how to conduct a gap analysis
some gap analysis models break the following steps into four processes others are a little more elaborate and expand the analysis into a few additional steps in either case a gap analysis entails understanding your current position determining where you want to end up and devising a plan on how to arrive at the desired endpoint a gap analysis starts by focusing on where your organization is currently operating at this includes researching the products it offers customers it serves geographical locations it reaches and benefits it offers to its employees this information can be quantitative i e financial records as part of required filings or qualitative i e surveys or feedback from key stakeholders often a company will perform a gap analysis because it is already aware of an issue for example customer feedback surveys have generated poor results and a company wants to investigate why and implement remedies before it can dream of what it wants to become it must understand why these errors are happening when issues are arising and who the change management leaders must be the crux of gap analysis resides in this step where a company must identify what it wants to become this stage must be done with great care as the identity that a company wants to have will dictate the strategic steps that it must make to obtain those goals in gap analysis a company must make specific measurable goals to yield the greatest long term success for example in the situation above it would do the company little good to set the goal of becoming better at customer service instead the company must identify more trackable metrics such as achieve customer satisfaction of 90 within 12 months another way of identifying the desired outcome is to analyze what competitors or other market participants are doing it may be easier to identify when another company is doing something well and attempt to emulate that with the current state and future state defined it s time to bridge the two and understand where the most critical differences lie in our running example it s in this stage that a company realizes it may be woefully understaffed has not provided enough staff training or does not have the technical capability to keep up with customer inquiries now that a company has defined its deficiencies it s time to come up with plans on how it will reach its target state sometimes there may only be one solution other times the gap analysis may call for several simultaneous changes that must work in tandem to gauge whether a solution will work it must often be quantifiable with ways to measure change our example of improving customer service may have an easy metric such as customer satisfaction percentage other gap analysis findings such as deficiencies in brand recognition may require more creative thoughtful solutions that can still be evaluated once the best ideas from step 4 are chosen it s time to put them into action in this stage the company attempts to close the gap identified in the analysis by putting the solutions in place the company attempts to become better at a targeted area of business or overcome a deficiency this implementation stage often entails following a detailed set of processes at a specific cadence as part of the gap analysis the company has a defined outcome and careful steps must be taken to ensure that more damage isn t caused instead of cured for example consider employees feeling overwhelmed and discouraged from laborious training an effort of making workers more proficient may lead to loss or productivity or decreased morale for this reason the company must also conclude its gap analysis by monitoring any changes sometimes the company took exactly the right steps other times the gap might have been wider than the company thought or the company failed to adequately assess its current position in any case gap analysis can be a circular process where after changes have been made the company can reevaluate its current position and where it compares against regarding other future states a gap analysis often contains sensitive information therefore companies will often not disclose their gap analysis model in addition the analysis would tip off competitors about the direction of the company types of gap analysisalso called product gap analysis market gap analysis entails making considerations about the market and how customer needs may be going unmet if a company is able to identify areas where product supply is not meeting consumer demand then the company can take measures to personally fill that market gap this type of analysis may be performed by external consultants who have more expertise in these areas of business in which the company may not currently be operating also called performance gap analysis strategic gap analysis is a more formal internal review of how a company is performing the analysis often entails comparing how a company has done against long term benchmarks such as a five year plan or a strategic plan a strategic gap analysis may also be performed to compare how a company is faring against its competitors this type of analysis may unearth ways that other companies are utilizing personnel or capital in more strategic resourceful ways this type of information may be hard to come by especially if departed employees have signed nondisclosure agreements and the company does not publicly disclose much information about processes a company may choose to directly analyze where its company may be falling short compared to competitors by looking specifically at financial metrics this may include pricing comparisons margin percentages overhead costs revenue per labor or fixed vs variable components the ultimate goal of a profit gap analysis is to determine areas in which a competitor is being more financially efficient this information can then be used in further broader gap analysis types instead of looking at the financial aspects of a company a business may choose to look at the human element instead a skill gap analysis helps determine if there is a shortfall in knowledge and expertise with current personnel a skill gap analysis must clearly define the goals of the company then map how current laborers may fit into that