Gap analysis allows you to identify strengths, weaknesses, opportunities, and threats to your business, enabling you to make informed decisions and take proactive measures to grow and succeed. Don’t wait until a problem arises before you assess your business. By regularly evaluating your business, you can stay ahead of the curve and achieve your goals faster.
What is Gap Analysis?
Gap analysis is the comparison of the current state or performance of your business with the optimal or intended outcome. This analysis is done to ensure that your company is making great use of all of its resources, so it doesn’t perform less than expected. In layman’s terms, gap analysis is the assessment done to know the difference between your current state and your desired state. A gap analysis will help you determine if you’re meeting your business’s requirements and what needs to be done if you are not. Gap analysis is also called a needs analysis, needs assessment, or need-gap analysis.
Gap analysis means that you are analyzing the gap between your present state and your desired state. Project managers use gap analysis as a strategy to achieve improvement in the workplace. Gap analysis helps you use real information on your business performance to gauge its optimum performance level.
You can use gap analysis to assess several aspects of your business, like customer satisfaction, revenue generation, productivity, supply chain cost, and more. Small businesses that do not have a lot of resources can particularly benefit from this analysis method. They can use gap analysis to figure out how to allocate their resources for optimal results prudently. Gap analysis consists of recording, determining, and enhancing the difference between what the business requires and what the business is capable of currently.
Gap analysis naturally stems from benchmarking and other forms of evaluation. Once you know what to expect from your business, it’s easier to conduct a gap analysis. What is found in the comparison is the gap, and it provides a way to measure the amount of investment needed to get to your desired outcome.
In this article, we’ll discuss the following:
What Is Gap Analysis? And Why Is It Important?
A gap analysis is an evaluation of the current state of your business and the state you aspire it to be. This can be simply done by asking three important questions;
- Where are we now?
- Where do we wish we were?
- How are we going to close the gap?
Gap analysis can help you streamline your business and also take it to the next level. It can do this by pointing out the gap you need to fill for a better product, income, and efficacy. Once you can identify the gap and what’s missing, you can focus your energy on how to fill in the gap and get to your intended outcome. If you don’t know how to do a gap analysis, it is quite simple, but there are several checklists like this that you can use to streamline and simplify the analysis.
A gap analysis template makes the analysis easier and easy to visualize the gap and share it with workers. A gap analysis to help your workers visualize where the organization is struggling can help induce more productivity and teamwork. Gap analysis can be used within a department, for a particular product, or for an entire business.
It is salient to be aware of the condition of your organization. Only then can you visualize the intended goal and how to reach it? This is the foremost reason every business needs a gap analysis to show you the difference between your current state and your desired state. But also to show you the difference between your current and former state. This analysis is crucial in forecasting the future of your business or company. It will also be a catalyst for creating an actionable strategy to guide your company to its peak. A gap analysis is the best way to know if you are doing your best and are on the right track to achieving your goals.
If you are not, the analysis reveals what areas you need to improve so your success efforts can be optimized. By looking into the company’s past performance and what input is required, you can determine the level of inputting your desired outcome needs. Gap analysis highlights the shortcoming and areas of improvement and gives businesses the chance to ruminate and decide on the best way to tackle that. If you think your business is stagnant or lagging and you don’t know why then the gap analysis is what you need.
The 4 Types Of Gap Analysis
There are so many phases of running a business or a company, and you will always be faced with challenges that may hinder you from reaching your goals. The best way to counter those challenges is with one of the best business management tools called a gap analysis. There are several types of gap analysis which are mentioned below;
Product or market gap analysis
Did you know that 95% of new products fail once they hit the market? There are many reasons why a product did not do as well as expected. A gap analysis is a cost-effective way to counter this issue even before you launch the product. The product gap analysis, also called the market gap analysis, can be used to evaluate the market, how the target audience may receive the product, competing products, and the steps the competing companies are taking. This will help you find the gap in your product’s areas. Whether it’s branding, pricing, features, or promotional activities of the products, you would find the gap and then take steps to make the best of your launch with this information.
HR/recruitment/skills gap analysis
Here is one of every company’s biggest assets. This is the department concerned with the employees’ hiring, safety, training, and wellness. Optimization of HR activities like these has a huge positive impact on any company. This is why HR managers are fond of gap analysis. They use it as a tool to know what each department needs to reach its goal and pinpoint each team’s strengths and weaknesses. HR managers use gap analysis to know which skill gap needs to be filled, so they know what a project or the company needs. 36% of HR professionals allude to the unavailability of sufficient technology as the cause of lack of improvement in the organization as it further inhibits their ability to train managers in proper onboarding techniques.
Needs gap analysis
This needs gap analysis is similar to the skills gap analysis, but it is more cumulative in this case. It takes a broader approach to the gap analysis, analyzing everything a company needs to reach a goal, not just the skills or staff. It encompasses all the resources a company needs, like equipment, knowledge, budget, and more. There is no set way to do this, and you should factor in all the resources you may need to fill in the gap between your current state and your goal. A needs assessment template can help make this analysis easier.
