As a business owner, you should have a rough idea of where it is you want your business to go. It can be a bit of a challenge though knowing how to begin and what direction to go in. This is why companies use Gap Analysis. It’s a helpful analysis tool that helps give you a broader framework regarding where you want your business to be in the present and the future.
What is Gap Analysis?
Gap Analysis works by comparing your company’s current state to its desired state in the future. The point between the present and future is the gap, and the gap analysis helps you to take steps to get you from point A to B. Doing a gap analysis is actually a lot easier than it may sound.
How to do a Gap Analysis
There are 5 steps to doing a Gap Analysis. However, before you do that, you need to take the time to go over your business and be completely honest with where things may not be working. Your business deficiencies are the first place to begin. You can’t do an effective gap analysis if you aren’t being honest about what isn’t working.
Your strengths are the next thing to consider. Understanding the positive aspects of your business will help you to focus on negative aspects. You need to be realistic so that you can set reachable goals later on in your gap analysis. Lastly, you need to be very specific with every part of the gap analysis.
The 5 Step Process
Defining your area of focus
You first need to set a few boundaries to help define the gap analysis’ scope. This starts with having a good idea regarding what needs to be improved. Here are some of the top areas of focus to give you some ideas:
- Financial Growth
- Excellent Customer Service
- Happiness of your Employees
- Scientific Achievements
- Impact on the Community
It’s a good idea to have 3 to 4 focus areas. Once you have that down, you can move on to the next step.
Desired Future State
In order to define your current state, you need to have an idea about your desired future state. The strategic focus areas you have chosen come into play here. Take each focus are and create a framework for what you desire for that area in the future. Let’s say you chose innovation as one of your focal areas and you want your business to be recognized as a top player in your industry. You want to keep things pretty broad here because you will get into detail later on in the analysis.
Assessing Your Current State
Now you can move on to the current state of your business. Where are things at today? Use those focus areas and write a sentence about the state of each one realistically. Let’s say one of those areas was excellent customer service. You could say that, currently, you have good customer satisfaction for larger clients but are lacking where smaller clients are concerned.
This is the step where you will get more specific where certain measures or KPI’s (Key Performance Indicators) come into play. It’s important to choose the right KPI’s when you are doing your gap analysis. Here are some tips:
- Make sure you choose KPI’s that you can measure along with a measurement approach
- Only work with KPIs that have a current baseline, as this will help you measure the gap between point A and B
- It’s a good idea to use a mix of both lagging and leading KPI’s. You can create a pro and con section for each focus area.
We’ll use innovation as an example. In the leading section, you could say you want to have at least 60% of your resources working to create new product features, but you currently are only using 10%. For the lagging section, you could say you want to achieve a score of 70% on a customer review site, but currently, only score 50% on one.
Your gap percentage is the difference between your current figure and your desired future figure, which in this case would be a gap of 20%.
Gap Analysis Action Plan
Your last step is to create your action plan based on your gap analysis, where you will figure out a specific action to address those gaps. Break this down into each area to make it easier, creating several projects that will help you to close that gap that you have identified. We’ll use innovation again as an example. For this area, you could create a few projects, such as hiring on more developers and creating a solid team to thoroughly check over new features and products.
Free Templates & Examples
The SWOT method differs from the detailed only in the categories to choose from. Since you now know all about it, here are some examples and templates for you:
Gap Analysis Template 05
Gap Analysis Spreadsheet 06
Gap Analysis Template 07
IT Gap Analysis Template
Frequently Asked Questions
Gap analysis is an important tool that helps you define gaps in service and take steps in closing that gap, for example, to enhance customer satisfaction.
This is one method of gap analysis that can be used to see if a company is getting the best rate of return from the resources that are being used.