How to Perform Gap Analysis: A Step-by-Step Guide

Gap analysis is a valuable technique that helps organisations identify the differences between their current and desired future states. Gap analysis consists of three key components- current state, desired state and the gap. By conducting a thorough gap analysis, businesses can identify areas for improvement, set realistic goals, and develop effective strategies to bridge the gaps. Gap analysis can be performed in various contexts, such as strategic planning, process improvement, technology implementation, and performance evaluation.

There are several types of gap analysis performed within organisations. The type of gap analysis used may vary depending on the purpose, industry, or project requirements. Each type of Gap analysis has its uses and advantages.

• Performance Gap Analysis: Performance gap analysis focuses on assessing the difference between the current performance of an organisation, department, or individual and the desired performance. It identifies areas where performance falls short and highlights the actions required to bridge the gap. For example, Organisations can reduce customer complaints by 20% within six months by assessing the current level of customer complaints, identifying the root causes, and implementing measures to address those causes and achieve the desired reduction.

• Market Gap Analysis: Market gap analysis examines the difference between the existing market demand and the organisation's current market share or offerings. It helps identify growth opportunities, understand customer needs, and develop strategies to capture a larger market share. For example, Software companies can expand their market share in a specific industry by assessing the current market share and identifying opportunities for growth by analysing competitors' market share, customer needs, and market trends.

• Skills Gap Analysis: Skills gap analysis focuses on identifying the gap between the skills possessed by the workforce and the skills required to meet organisational objectives. It helps identify skill deficiencies, training needs, and areas for professional development. A gap analysis example in this scenario is where technology companies evaluate employees' current skill levels, identify skill gaps, and design training programs to bridge those gaps and strengthen the company's cybersecurity capabilities.

• Technology Gap Analysis: Technology gap analysis evaluates the discrepancy between an organisation's current technological capabilities and the desired technology infrastructure or systems needed to support its operations. It identifies gaps in hardware, software, networks, or IT processes and assists in planning technology upgrades or implementations. Let’s understand this with the help of a gap analysis example. Manufacturing companies assess the existing technology infrastructure, identify gaps in machinery capabilities, and develop a technology upgrade plan to modernise the equipment and improve productivity.

• Product Gap Analysis: Product gap analysis compares the features and characteristics of a company's product or service with the desired market requirements or customer expectations. It helps identify product design, functionality, or quality gaps and guides product development efforts.

• Compliance Gap Analysis: Compliance gap analysis compares an organisation's current practices and processes with the regulatory requirements, industry standards, or internal policies. It helps identify non-compliance, risks, and necessary corrective actions to ensure adherence to legal and regulatory obligations.

Step 1 - Define the Scope and Objectives 

Before diving into the gap analysis process, it's crucial to define the scope and objectives of the process clearly. Determine the specific area or process you want to evaluate and identify the goals you aim to achieve through the analysis. Whether it's assessing performance, identifying training needs, or improving customer satisfaction, a well-defined scope will help you stay focused throughout the analysis.

Step 2 - Identify the Current State

The next step is to gather data and information about the current state of your organisation or process. This may involve reviewing existing documentation, conducting interviews, or analysing relevant data sets. Document key metrics, processes, and performance indicators relevant to the area under analysis. This data will serve as a baseline for comparison with the desired future state.

Step 3 - Determine the Desired Future State

Clearly articulate the desired future state that you want to achieve. It involves setting Specific, Measurable, Achievable, Relevant, and Time-bound (SMART) goals. Consider industry benchmarks, customer expectations, and organisational objectives when defining the desired future state. This step provides a clear target for the gap analysis and helps identify areas where improvements are required.

Step 4 - Identify the Gaps 

Benchmarking enables organisations to identify gaps between their current performance and the desired level of performance indicated by the benchmarks. These benchmarks can be derived from industry standards, competitor performance, or best practices within the industry. By comparing their performance against these benchmarks, businesses can identify gaps and areas for improvement.

