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Every business seeks to grow and thrive. You have aspirations for your company, but what happens when you fall short of achieving them? This gap between desired and actual outcomes indicates it’s time to perform a gap analysis.
The gap analysis process is straightforward, but the devil is definitely in the details. Depending on what part of the business you’re seeking to improve, a gap analysis report can be extensive.
Let’s dive into this framework for identifying business optimization opportunities.
A gap analysis is a formal study of what your business is currently doing, where it wants to go, and how you close the gap between the two. It compares desired and actual outcomes and pinpoints opportunities for improvement.
The need for a gap analysis usually arises from a shortcoming. Perhaps the sales team missed their targets, or customer service response times are too slow, and customers are complaining.
It can also come from proactive leaders who want to understand how to improve the chances for success before undertaking a strategy. Even an individual looking to elevate their own performance can find answers through a gap analysis.
This analysis can be conducted from various perspectives, and as a result, different types of gap analysis methodology exist. There are four main types:
Any member of the organization can initiate a gap analysis to determine how to make improvements. The gap analysis can be applied to performance of a department or team, an individual, or the entire company. Whenever goals are not met, it’s time to dig into what may be getting in the way through a gap analysis.
A gap analysis enables your organization to perform at its peak potential. Here are some gap analysis examples illustrating how this tool helps.
With the assistance of a gap analysis, you can review your current portfolio of products and services to determine new opportunities.
Since it’s common for some kind of gap to exist between the needs of customers and a company’s offerings, the gap analysis helps you identify these areas to determine if you want to develop new offerings to fill the gap.
You can also use a gap analysis when a product or service fails to meet your target adoption and revenue goals. Here, you can apply a gap analysis to determine if the new offering includes all of the essential items identified in the business requirements.
A gap analysis can identify areas for improvement within your company’s operations. Whenever an area of the business is underperforming, execute a gap analysis. If your accounting team is routinely failing to pay invoices on time, a gap analysis can identify process improvement opportunities.
If you missed your profit targets, use a gap analysis to uncover what went wrong and how to fix it. For instance, the analysis can determine if the forecasting method had issues that set the wrong profit targets, if unexpected competition took business away, if costs increased, or other reasons.
The following step-by-step gap analysis template guides you through how to identify the difference between reality and your aspirational business targets, making it easy to uncover where there exists room to grow. This template can apply to the entire organization, or all the way down to a single process.
The initial step is to understand where you want to apply a gap analysis model, and what you seek to get out of it. From there, you can assess what type of gap analysis you want to apply to the situation.
Perhaps you want to enhance the efficiency of an existing operation, in which case a performance gap analysis can help. Maybe you’re trying to determine if you need to hire more staff. In that case, you would leverage a manpower gap analysis.
When looking to begin a gap analysis, consider these suggestions.
Once you’ve identified where a gap analysis is needed and the purpose of that analysis, you can review where you are today. By looking at the current state, you determine your starting line for improvement.
For instance, if you’re getting customer complaints about slow response times, learn what those response times currently are.
Collect any relevant business intelligence, and document all of the contributing factors that created the current state. Be specific and detailed in this documentation to help with the analysis. For instance, if a statement of work sets certain legal requirements that contribute to the current state, capture that detail.
Also, note which are beneficial factors and which appear to be hurting the business. This allows you to dissect where you can improve once you define the future state in the next step.
Here are some tips for analyzing the current state.
After understanding where you currently stand, it’s time to define quantifiable goals to strive for. This is the end state you’re optimizing your business to reach. The end goal should be an improvement over the current state, and it should be measurable so you know when you’ve reached it.
One way to determine your ideal future state is to look at industry standards -- or the bar set by the competition. The benefit of this approach is that you know it’s achievable once a company addresses its shortcomings.
Another approach is to look at historical data for your company. If you’ve been growing sales at 10% each year, but they suddenly drop to 8%, the end goal might be to bring sales back up to the 10% level or higher.
You can also use employee or customer feedback to understand the end state you should be creating. For instance, customers might tell you that your offerings are missing a key feature, so the goal can be to develop that feature.
These suggestions can help as you define your end state.
You’ve looked at the current state. You’ve defined a future state. Now, compare the two to understand the gap you’re trying to close.
Perhaps the gap is small, like a few minor tweaks to an existing workflow, or it could involve making large organizational or operational changes, necessitating a change management process. This is the time to understand what hurdles you’re trying to overcome.
Document all of the challenges in the current process that must be overcome to get to the end state. Note which are significant issues that will take time and which can be addressed quickly. This list defines what the gap looks like, which will be helpful for the next step.
Use these suggestions to help you understand and define the gap.
Now it’s time to determine a plan of action to bridge the gap. Now that you’ve done the hard work of the prior steps, this step centers on compiling recommendations and getting buy-in from relevant stakeholders.
With clarity on the hurdles to overcome, you can go down this list and devise solutions for each, such as pursuing business development to increase sales. Be sure to collect feedback on your solutions to ensure there’s buy-in across the organization.
Some gap analysis tools that can help turn your findings into an action plan include a S.W.O.T. analysis (strengths, weaknesses, opportunities, threats), which helps you organize the problem areas as well as the recommendations, and a fishbone diagram, which enables you to map the root causes of issues.
Since the plan you devise can be complex, make use of the best project management software in your project planning to turn your ideas into an actionable project plan.
Apply these tips to help you build your plan of action.
Now that you know how to conduct a gap analysis, you can use this tool to understand the issues you’re facing and how to fix them. A gap analysis crystalizes the challenges to overcome and puts solutions into action that will get your organization to the desired end state.
Don’t get too bogged down with the gap analysis. Spend only the necessary time to efficiently complete the analysis so you can quickly move into the action plan and turn your company into a better-optimized business.
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