We all have a rough vision of what we want to accomplish in life, right? Nonetheless, there are days when we feel like there’s a huge gap between where we are and where we want to be.

The best way to get out of this rut? Reflect on the journey you’ve been on so far, find out what’s going well, what’s holding you back, and most importantly, the areas where you could improve.

And, it turns out, things are pretty much the same in the world of business too. There are times when a business fails to meet its projected goals and targets – whether it is due to lack of budget, poor communication, missing IT functionalities, insufficient resources, or a mix of many factors.

All in all, there’s a gap between the current situation and the ideal situation of the business…and that’s where a gap analysis comes in! It answers three important questions, i.e where your business currently stands, where do you want it to be, and how you are going to take it there.

Basically, a gap analysis explores why the business isn’t living up to its potential, and how the situation can be altered to reach the projected goal.

In this blog, we will walk you through everything you need to know about gap analysis, including how can it help your business and some techniques that you can use. Ready? Let’s go.


What is Gap Analysis? (Definition)

Gap analysis is the process in which an organization monitors its actual performance in comparison to its anticipated/projected performance.

It is all about identifying, analyzing, and addressing the ‘gap’, i.e, the void between where an organization currently is, and where it needs to be.

To put it simply, through gap analysis, you can evaluate how far you are behind your target point and create the required action plan to get to that point.

In gap analysis, you examine all the strategies and possible opportunities that can optimize the output. Moreover, you can use gap analysis for a single operation, or the entire business.

Gap analysis has far-reaching benefits and it can do wonders for an organization. Let’s explore a few reasons why you should perform a gap analysis.


7 Reasons Why Every Company Should Perform Gap Analysis

1. Reach Your True Potential

No matter how successful an organization is, there are always areas where it can improve. By carefully evaluating what’s going on in the industry, and analyzing where it’s falling short, gap analysis can help your organization reach its true potential and achieve great results.


2. External Benchmarking

External benchmarking is about comparing the results of a specific process or product, against some external criteria. For instance, you might want to compare your product reviews with the competitor, or you might want to compare your quality management system with the legal standards for quality management.

Read more: Risk Assessment Matrix: What is it and How to Create it?


3. Make Better Decisions

As we already know, gap analysis maps out the current processes and operations and gives you a big picture of the current situation. You can use the results, compare them with the goals, and then make informed decisions to steer the business in the right decision.


4. Boost Productivity and Profits

Gap analysis directly affects the organization’s efficiency, which in turn impacts the bottom line. By analyzing and filling the gaps in your operations and staff performance, you can improve the productivity of your organization, which will ultimately lead to a boost in profits.


5. See Your Strengths & Weaknesses (In Real Time)

You don’t need to wait until the end of a project or an operation to see what did not work. Perform gap analysis and find out what’s happening at the moment and what’s going to happen as you move forward. In short, it’s not about ‘what used to be’, but ‘what could be’.


6. Keep The Organization Fresh

If you want to survive in the competitive world, you should constantly check in on your activities, staff, and other operations. Gap analysis helps you examine your organizations ‘hits and misses’, i.e, your strengths, wasteful practices, inefficiencies, good use of resources, and more.


7. Analyze The Profit Percentage

If you didn’t reach your forecasted profit percentage, you can conduct a gap analysis to understand why you couldn’t meet the target. The reasons could be anything from unexpected competition to poor resource allocation – and gap analysis can help you pinpoint the reason.

All these benefits of gap analysis make it a popular and commonly-used process in businesses! Now, let’s get to the soul of this blog post – how to conduct a gap analysis in 5 easy steps.


How to Perform Gap Analysis? (Step By Step)

Step 1: Identify The Present State

Whether it is your conversion rate, customer retention rate, or your return on investment, there are always ways to improve every nook and corner of your business. With that being said, start by tackling those aspects that could impact your organization the most.

Luckily, the rise in data accessibility has made it much simpler for organizations to clearly determine how they are performing. For instance, you can combine the data related to sales, production, hours worked, and evaluate the performance of your projects.


Step 2: Specify Where You Want To Be

Clearly specify your goals and objectives, i.e, what exactly do you want your business/project to accomplish, and where do you want to take your business. The clearer your goals are, the easier it is to understand how to achieve them and perform a gap analysis.

