GAP ANALYSIS: The Fundamental Components of a Gap Analysis

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Companies evaluate their present performance against their desired and expected performance using gap analysis. This evaluation is done to see if a business is spending its resources wisely and meeting customer expectations. In this article, we will find out the meaning of gap analysis and look at examples.

By evaluating time, money, and labor, a corporation can identify its current state. The management team can develop an action plan to advance the organization and close performance gaps by identifying and analyzing these gaps.

What is Gap Analysis?

Organizations may not be able to realize their full potential if they aren’t utilizing their assets, money, and technology to the fullest. An analysis of the gaps can be useful here.

Any type of organizational performance benefits from a gap analysis, also known as a requirements analysis. It enables businesses to assess their current position and desired future state. Through gap assessment, businesses can reevaluate their objectives to determine if they are on the correct path to achieving them.

In the 1980s, gap analyses were frequently used with duration analyses. A gap analysis can be used to gauge exposure to a range of term structure movements, even though it is less common and thought to be tougher to utilize than a duration assessment.

How to Conduct a Gap Analysis

The ensuing steps are divided into four processes in some gap analysis frameworks. Some are a little more complex and break the analysis down into a few more phases. Understanding your existing situation, deciding where you want to go, and coming up with a strategy to get there are all parts of a gap assessment, regardless of the situation.

#Step 1: Identify Your Current State

Focusing on where your business is currently operating is the first step in a gap analysis. This entails investigating the goods it sells, the clients it serves, and the perks it provides to its staff. This data may be quantitative (such as financial records submitted as part of filing requirements) or qualitative (such as surveys or comments from important stakeholders).

A corporation frequently does a gap analysis because it has findings or is already aware of a problem. The business wishes to look into why customer feedback surveys produced subpar results and put corrective measures in place. It must comprehend why these mistakes are occurring, when problems are forming, and who the change management leaders must be before they can imagine what it wants to become.

#Step 2: Identify Your Future State

This step, when a corporation must decide what it wants to become, is the essence of gap analysis. Care must be taken during this stage since the identity that a firm wishes to have will determine the strategic moves that it must undertake to achieve those objectives.

For the greatest long-term success, a business must set defined, quantifiable goals during gap analysis. It would be ineffective for the business, for instance, to have the objective of “improving customer service.” The business must instead choose more measurable targets, like achieving 90% customer satisfaction within 12 months.”

Analyzing what rival companies or other market players are doing can also help you determine the intended result. It can be simpler to spot what another business is doing right and try to copy it.

 #Step 3: Identify the Gaps

It’s time to draw a comparison between the present situation and the desired future state to identify the key distinctions. In our hypothetical example, it is at this point that a business may realize it is woefully understaffed, has not adequately trained its employees, or does not have the technical capacity to respond to consumer concerns.

#Step 4: Assessing the Solutions

A corporation must now develop plans for how it will attain its desired condition after defining its deficiencies. There may just be one answer in some cases, while other times the gap analysis may require several concurrent improvements that must cooperate.

A solution frequently needs to be quantified with tools to monitor change to determine whether it will succeed. A simple indicator, like the percentage of satisfied customers, might be available for our example of improving customer service. Other gap analysis results, such as weaknesses in brand identification, might call for more original, deliberate remedies that can still be assessed.

#5: Carry out the Change

It’s time to put Step 4’s greatest suggestions into action after selecting the top ones. In this phase, the business makes an effort to close the identified gap. By implementing the solutions, the organization aims to improve in a particular area of business or address a weakness.

Following a certain cadence and a detailed set of processes are frequently required at this implementation stage. The business has a specific goal in mind for the gap analysis, so care must be taken to avoid causing more harm than is necessary. Think of personnel who are fatigued and demoralized by lengthy training, for instance. Making an effort to increase worker proficiency may result in lost production or low morale.

