To be able to thrive and stand out among the competition, companies need to have a solid understanding of their current strengths and weaknesses, a precise vision of the desired future, and, perhaps most importantly, a clear roadmap to bridge the gap between the two.
This is where gap analysis comes in as one of the most powerful techniques to assess performance disparities and chart a course leading toward the set goals.
Businesses, especially successful ones, are constantly in pursuit of improvement and growth which typically involves optimising their operations, exploring untapped markets, or enhancing customer experiences.
Business analysts often use gap analysis as the guiding compass through these transformative processes as it helps them evaluate existing processes, resources, and performance metrics against set objectives, so they can discover valuable insights that can move businesses in the direction of where they want to be.
We will delve deeper into the gap analysis process and explore what it is, how it works, and how it can benefit organisations looking for sustainable success.
Table of Contents
What is Gap Analysis?
Gap analysis is a strategic approach used by businesses to identify and assess disparities between the current performance (current state) and desired benchmarks or goals (future state).
The main value of this approach is that it provides insight into the areas where an organisation falls short in meeting set objectives, allowing them to design effective strategies for performance improvement.
By using this method business analysis and companies can measure the actual against the expected results and use the findings to discover missing or suboptimal strategies, skills, technologies, or any other element of a business process.
The results of the gap analysis are commonly used to recommend the actions that a company should take to meet its set goals. Comparing the current vs the target state, the organisation can determine the areas it needs to work on to get on the right path quicker and improve its performance and results.
Plus, gap analysis can be used to evaluate individual or team performances and grade them based on competency or productivity level.
When conducted properly, the gap analysis method should provide the business analyst with quantifiable data that helps them gain a realistic perspective of what the organisation actually needs to achieve the desired state.
Gap analysis results can be used to convince the relevant stakeholders and explain to them the scope of work, prioritise features for implementation, make informed decisions about resources, effort, and costs needed to reach the set goals, and make sure that the future state is aligned with the overall organisational vision and objectives.
Unlike some other approaches that provide more generalised ways to improve performance, gap analysis helps discover specific areas that need improvement and can be used to design the actual, actionable steps for improving any part of a business process
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How Does the Gap Analysis Work?
The actual process of conducting the gap analysis process may depend on the specific case but typically involves several key steps.
Identifying and Assessing the Current State
The first step of gap analysis involves analysing the present state of business processes, resources, performance metrics, and products or services under consideration.
To properly understand the current situation, it’s necessary to gather all the relevant data and feedback from stakeholders, including product specifications, process maps, customer feedback, etc.
Doing this will make clear what is the subject of gap analysis and what is not and help maintain the focus during the entire process. Besides qualitative information, such as surveys or feedback from stakeholders, it’s also important to gather quantitative information, i.e. all the data that can be measured and counted, as it will provide a much clearer picture of the current state.
This step should provide the foundation for determining strengths and weaknesses and identifying areas that can be improved. Once all the contributing factors are laid out, it’s much easier to understand the root of the problem hindering business performance.
Establishing Future State
Once the current state has been properly assessed, the next step is to establish and define the future state or performance targets. Basically, this is when the organisation identifies what it wants to become.
This is probably the vital stage in the gap analysis process, as it dictates the strategic steps that must be taken to reach the desired goals. When performing gap analysis, the analyst and the company must determine measurable and specific objectives that should bring long-term success.
So, instead of just describing general goals such as “becoming better at marketing the products,” the company should develop specific, achievable, and measurable metrics that will clearly establish the level of improvement, tangible benefits, and timeframe for achieving the set objectives.
Often, this is done by researching the market and analysing what the other competitors are doing well. Other techniques used when establishing a future state include reviewing industry standards and best practices and stakeholders consultation,
Having a clear picture of the desired future state helps the company reach a higher potential and capitalise on the opportunities inside and outside the organisation. Even when the company is performing well, striving for higher goals can help it improve even further. Of course, these goals still have to be realistic because setting unrealistic objectives will only frustrate employees working to achieve them.
Identifying Gaps
Properly assessing the current state and establishing the future state paves the way to identifying the gaps between the two. The discrepancies between where the organisation is and where it wants to go are the gap that must be bridged to reach the desired target.
However, to be able to do this, the company must first specify that gap. This means that these gaps should be determined and quantified in terms of performance metrics, resource deficiencies, lack of competency, or process inefficiencies. Besides defining the gap, it’s also necessary to determine why it happened and what are the contributing factors that led to it.
So, there must be an investigation of the underlying reasons for the gaps. To pinpoint these vital issues, the process will typically have to include interviews with stakeholders, conducting surveys, and data analysis. The result of analysis in this stage should be the clear identification of the areas that the organisation either lacks or could benefit from improving.