You can use the good old method of setting SMART goals (Specific, Measurable, Attainable, Relevant & Time-bound). This will allow you to set distinct goals to aim for, and the ‘gap’ that you ‘analyze’ will be more transparent and easier to measure.


Step 3: Determine The Gaps

Once you start comparing how your business is presently performing with how you want it to end up, you will start noticing the ‘gaps’ between the two points. One thing that you need to ensure here is that your current position and your future goals are in the same timeframe.

For instance, if you want to increase your retention rate by 5% in the next three years, you need to take your existing rate and your current pace into consideration. Accurate information is extremely important when it comes to identifying the gaps, as an underestimated or overestimated gap size can lead to chaos!


Step 4: Describe The Gap

Well, now that you know what the gaps are, it’s time to understand why they exist. In this step, you need to analyze and evaluate all the factors that are causing the gap. They could be quantitative or qualitative. In a nutshell, ask yourself ‘why does this gap exist?’

To get to the core reason for the gap, you can utilize the ‘5 Whys’ technique. You can also conduct a SWOT analysis, and we will explain it in detail later in the blog! All in all, these methods will help you explore the cause and effect of the gap, organize your thoughts and ease the entire process.


Step 5: Bridge The Gap

The next (and last) step is to figure out how you are going to close the gaps that you will identify. In this step, you need to create a solid plan of action. Always, always base your action plan on the data, insights, and information that you’ve learned throughout the analysis.

Consider the price of implementation for each strategy that you mention in your action plan. Most importantly, give yourself a reasonable time frame. Why? Because without concrete deadlines, the action plan might go sideways or worse, be forgotten. What a nightmare!

There are so many techniques out there that make the gap analysis process easier and help you ensure that nothing falls through the cracks. Read on to know more!

Read more: Action Plan: Definition, Importance & How to Steps!


The Four Most Used Techniques For Gap Analysis

1. Fishbone Analysis

A fishbone diagram, also known as Ishikawa cause-and-effect diagram, is a visualization technique that helps to analyze the root cause of a problem. Even though it started as a manufacturing analysis, it can be used by an organization that wants to identify any underlying issues and figure out how to make things right.

This diagram is in the shape of a fish skeleton – the problem/effects are at the mouth, and related causes are branching out from the spine. This layout gives you an overview of how specific issues are linked to one another, so you can decide what you need to prioritize while devising a solution.


2. McKinsey 7S Framework

This tool has been named after the consulting firm ‘McKinsey & Co’, and it is used to determine whether your organization or team is meeting the current expectations. This framework involves seven people-centric categories, namely strategy, structure, systems, shared values, skills, style, and staff.

The ultimate goal of this framework is to gain a deeper understanding of how each element aligns with each other, recognize gaps that could potentially affect the performance, and align all the processes to minimize disruption and boost productivity.


3. SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats – four elements that could impact the efficiency and success of a product, project, or organization. This technique is incredibly popular and it helps you strategically shape your decision-making.

SWOT-analysis helps an organization come up with the best solution by leveraging their strengths, mitigating the witnesses, while pursuing opportunities and avoiding potential threats. You can use it to assess the current state of your organization, evaluate it, and then refine it.


4. Nadler-Tushman Model

Named after Professors David Nadler and Michael Tushman, the Nadler-Tushman model (also known as the organizational congruence model) gives you a big picture of your business processes, uncovers the root cause of problems, and links four performance elements: work, people, structure, and culture.

The higher the compatibility between these four elements, the better the performance! The elements are then separated into four groups – input (company’s environment, workforce, resources), transformation (things that convert input into output, other systems), and output (the final product/service).


Wrapping Up

To achieve your organization’s true potential, you need to be clear about where you stand today and where you want to end up. That’s precisely where gap analysis comes in.

It helps you understand the organization’s current situation (performance), your ideal situation (potential), and what needs to be done to get from performance to potential (bridging the gap).

By performing gap analysis, you can improve your organization’s efficiency levels by leaps and bounds. You will also be able to better optimize time, money, and all the resources!

Further reads:

Succession Planning: What is it & How to do it?

Management Report: What is it & How to Create it?

Competitor Analysis: What is it & How to do it? (Template Included)

Knowledge Sharing at the Workplace For Enhancing Productivity

Mission Statement: What is it & How to Write it? (With Examples)

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