#Step 6: Keep an eye on changes

This is why the business must also check for changes after completing its gap analysis. Sometimes the business makes the ideal decisions. Other times, the gap may have been larger than the company initially believed. In any event, gap analysis can be a circular process in which the business can reevaluate its current position and how it compares to alternative future states once adjustments have been made.

Types of Gap Analysis

Let’s dig a little further now and talk about the many kinds of gap analysis.

#1. Product or market gap analysis

It’s a sad statistic that 95% of items that are released to the market fail.

A gap analysis is an excellent technique to find problems before investing time and money in a failed product launch because there are many different reasons why a product might not succeed.

A market gap study, sometimes referred to as a “product gap analysis,” evaluates the market’s condition. It analyzes the target market’s readiness, any rival products, and the actions of competing businesses. It aids in identifying weaknesses in the product’s characteristics, branding, launch strategy, and promotional activities so the business may fully capitalize on market prospects.

#2. Strategic Gap Analysis

Strategic gap analysis, also known as performance gap analysis, is a more official internal assessment of how a corporation is operating. In the study, performance against long-term standards like a five-year plan or a strategic plan is frequently compared.

A strategic gap analysis may also be carried out to evaluate how well a business is doing in comparison to its rivals. This kind of research could reveal how other businesses are employing staff or resources in more clever, strategic ways. This kind of information may be difficult to obtain, particularly if departing employees have nondisclosure agreements in place and the business withholds little process-related information from the general public.

#3.  Financial/Profit Gap Analysis

By focusing on financial measures, a company may decide to directly assess where it may be lacking in comparison to its rivals. Pricing comparisons, margin percentages,  just providing additional training to current employees to acquire new abilities, or seeking outside expertise to hire new employees.

For innovative businesses that depend on having specific skill sets to remain competitors (or industry leaders), this kind of study is particularly crucial. Additionally, a skill gap study is essential for small businesses that depend on a smaller workforce to function. In this situation, people frequently need a wide range of adaptable skills that can be valuable in numerous business-related areas.

#5. Compliance Gap Analysis

A compliance gap analysis compares a company’s performance to a set of external regulations that specify how something should be done. This analysis frequently makes use of internal audit services. For example, a business might conduct an internal assessment of its accounting and reporting procedures before asking an external auditor to assess its financial statements.

Compared to other strategic forms of gap analysis, compliance analysis is more defensive and preventative. Instead of analyzing gaps to try to increase market share, compliance gap analysis, for instance, frequently aims to comply with rules, avoid penalties, fulfill reporting obligations, and guarantee that external deadlines can be met.

#6. Gap Analysis of Product Development

Gap analyses can be carried out as a company develops new products to determine which features will satisfy consumer demand. When developing software or items that take a long time to build, this form of gap analysis is frequently used.

A corporation may assess which elements of the product or service have been effectively implemented, delayed, or purposefully deleted. The company may then continuously assess how its product plan is changing and whether it has the internal resources to fill the internal gaps. These gaps are required for product development completion by combining the various types of gap analysis mentioned above.

#7. Needs gap analysis

Similar to a skills gap analysis, a needs gap assessment looks at all the things an organization requires, not just employee abilities, to achieve a goal. What materials do you require? equipment, knowledge, finances, and adherence to regulations

There are no rules; when conducting a requirements assessment, you can and should consider any resource required to bridge the gap between the present situation and the desired future state. It might be something significant, like a new regional office, or something modest, like extra coffee for overtime work.

#8. Health gap analysis

The current healthcare sector is a complicated web of HMOs, insurance providers, medical facilities, clinics, hospitals, and patients. Furthermore, there is fierce competition. Healthcare providers must put forth a lot of effort to meet legal requirements like HIPAA while providing top-notch patient care to compete.