design a skill gap analysis may lead to the recommendation of simply training existing staff to incur new skills or seeking outside expertise to bring in new personnel this type of analysis is especially important for innovative companies that must rely on having direct skill sets to continue to be competitors or leaders in their industry in addition skill gap analysis is critical for small companies that must rely on a smaller staff to operate in this case individuals must often have diverse flexible talents that can be useful in many different aspects of the business often leveraging internal audit functions a compliance gap analysis evaluates how a company is faring against a set of external regulations that dictate how something should be getting done for example a company may internally evaluate its accounting and reporting functions in advance of seeking an external auditor to provide an opinion on its financial statements compliance gap analysis tends to be preventative and defensive as opposed to more strategic forms of gap analysis for example instead of performing a gap analysis to attempt to gain a greater percentage of market share compliance gap analysis often has the intention of meeting regulations avoiding fines meeting reporting requirements and ensuring that external deadlines can be met successfully as a company builds new products gap analysis can also be performed to analyze which functions of the products will meet market demand and where the product will fall short this type of gap analysis is often associated with the development of software products or items that take a long time to develop in which the market demand may have shifted during product development gap analysis a company may also evaluate which aspects of the product or service have been successfully implemented delayed intentionally eliminated or still in progress with a blend of multiple types of gap analysis above the company can then perpetually evaluate how its product plan is changing and whether it has the internal resources to meet the internal gaps needed for product development completion gap analysis toolsto assist with the gap analysis process companies have an assortment of tools at their disposal the tools listed below have an intended use that is best suited for a specific aspect of a gap analysis one of the more recognizable analysis tools swot analysis determines a company s strengths weaknesses opportunities and threats as a gap analysis tool a company can evaluate both internal and external factors that it can improve upon or realize its lead on in a swot analysis a company evaluates its strengths and weaknesses as part of internal analysis during a gap analysis a company may choose to divert resources from its strengths especially if it feels comfortable with its current market lead on the other hand companies may be more interested in what its weaknesses are and how far behind it may be from outside parties in some cases companies may decide that its weaknesses cannot be overcome due to barriers of entry massive capital investment requirements or consumer preferences the other half of a swot analysis relates to external forces often outside of the control of a company the opportunities and threats that a company faces are often the uncontrollable forces that pose risk of the findings of a gap analysis not materializing for example a company may outline the plan to capture greater market share by releasing a new product should the threat of a government tariff on the product increase the per unit cost the company s gap may be more difficult to close a fishbone diagram also called a cause and effect diagram or an ishikawa diagram is useful to identify what might be causing problems it is also helpful to encourage creative thinking when sleuthing through a business constraint a fishbone diagram is created by determining the problem at hand and writing that at the center of an area then major categories are written on branches that expand away from the main problem eventually additional branches are added to these branches that identify why problems within each category exist in the end the fishbone diagram attempts to break a large complex problem into various aspects that can be more easily approached and solved the mckinsey 7s framework identifies seven elements that are key to determining how well a company performs and what has an impact on how it operates the model contains three hard elements of strategy structure and systems along with four soft elements of shared values skills style and staff using the mckinsey 7s model a company can identify how each area fits into prevailing gaps and how the company can influence each aspect to better conform to long term objectives as adjustments are made it s often recommended to iteratively monitor and review company performance the nadler tushman model is used specifically to identify problems understand how a company may be underperforming and determine how to address that performance the core of the nadler tushman model is based around the concept that aspects within a company should be aligned and work together otherwise the company will not be as successful the model is centered around different components including culture work structure and people these four core principles receive data that is input a company s strategy as well as output a company s performance the end goal is to determine how each of the four components are working together a pest analysis entails gauging external factors and how they may impact the profitability of a company pest stands for political economic social and technological a common variation of pest analysis is pestle analysis which also incorporates legal and environmental concerns pest analysis can help with a gap analysis as a company may not be considering external factors that may cause exacerbate or solve current gaps for example government legislation may cause a company s product to become much more expensive to export in this case a company may have a potential gap should external forces shift in a way that adversely impacts the company companies often use a combination of these tools as findings from one tool may contribute to the analysis in another 