Performance gap analysis
When you have goals for your business, it is important to conduct a performance gap analysis so you can compare this week’s performance with last week’s performance. Whether your business or company is having problems with sales, customer acquisition, retention, or project performance, all you need is a performance gap analysis. This will help you visualize the results if your company continues with its current performance. That way, you can know if you need to intensify efforts and create more actionable plans so as to reach your goal. If your company’s goal is to make 10 million in three months, a gap analysis at the end of one month can help you realize if you will meet up with the goal or if you need to change strategies to enhance performance so you can make 10 million at the end of three months.
Healthcare gap analysis
With the complexity of everyday lives in the healthcare industry, it’s easy to lose sight of goals. But with a gap analysis, healthcare providers can meet up with competitors and beat them. With the myriad of policies they have to keep up with, it is essential to use a gap analysis to confirm that you are in line with your goals and closer. If not, it’s essential to go back to the drawing table to provide maximum healthcare for everyone.
IT gap analysis
IT is an expensive, functional tool that must not be wasted so as to get maximum return on investment (ROI). Therefore, regular IT gap analysis must be done to know which software your employees do not need and which software you can invest in to cut costs on staff and increase efficiency. IT gaps analysis can also steer you in the right direction, so you know which IT to invest in to troubleshoot your processes to get your preferred outcome. Research shows that wearable technology increases productivity by 8.5% and job satisfaction by 3.5%; this may be an option to explore after considering if it will streamline your workforce.
Financial gap analysis
Every company that wants to succeed must have excellent financial knowledge. Financial gap analysis helps you assess your company to know your status and the optimal status. With this analysis, you can find the difference between your current status and financial goals.
Retail gap analysis
Retailers can use gap analysis to understand the market and figure out a way to understand the market so they can excel. They can also use it to know why a product is not selling and how they can improve that. A gap analysis example is a retailer using this analysis method to evaluate a regional market to know if they have their target audience.
How To Perform A Gap Analysis In 4 Simple Step
You own a company and feel like you are at a standstill, and nothing seems to give you the desired outcome. It’s time to perform a gap analysis. It’s okay if you don’t know how to perform analysis, you can get it right with 4 simple steps.
The first step is to know what you want to achieve. Let’s say you want your company to meet a particular sales target by the end of the month. Hypothetically, your company is making 1 million monthly, but you want to triple that next month. That means your current state is 1 million. Note that your current state does not necessarily have to do with finances, as there are different types of gap analysis; this is only an example. You could have three regional stores and plan to own more. That means your current state is three regional stores. So, firstly decide what you want to do an analysis and determine your current state.
The next step is to identify your goal, which can be your desired state or future target. For your current state to be relevant, you must figure out where you plan to be. You should decide your desired state within a reasonable timeframe. Going by the example we used earlier, that means that your desired state is 2 million, and the timeframe is a month.
Now that you know your current and desired state, it’s time to find the gap between the two. So if your goal is to make 3 million next month and you currently make 1 million. Your gap would be 2 million. Now, you have to figure out why there is a gap. Why are you not presently making 3 million per month, and what can you do to reach that goal of making 3 million a month instead of 1 million? You can start by questioning yourself and your workers to answer this question. You can use the 5 Whys to answer this question.
Knowing the reason why you haven’t been making up to 3 million in a month means that you now know what to tackle and how to tackle it. It’s time for an actionable plan to take you to your goal. Ensure that your strategy is fail-proof and accurate. Your improvement processes must be based on the information you uncovered in the gap analysis. There are different tools you can use to implement your strategy. Don’t forget to consider the financial part of your strategy and consider if your company or business can afford it.
The Gap Analysis Vs. The Swot Analysis
Gap analysis and SWOT analysis are two widely-used strategic planning tools that businesses can utilize to evaluate their current state and identify opportunities for growth. Despite having distinct approaches, both analyses are essential for companies seeking to improve their performance and competitive advantage.
A SWOT analysis is a comprehensive examination of a company’s internal and external factors, including strengths, weaknesses, opportunities, and threats. This assessment helps businesses gain a thorough understanding of their current position in the market and formulate strategies for future growth. Qualitative data is gathered through surveys, interviews, and market research to provide insights into various aspects of the business, such as customer satisfaction, brand reputation, and market trends.
In contrast, gap analysis evaluates the gap between the current state of a company and its desired state. This method identifies areas that need improvement to achieve the desired outcome. Quantitative data is collected through performance metrics and benchmarks, making gap analysis more data-driven than SWOT analysis.
Both gap analysis and SWOT analysis are valuable tools that companies can use to gain a deeper understanding of their strengths, weaknesses, opportunities, and threats. By utilizing these strategic planning tools, businesses can formulate more effective strategies to drive growth and success.