’ and ‘where you want to be’. According to Tom Hawes, the goal of competitive intelligence is to produce actionable intelligence for decision makers. Gap analysis is one of the many competitive intelligence tools you can use to interpret your information about the competitive environment.
A gap is simply the difference between; where you and your competitors are positioned. A positive gap indicates you are in a better position than your rivals, while a negative gap clearly means the reverse– in a worse position.
According to David Ingram; A gap analysis is a formal way to identify areas of business operations that are not meeting desired performance levels; and uncover the changes necessary to improve results in that area. As with any strategic initiative, top management is responsible for initiating a gap analysis planning process, for example; bringing all relevant employees on board, overseeing the process, and making final decisions about the analysis’ outcomes and implications.
Strategic initiatives like a gap analysis can only be fully effective if top management exhibits total commitment to the change effort. Business leaders must act as; champions, communicators, and mediators in times of change. Management must make the gap analysis a prime issue, in their workdays, and must encourage employees, at all levels of the organization, to achieve excellence.
Employees often emulate the behavior of top management. If the leadership shows no real interest in the gap analysis and its implications, managers and employees throughout the company are likely to feel the same way. If the leadership is fired up and passionate about the program, more employees will be on board. A gap analysis can be broken down into specific steps, such as:
- Identify areas in which performance is lagging– actual performance levels must be measured and specific.
- Measurable goals for improvement must be set.
- Identify possible causes for performance lags, as well as opportunities for performance-enhancing changes.
- Decide which identified areas should be focused on, and implement the changes.
The performance of the target area must be closely monitored over time– looking for ‘change in performance level’, which should shed light on the effectiveness of the program. A gap analysis can be used in time of crises to find solutions for obvious problems; however, the tool has more potential than just being a damage-control technique.
Using a gap analysis on various departments and business units on regular basis can help organizations continually improve the efficiency of their operations while cutting costs and delivering a consistently higher quality product or service…
Gap analysis (also known as need-gap analysis, needs analysis or needs assessment) is an examination of business performance and provides insight into the needs for improvement and helps determine what steps to take to attain business goals.