gap analysis

A gap analysis is a technique used to assess the differences between the current and desired performance levels of a company's systems or applications, as well as determine how to meet those requirements.

A gap analysis is a method of assessing the differences in performance between a business' information systems or applications to determine whether the system requirements are being met and, if not, the steps needed to do so. Gap refers to the space between "where we are" (the company's present state) and "where we want to be" (its target state). A gap analysis is also known as a needs analysis, needs assessment or need-gap analysis. Gap analysis can be utilized by individuals in a company, project managers and process improvement teams. Small businesses, in particular, can also benefit from performing gap analyses when they're in the process of figuring out how to allocate resources. In addition to traditional gap analysis, companies can also use the more specialized methods of SWOT analysis or benchmarking.

In software development, gap analysis tools can document which services and/or functions have been accidentally left out, which have been deliberately eliminated, and which still need to be developed. In compliance, a gap analysis can compare what is required by certain regulations to what is currently being done to abide by them.

How to conduct a gap analysis

The first step in conducting a gap analysis is to establish specific target objectives by looking at the company's mission statement, strategic goals and improvement objectives. These objectives provide you with your future state, or where you want your company to be once your projects have been completed.

The next step is to analyze current business processes by collecting relevant data on performance levels and how resources are presently allocated to these processes. This data can be collected from a variety of sources depending on what's being analyzed, such as by looking at documentation, conducting interviews, brainstorming and observing project activities.

Lastly, after a company compares its target goals against its current state, it can then draw up a comprehensive plan that outlines specific steps to take to fill the gap between its current and future states, and reach its target objectives.

What's in a gap analysis template?

While a gap analysis can be either concrete or conceptual, gap analysis templates often have in common the following fundamental components:

Identifying the current and future states
Current state: A gap analysis template starts off with a column that might be labeled "Current State," which lists the processes and characteristics an organization seeks to improve, using factual and specific terms. Areas of focus can be broad, targeting the entire business; the focus instead may be narrow, concentrating on a specific business process, depending on the company's outlined target objectives. The analysis of these focus areas can be either quantitative, such as looking at the number of customer calls answered within a certain time period; or qualitative, such as examining the state of diversity in the workplace.

Future state: The gap analysis report should also include a column labeled "Future State," which outlines the target condition the company wants to achieve. Like the current state, this section can be drafted in concrete, quantifiable terms, such as aiming to increase the number of fielded customer calls by a certain percentage within a specific time period; or in general terms, such as working toward a more inclusive office culture.

Describing the gap
Gap description: This column should first identify whether a gap exists between a company's current and future state. If so, the gap description should then outline what constitutes the gap and the factors that contribute to it. This column lists those reasons in objective, clear and specific terms. Like the state descriptions, these components can either be quantifiable, such as a lack of workplace diversity programs; or qualitative, such as the difference between the number of currently fielded calls and the target number of fielded calls.

Bridging the gap
Next steps and proposals: This final column of a gap analysis report should list all the possible solutions that can be implemented to fill the gap between the current and future states. These objectives must be specific, directly speak to the factors listed in the gap description above, and be put in active and compelling terms. Some examples of next steps include hiring a certain number of additional employees to field customer calls; instituting a call volume reporting system to guarantee that there are enough employees to field calls; and launching specific office diversity programs and resources.

Gap analysis tools and examples

There are a variety of gap analysis tools on the market, and the particular tool a company uses depends on its specific set of target objectives. The following are some common gap analysis methods:

McKinsey 7S Framework: This gap analysis tool, named after consulting firm McKinsey & Co., is used to determine specific aspects of a company that are meeting expectations. An analyst using the 7S model examines the characteristics of business through the lens of seven people-centric groupings: strategy, structure, systems, staff, style, skills and shared values. The analyst fills in the current and future state for each category, which would then highlight where the gaps exist. The company can then implement a targeted solution to bridge that gap.

A visual representation of the McKinsey 7S framework
A visual representation of the McKinsey 7S framework

SWOT analysis: SWOT, which stands for strengths, weaknesses, opportunities and threats, is a gap analysis strategy used to identify the internal and external factors that affect the effectiveness and success of a product, project or person. Once these factors are determined, the company can then determine the best solution by playing to their strengths, allocating resources accordingly, while at the same time avoiding potential threats.

Cate Costa describes how a SWOT analysis can help small businesses

Nadler-Tushman model: The Nadler-Tushman organizational congruence model, named after Columbia University professors David A. Nadler and Michael L. Tushman, examines how business processes work together and how gaps affect the operational efficiency of the organization as a whole. The model analyzes these operational gaps by analyzing the company's operational system as one that transforms inputs into outputs, dividing the business processes into three groups: input, transformation and output. Input includes the operational environment, tangible and intangible resources used, and the company culture. Transformation encompasses the existing systems, people and project activities currently in place that convert input into output. Outputs can take place at a system, group or individual level. The Nadler-Tushman model puts a spotlight on how inadequate inputs and transformation functions that fail to work together cohesively can lead to gaps, as well as how gaps in the outputs can point to problems in the inputs and transformation functions. This model highlights how the various components fit together, or are congruent -- the more congruent these parts are, the better a company performs. The Nadler-Tushman model is a dynamic one that changes over time.

Nadler-Tushman model
The Nadler-Tushman model
This was first published in December 2014

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