A gap analysis is a tool that can help businesses identify where they aren’t living up to their potential, and then use that information to plan ways for improvement. Learn how gap analyses work, find examples, and follow our step-by-step guide to perform one for your company. Show
What Can a Gap Analysis Do for You?A gap analysis measures actual against expected results to identify suboptimal or missing strategies, processes, technologies, or skills. Use the results of a gap analysis to recommend actions that your company should take to meet its goals. By comparing the current state with the target state, companies, business units, or teams can determine what they need to work on to make their performance or results better and get on the right path quicker. Companies can also use the gap analysis process to elevate individual or team performance, and look at attributes such as task competency, performance level, and productivity. Other names for the process include need-gap analysis, needs analysis, and needs assessment. As opposed to a risk assessment, which tend to be forward-looking, a gap analysis examines the current state. ANSI (American National Standards Institute), ASIS (American Society for Industrial Security), and RIMS (Risk and Insurance Management Society) standards say that risk assessment includes the identification, analysis, and evaluation of uncertainties to objectives and outcomes of an organization. You can also look at a gap analysis as a means of comparing performance to potential. In other words, how far did a person, group, or product fall from their capacity? Did the resources fall short of the needs? Gap analysis is a process that, when applied to other business processes, becomes a reporting process used for improvement. When applied to manufacturing or production, a gap analysis can help balance the allotment and integration of resources from their current allocation level closer to an optimal level. Those resources can be time, money, material or human resources. Concrete vs. ConceptualYou can perform a concrete gap analysis thats looks at the real world, or a conceptual one that examines hypothetical scenarios. While you can use the same template in both exercises, when performing a conceptual gap analysis, you’ll need to make assumptions about which parameters to use. Conversely, use real facts and data for a concrete analysis. Strategic vs. OperationalA gap analysis can be strategic and focus on the overall organization and the planning and execution at that level, or it can be operational and focus on the day-to-day work of a team or department. Since both methods are based on real-world situations, there’s no need to make assumptions. Many business departments use the gap analysis process, including accounting, sales, customer service, and human resources. Below you’ll find a few specific examples of scenarios in which a company can use a gap analysis:
Why Do Businesses Perform a Gap Analysis?Businesses perform gap analyses to identify the difference between where they are with where they want to be. You can use a gap analysis to evaluate those differences, identify the causes, and inform the steps needed to bridge the gap. In project management, the difference between the way a company is performing a task or activity and the ideal way it could be performed is called CΔV (pronounced “C delta-V”), or the current gap vision. The difference between a target for a metric and the actual metric performance is called AΔT (pronounced “A delta-T”), or the actual gap target. Below are some reasons that a company might perform a gap analysis:
What Is a Market Gap Analysis?A market gap analysis is a method of researching sales opportunities where the demand outweighs the supply. An organization can use these analyses, which can be performed internally or externally, to make decisions based on market facts, rather than opinion. A market gap analysis differs from market research in that it’s proactive rather than reactive. Business to consumer (B2C) companies take advantage of this process often. The market they might investigate can be geographic (there’s nobody selling anything like our product on the west coast), product based (there was a time when no one was selling mobile phone cases that doubled as wallets), service based (there may a lot of dogs in a city, but not many dog walkers or other pet care businesses), or look for a way to better utilize existing resources (think of Uber launching Uber Eats). What Is a Strategic Gap Analysis?A strategic gap analysis compares a company’s strategy to that of its competitors. A business can then adopt the top-performing aspects of its competitors’ approaches and integrate these aspects within the most successful parts of its own existing strategy. When to Perform a Gap AnalysisA company can perform a gap analysis at any time, but be thoughtful about timing to maximize its effectiveness. Conduct gap analyses on a regular basis, before a period of strategic planning, or whenever a department or venture is underperforming. A gap analysis is often a key part of strategic planning, which is a process that helps an organization