Gap analysis is used by a variety of health organizations to ensure that they are consistently making progress toward their objectives. This includes public hospitals, private health firms, and international health organizations like the WHO. For instance, gap analyses can assist healthcare organizations in determining which outside vendors have access to patient’s protected health information (PHI). It must, consequently, abide by HIPAA regulations by signing a business associate agreement (BAA).

What Does a Gap Analysis Template Contain?

Although gap analysis approaches can be both conceptual and concrete, gap assessment templates frequently include the following core elements:

#1. The present situation

The first column in a gap analysis template may be titled “Current State.” It uses factual terminology to identify the procedures, traits and features that a company wants to enhance.

Focus areas might be wide, aiming at the entire company, or small, focused on a single business activity. The decision is based on the goals the organization hopes to achieve.

These focal areas can be analyzed quantitatively—for example, by counting the number of customer calls answered in a given amount of time—or qualitatively, by looking at workplace diversity.

#2. Upcoming state

In addition, a column titled “Future State” that describes the desired condition for the organization should be included in the needs analysis report.

This part can also be written in specific, measurable terms, like “attempting to increase the number of customer calls handled by a certain percentage within a certain time frame.” Alternatively, it could be phrased broadly as “working toward a more inclusive office culture.”

#3. Gap explanation

First, this column should determine if there is a difference between a company’s present state and its potential. If so, the gap description should specify what the gap is and the underlying issues that led to it.

These factors are listed in this column in an impartial, understandable manner. These elements might be quantitative or qualitative, much like the state descriptions. They might point to things like the absence of diversity programs or the discrepancy between the actual and desired numbers of calls fielded.

#4. Proposals and next stages

A gap analysis report should include a final column that lists all feasible fixes that might be put in place. This is to bridge the gap between the present and the desired future state.

These goals must be concrete, specifically address the elements identified in the gap description, and be expressed in compelling, active language. They ought to have specific goals and a deadline for reaching them.

The following steps can involve employing a certain number of extra workers to answer customer calls, implementing call volume reporting, or starting particular office diversity programs and resources.

Gap Analysis Examples

Gap analysis gives you a frame of reference for evaluating how strategies, technologies, and procedures are performing for your company. This aids the organization in advancing toward its objective while removing risks and errors along the route.

Let’s look at some examples of gap analysis:

#1. Individual evaluation

Employees can use gap analysis to examine where their performance is weak and how they might close the gap by putting in the extra effort.

Individuals are considered in this analysis. When a department in an organization falls behind in delivering the desired result, the team members in that department must assess their performance to determine where the efforts are being wasted.

#2. A brand-new product debut

A business might use gap analysis after launching a new product. This is to help determine where sales are fluctuating and make the required adjustments.

The product may not be delivering what is expected, which would explain why sales are falling short of expectations. In these situations, the production team should experiment with alternative methods of product manufacturing to make it more effective and marketable.

What are the three fundamental components of a gap analysis?

The current state, the desired state, and the gap are the three core elements of a needs analysis. The way company practices and processes are being used is the current situation. Where the business hopes to be in the future is the ideal state. Usually, this also means increased efficacy and efficiency.

What is another name for gap analysis?

A “needs analysis” or “needs assessment” may also be used to describe a gap analysis. The space between “where we are” as a corporation (the present state) and “where we want to be” (the target state or desired state) is referred to as the “gap” in the gap assessment process.

Is a SWOT analysis a gap analysis?

One example of a gap analysis is a SWOT analysis. Using a SWOT diagram is a wonderful approach to assess a company’s current situation, place in the market, things it’s doing right, and areas where it may improve. So, one tool for identifying weaknesses in a corporate or commercial endeavor is a SWOT analysis.


 A gap analysis is a method that businesses can use to assess where they are now. It can also be used to choose where they want to be in the future and develop a strategy to close the gap. A corporation having operational difficulties or wanting to become more strategic may decide to do a gap analysis. In either scenario, several tools can assist the business in creating and carrying out a long-term plan, including SWOT analysis, PEST(LE) analysis, etc.


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