Step 5 - Determine the Causes 

Once the gaps are identified, it's essential to determine their causes. Conduct a Root Cause Analysis (RCA) to understand why these gaps exist. It involves further data collection or brainstorming sessions with relevant stakeholders. By understanding the underlying causes, you can effectively develop targeted strategies to address the gaps.

Step 6 - Develop an Action Plan

Based on the identified gaps and their causes, develop an action plan to bridge those gaps. Set specific objectives and define the steps required to achieve them. Identify the resources, budget, and timeline needed for each action. Assign responsibilities to individuals or teams responsible for implementing the action plan. Break down the plan into manageable milestones to track progress effectively.

Step 7 - Implement and Monitor 

Execute the action plan and monitor the progress closely. Regularly review and assess the plan's implementation, ensuring the necessary steps are being taken to bridge the gaps. Monitor Key Performance Indicators (KPIs) and track the impact of the implemented actions. This will help you calculate the effectiveness of your strategies and make adjustments if needed.

Step 8 - Evaluate and Review

Once the action plan has been implemented, evaluating the outcomes and reviewing the results is crucial. Assess whether the desired future state has been achieved and measure the extent to which the gaps have been closed. Identify any new gaps that may have emerged during the implementation phase. Use this information to refine your strategies and improve future gap analysis processes.

The Gap Analysis Template helps identify disparities between two or more data sets. It can compare data from different sources over time and highlight gaps in processes or procedures. Creating a gap analysis template involves organising and structuring the information you need to assess the current state and identify the desired state of a process, project, or organisation. Here's a step-by-step guide to help you create a gap analysis template:

• Define the Purpose: Determine the objective of the gap analysis. Are you conducting it for a specific project, process improvement, or organisational assessment? Clarify the purpose to ensure your template aligns with your goals.

• Identify Key Areas: Determine the key areas or categories you want to analyse. These areas depend on the specific context of your analysis. For example, if you're assessing a project, relevant categories include scope, budget, resources, timeline, and quality.

• List Current State: Create a column or section to list the current state of each identified area. It can include measurable factors, performance metrics, or specific descriptions of the existing condition.

• Define Desired State: Create a column or section describing each area's desired or target state. This should reflect the ideal condition or performance you want to achieve.

• Determine the Gap: Calculate the gap between each area's current and desired states. This could be represented numerically (e.g., actual vs. target values) or descriptively (e.g., high, medium, low). The gap represents the difference between the current and desired performance levels.

• Identify Factors: Add a column or section to identify the factors contributing to the current state and the desired state. It helps in understanding the reasons for the gaps and provides insights for improvement.

• Prioritise Gaps: Assess the significance of each gap and prioritise them based on their impact and urgency. This allows you to focus on the most critical areas that require attention.

• Develop an Action Plan: Create a section or column outlining specific actions or strategies to bridge the identified gaps. It includes tasks, responsible parties, timelines, and resources required for each action.

• Monitor Progress: Include a mechanism to track the progress of the gap closure activities. This could be a separate column or section to update the status of each action item and measure the improvement achieved.

• Review and Iterate: Regularly review the gap analysis template, update it as needed, and refine the action plan based on the progress and changing circumstances.

Remember, the structure and format of your gap analysis template can vary based on your specific requirements. You can use a spreadsheet, document, or specialised software to create the template, whichever suits your needs and allows for easy analysis and sharing of information.

A gap analysis report is a document that presents the findings, analysis, and recommendations resulting from a gap analysis. It provides a comprehensive overview of the gaps identified between the current state and desired state of a specific area within an organisation, such as performance, skills, technology, or market presence. 

A gap analysis report serves as a valuable tool for decision-makers and stakeholders within an organisation. It provides a comprehensive overview of the current and desired states, identifies gaps that must be addressed, and offers actionable recommendations to drive improvement and bridge them. 