define a strategy to accomplish its goals. By looking for issues via a gap analysis, the business can adjust its strategy to better fit the situation, or update the company's processes to align with the strategy. When an organization is looking for problems with their performance, a gap analysis can be a key tool in identifying where things are falling short. For example, if a company wants to start a marketing campaign to improve their reputation or apply for a loan, they could perform a market gap analysis to help determine their impact on the their local economy and use that data as part of their campaign or loan application. Similarly, when a company is preparing for an audit or other oversight activities, a gap analysis is a proactive way of showing the auditors which regulations the company is complying with, and that it has a plan to meet the rest. Benefits and Challenges of a Gap AnalysisGap analyses benefit organizations in many ways, such as identifying growth opportunities and prioritizing resources. They can also be difficult and time consuming, and require in-depth knowledge of the department they’re targeting. We’ve outlined the top benefits and challenges below:
While valuable, gap analyses are not perfect. Some challenges related to the gap analysis process include the following:
How to Perform a Gap AnalysisPerforming a gap analysis is straightforward. First, identify the area to evaluate and state its ideal outcome. Next, analyze its current state. Compare that with the ideal results, and quantify the difference. Finally, make a plan to bridge the gap. In larger organizations, the gap analysis process is generally the responsibility of business analysts, project managers, process improvement teams, or management. But with a little training, and a well-designed gap analysis template, anyone can work through the process. Some organizations may already have a process outlined that you can follow. However, the basic steps for performing a gap analysis are explained below.
Gap Analysis Best PracticesWhen performing a gap analysis, be thoughtful about which areas, items, and processes to analyze, and which recommendations to adopt. Understand that the changes you make may affect others. Ensure your goals are specific, measurable, achievable, relevant, and time-bound (SMART). Back up your recommendations with supporting data from your analysis to increase the likelihood that your company will adopt them. Use charts to illustrate your data and make it easier to understand. It’s also imperative to consider cost, resources, and consequences when recommending problems to address and solutions. Remember, if a solution is out of reach, the company is unlikely to adopt it. Assign an owner to each part of the process to ensure that you complete each step. By digging deep into the proposed solution, you’ll find it might not be easy to achieve. Look beyond the obvious to see if there are other possible solutions. Learn more about how creating SMART goals can ensure that your gap analysis is as effective as possible. Frameworks for Gap AnalysisYou can use a framework for your gap analysis, like the Nadler-Tushman Model and the PESTEL framework, to simplify the process. Use each framework listed below as an organizing principle for both the causes you discover and your proposed solutions. McKinsey 7Ss Framework An example of a misalignment might be if a production line requires 20 people to operate at full capacity, but the graveyard shift only has 15 people available. In this case, there's a misalignment between systems and staff. Nadler-Tushman Congruence Framework SWOT Framework Download a free SWOT analysis template to get started with this framework. PESTEL Framework Fishbone Framework The 8 Ps of Product Marketing
The 4 Ss of Service
What Is a Gap Analysis for a Bank?In the banking sector, a gap analysis evaluates risk by looking at the balance of assets and liabilities. The analysis determines if there is a negative gap (when liabilities exceed assets) or a positive gap (when assets exceed liabilities). The banking gap analysis doesn’t take potential interest rate changes into account, and generally focuses on near-future time periods (one month out, three months out), so it is a limited tool. What Is a Gap Analysis in the Pharmaceutical Industry?A gap analysis (also known as validation gap analysis) in the pharmaceutical industry looks at the difference between regulatory requirements affecting a company, and the practices and processes that a company currently uses. Turn a Gap Analysis into Actionable Processes with Real-Time Work Management in SmartsheetEmpower your people to go above and beyond with a flexible platform designed to match the needs of your team — and adapt as those needs change. The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time. Try Smartsheet for free, today. Which of the following is the first step while conducting a gaps?The first step in conducting a gap analysis is to establish specific target objectives by looking at the company's mission statement, strategic business goals and improvement objectives.
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