Bridging the Gap
When the gap has been identified and the reasons that led to it have been established, it’s time to, based on that analysis, develop a comprehensive action plan to bridge those gaps and achieve the desired state.
All the actions toward improvement should be made based on the guidelines developed from the information discovered while identifying and analysing the gap.
When developing a solution, it’s important to think of the cost of its implementation as it should not extend over the available resources and capacities. The solution should also have a set date indicating when the gap should be closed, as it will help proper prioritising and make sure it doesn’t get overlooked. Bridging the gap may call for a single solution, but, at times, it may require several changes to be performed simultaneously.
A big part of this stage of gap analysis is convincing the other stakeholders that the solution will work. This is particularly important as the change will often involve and impact multiple departments and it’s necessary to get buy-in from all of them.
That’s why the plan must feature a clear strategy and actionable objectives. In addition, this means that the solution will, in most cases, need to be quantifiable, so the change can be measured.
A solution developed following these guidelines will ensure that everyone involved in aligned around the set goals of the project. Plus, it will make it easier to conduct a follow-through, monitoring and sustaining the improvements made by doing a gap analysis.
Gap Analysis Tools and Techniques
To facilitate a successful gap analysis, business analysts can utilise various tools and techniques, many of which are already an important part of the BA toolbox.
Using these tools and techniques will ensure that the process of gap analysis is conducted properly and that nothing falls through the cracks and gets overlooked.
- SWOT analysis – Using SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis will help the analyst identify the internal strengths and weaknesses of the organisation, discover external opportunities, and detect threats that may impact the company’s performance. It will make it easier to find the best possible solution by making use of the organisation’s strengths, properly allocating resources according to the needs, and avoiding potential risks.
- Fishbone diagram – Also known as cause-and-effect or Ishikawa diagram, this technique can be very helpful when identifying the root causes of a problem during the gap analysis process. Through visualisation, the Fishbone diagram can aid in discovering how each of the business process elements (materials, manpower, equipment, methods, environment) links to the underlying issues that may exist and impact the performance. Therefore, it’s particularly useful when assessing the current state.
- McKinsey 7S framework – Using this tool, the analyst can discover which particular aspects of the organisation are performing up to expectations and which ones fail to meet them. McKinsey 7S Framework does this by analysing the business process through seven organisational categories (strategy, structure, staff, systems, style, skills, and shared values). In the context of gap analysis, this framework can be utilised to improve business performance, investigate the effects of future change, align individuals and teams around the shared goal, and determine which potential solution will work best to bridge a specific gap.
- PEST analysis – Similar to SWOT, this type of analysis helps discover threats and opportunities, but it does so by focusing on four external business environment factors: political, economic, social, and technological. When it comes to gap analysis, this tool can help bridge gaps by pointing to current issues, discovering change opportunities (technological improvements for example), and identifying and minimising risks on the market (political situation). There’s also an extended version of this tool, PESTLE analysis, which also includes legal and environmental factors.
- Nadler-Tushman model – This model
allows analysts to look at the broader picture and understand how different aspects of the organisation work together to impact certain outcomes. It does so by observing the operation processes from their beginning to their end. By understanding how different parts align with each other, business analysts can get an idea of how gaps in the business process can influence the operation effectiveness of the organisation.
Gap Analysis Best Practices
There are a number of things a business analyst should consider when conducting a gap analysis. To maximise the effectiveness of the process, it’s important to follow and implements these best practices:
- Involving stakeholders – engaging stakeholders from different apartments with interest in the project will contribute to a shared and comprehensive understanding of the organisation’s strengths and weaknesses. Plus, it will ensure their buy-in and support.
- Setting realistic and clearly defined goals – the future state objectives should always be achievable and aligned with the overall organisational vision. Furthermore, the goal should be specific, measurable, achievable, relevant, and time-bound (SMART).
- Using multiple tools – When collecting and analysing information about the processes involved in gap analysis, it’s best to use multiple tools, including the ones mentioned above, and combine the obtained results to get a comprehensive view of the scope of the change.
- Focus on the processes – During the process of collecting information it’s important to focus on business processes, workflows, and interdependencies between the business elements rather than on individuals conducting them.
- Regular reviews – the gap analysis should be conducted regularly, so the organisation can monitor the progress and changes and, if necessary, make adjustments to action plans.
- Focus on data quality – accurate and reliable data will help you avoid incorrect conclusions. In addition, backing up your solution recommendation with quality data will make it easier to gain support and increase the likelihood of the organisation adopting them.
- Prioritise gaps – Depending on their potential impact and feasibility prioritise gaps, so you can focus on the ones that can contribute to the organisational success the most.
Gap Analysis Template
Business Analysis Doctor has a gap analysis template that can be used for gap analysis.