• Identifies areas for improvement: Gap Analysis allows businesses to pinpoint specific gaps and areas that require improvement, enabling them to effectively prioritise and focus their efforts and resources.

• Sets realistic goals and objectives: Gap analysis provides valuable insights into what needs to be done to reach the desired state, allowing for establishing clear objectives aligned with the organisation's vision and strategy.

• Guides decision-making: Gap Analysis helps managers and decision-makers understand the areas that need attention, allocate resources accordingly, and prioritise initiatives by highlighting the most critical gaps.

• Supports strategic planning: Gap analysis identifies gaps and areas for improvement so that organisations can align their strategies and action plans with strategic initiatives.

• Enhances performance and efficiency: Gap Analysis helps in addressing the gaps, organisations can optimise processes, enhance productivity, streamline operations, and deliver better products or services.

• Facilitates change management: Gap Analysis enables organisations to change management strategies, plans for training and development, and address any resistance or challenges during the market changes.

• Enhances competitiveness: Gap Analysis helps businesses to adapt to market demands, meet customer expectations, and differentiate themselves from competitors by identifying new opportunities, developing innovative solutions, and improving their value proposition to gain a competitive edge.

Performing a gap analysis is a proactive approach to organisational improvement. By systematically identifying and addressing gaps between the current state and the desired future state, businesses can drive growth, enhance performance, and stay ahead of the competition. Remember, Gap analysis is ongoing; regular reviews and updates are essential to ensure continued success. A gap analysis can be performed in various situations throughout the life cycle of a business or a specific project.

• Goal setting and strategic planning: A gap analysis allows businesses to define their strategic objectives and set realistic goals. By identifying the gaps between the current and desired state, organisations can establish specific targets and develop plans to bridge those gaps.

• Performance improvement: Gap analysis helps businesses evaluate their performance and identify areas where they fall short. By understanding these gaps, organisations can take targeted actions to improve performance and meet their objectives more effectively.

• Resource allocation and prioritisation: Conducting a gap analysis enables businesses to assess their available resources and allocate them strategically. By identifying the gaps and prioritising areas of improvement, organisations can allocate their resources efficiently and focus on the most critical aspects that require attention.

• Process improvement: Gap analyses are valuable when businesses seek to optimise their processes. Organisations can pinpoint areas that require improvement or reengineering by identifying gaps in existing workflows, systems, or procedures. Gap analyses can reveal inefficiencies and bottlenecks to enhance Overall Operational Effectiveness(OEE).

• Risk management: Identifying gaps helps businesses understand potential risks and vulnerabilities. By recognising the gaps in compliance, security, or other critical areas, organisations can proactively implement measures to mitigate risks and ensure regulatory compliance.

• Market research and customer satisfaction: A gap analysis can also help businesses identify new opportunities for growth and innovation. By analysing the gaps in the market, customer needs, or technological advancements, organisations can discover untapped areas for expansion and develop strategies to capitalise on them. Businesses can identify gaps in meeting customer requirements by comparing the current offerings or services with customer expectations and feedback. This analysis helps organisations align their products or services with customer demands and improve customer satisfaction.

• Technology adoption and digital transformation: Gap analyses are useful when organisations consider adopting new technologies or undergoing digital transformation. By assessing the current technology landscape and identifying gaps in IT infrastructure, systems, or skills, businesses can plan and implement necessary changes to leverage technology effectively and stay competitive.

SWOT analysis, Fishbone diagram, McKinsey 7S framework, PEST analysis, Nadler Tushman model, and Burke-Litwin causal model are valuable tools that can be used with a gap analysis to gain deeper insights and facilitate decision-making. 

These tools provide different perspectives and approaches to conducting a gap analysis, allowing for a comprehensive understanding of the gaps and developing effective strategies to bridge them. It's important to select the most appropriate tools based on the specific context and objectives of the gap analysis. Let's take a closer look at each tool:

• SWOT Analysis: SWOT analysis helps identify an organisation's internal Strengths and Weaknesses (related to the current state) and external Opportunities and Threats (related to the desired future state). It provides a comprehensive view of the organisation's position and helps identify gaps that must be addressed.

• Fishbone Diagram (Cause and Effect Diagram): The fishbone diagram is a visual tool used to identify the root causes of a problem or gap. It helps in brainstorming and categorising potential causes under various categories (such as people, processes, equipment, etc.) to understand the underlying factors contributing to the gap.

• McKinsey 7S Framework: The McKinsey 7S framework assesses an organisation's alignment across seven key elements: strategy, structure, systems, shared values, skills, staff, and style. Analysing these elements helps identify gaps and inconsistencies within an organisation that may hinder progress towards the desired future state.

• PEST Analysis: PEST analysis examines the external macro-environmental factors that can impact an organisation. It assesses Political, Economic, Social, and Technological factors and Environmental and Legal considerations. PEST analysis helps identify gaps by understanding the broader context and potential influences on the organisation.

• Nadler Tushman Model: The Nadler Tushman model analyses the congruence between an organisation's strategy and structure, tasks, people, and culture. It helps identify gaps by assessing the alignment between these components and the desired future state.

• Burke-Litwin Causal Model: The Burke-Litwin causal model focuses on understanding the cause-and-effect relationships within an organisation. It considers various factors, including the external environment, leadership, strategy, structure, systems, and organisational culture. The Burke-Litwin causal model helps identify the key drivers and dependencies contributing to gaps and change readiness.

By implementing these strategies, organisations can conduct gap analysis more accurately, comprehensively, and effectively. This, in turn, enables them to bridge gaps efficiently and drive continuous improvement towards their desired performance state.

• Ensure Data Accuracy: Guarantee the reliability and accuracy of the data used for the gap analysis. Thoroughly validate and verify the information to avoid any skewed or misleading results.

• Engage Key Stakeholders: Involve relevant stakeholders and subject matter experts throughout the gap analysis process. Their insights and perspectives can contribute valuable information and ensure a comprehensive analysis.

• Regular Review and Updates: Continuously review and update the action plan derived from the gap analysis. As circumstances evolve, make necessary adjustments to align with changing priorities and ensure the plan remains relevant.

• Leverage Technology Tools: Utilise technology tools and software to streamline the analysis process and enhance monitoring and reporting capabilities. This enables more efficient data analysis and facilitates ongoing tracking of progress.

• Foster Open Communication: Encourage open communication and collaboration among team members involved in the gap analysis. Effective communication ensures everyone is aligned, shares their insights, and collectively contributes to bridging the identified gaps.

• Set Realistic and Attainable Goals: Establish realistic, attainable, and measurable goals. This helps maintain motivation and focus, ensuring that the organisation can effectively work towards closing the gaps identified during the analysis.

• Embrace Continuous Improvement: Embrace a culture of continuous improvement within the organisation. View the gap analysis as an ongoing process rather than a one-time event, regularly reassessing and addressing new gaps as they emerge.

After conducting a gap analysis, several key steps are needed to address the identified gaps and drive improvement effectively.

• Develop an action plan: Based on the gap analysis findings, create a detailed action plan that outlines specific steps and initiatives required to bridge the identified gaps. Define clear objectives, set timelines, allocate resources, and assign responsibilities to ensure accountability.

• Prioritise initiatives: Prioritise the identified gaps and initiatives based on their importance, potential impact, and feasibility. Focus on addressing critical gaps that significantly influence organisational performance or customer satisfaction. This helps optimise resource allocation and ensures efforts are directed towards the most crucial areas.

• Allocate resources: Allocate the necessary resources, including financial, human, and technological resources, to support the implementation of the action plan. Adequate resource allocation is crucial to bridge the gaps and achieve the desired state effectively.

• Implement changes and improvements: Execute the action plan by implementing the necessary changes and improvements identified during the gap analysis. It involves process redesign, technology upgrades, training programs, policy changes, or other initiatives required to close the gaps.

• Monitor progress: Continuously monitor and track the progress of the implemented initiatives. Regularly assess and evaluate the effectiveness of the actions to bridge the gaps. Use relevant Key Performance Indicators (KPIs) and metrics to measure progress and ensure the gaps are addressed effectively.

• Adjust and adapt: Be flexible and willing to adjust the action plan. As the implementation progresses, new insights and challenges may emerge. Regularly review and refine the action plan based on feedback, evaluation results, and changing business circumstances.

• Communicate and engage: Communicate the gap analysis findings and the progress made in addressing the gaps to relevant stakeholders. Engage employees, team members, and other stakeholders to create a sense of ownership and involvement in the improvement process.

Gap analysis is a valuable tool used in various industries to assess and address gaps between current performance or state and desired performance or state. The specific application and focus of gap analysis may vary based on each industry's unique needs and objectives. Here are some examples of how gap analysis is applied in different sectors:

Gap Analysis in Healthcare Industry: In healthcare, gap analysis is used to evaluate the quality of patient care, identify areas for improvement, and ensure compliance with healthcare standards and regulations. It can be applied to assess gaps in medical equipment, staffing levels, patient satisfaction, or adherence to clinical guidelines.

Gap Analysis in the Information Technology (IT) Industry: In the IT sector, gap analysis is commonly employed to evaluate an organisation's technology infrastructure, software systems, and IT processes. It helps identify cybersecurity measures, software compatibility, IT training, or technology adoption gaps, enabling companies to align their IT capabilities with business objectives.

Gap Analysis in Manufacturing Industry: Gap analysis is used in the manufacturing industry to improve operational efficiency and productivity. It can be applied to analyse discrepancies between production targets and actual output, identify bottlenecks in the manufacturing process, assess equipment performance, or evaluate supply chain management gaps.

Gap Analysis in Financial Services Industry: In the financial sector, gap analysis helps evaluate the performance of financial institutions, assess risk management practices, and ensure compliance with regulatory requirements. It can be used to identify gaps in financial reporting, internal controls, customer service, or adherence to Anti-Money Laundering (AML) and Know-Your-Customer (KYC) regulations.

Gap Analysis in Retail Industry: In retail, gap analysis is utilised to evaluate the customer experience, optimise inventory management, and identify growth opportunities. It can be applied to assess gaps in product assortment, pricing strategies, and customer service standards, enabling retailers to enhance their competitive advantage.

Gap Analysis in the Educational Sector: In the education sector, gap analysis assesses student learning outcomes, curriculum effectiveness, and educational program delivery. It helps identify gaps in academic performance, teaching methodologies, infrastructure, and resources. Schools and educational institutions can use the analysis to implement targeted interventions, professional development programs, and curriculum enhancements to close the gaps and improve educational outcomes.

Gap analysis in Energy Industry: In the energy sector, gap analysis is used to assess energy consumption, identify energy efficiency opportunities, and implement sustainable practices. It can be applied to evaluate gaps in energy management systems, renewable energy integration, carbon emissions reduction, or compliance with environmental regulations.

Gap analysis plays a vital role in achieving organisational success. By thoroughly assessing the gaps between the current state and desired state, businesses can identify areas for improvement and develop targeted strategies to bridge those gaps.

Businesses must incorporate gap analysis as a strategic tool. By integrating it into their regular planning and decision-making processes, organisations can proactively identify and tackle gaps, ensuring continuous growth and improvement. Gap analysis helps align strategies and objectives, allocate resources wisely, and foster a culture of continuous improvement within the organisation.

Addressing gaps has a transformative power that goes beyond immediate improvements. It enables organisations to adapt to changing market conditions, seize new opportunities, and overcome challenges. By closing these gaps, businesses become more agile, efficient, and customer-focused, positioning themselves for long-term success.