Everything You Need To Know About Conducting A Gap Analysis: Steps + Frameworks

How do you run a business that consistently grows and provide improved returns?

You focus on all critical processes and ensure they run smoothly. Identifying the shortcomings is the first step to accomplishing that goal. Next comes investing your time and resources efficiently. Many businesses conduct a gap analysis to achieve the same.

But what is a gap analysis? How can you use it to improve your business performance?

Let’s dive straight into the topic to take your business to the next level.

What Is Gap Analysis? Why Is It Important For Business Growth?

Gap analysis refers to examining the current business state and comparing it with the potential state to identify gaps hindering growth. It helps determine the right ways of achieving business goals to reach your fullest potential. Devising a strategy is the next step once you identify gaps.

Your entire company can benefit from using gap analysis. But most businesses focus only on key functions directly targeting business growth. These core areas include HR, fiscal performance, IT, sales, innovation, and market competition.

Here are some major objectives companies achieve with a gap analysis for business growth:

• Identifying the areas of improvement in customer engagement, employee productivity, sales, etc.
• Determining the weak spots of a business.
• It helps ensure businesses make efficient use of their resources.
• Determine whether the objectives of specific functions are met or not.
• Covers the gap between assumptions and reality for calculated business growth.

Let’s look at some use cases of gap analysis to understand how companies use gap analysis to improve results.

Gap Analysis Use Cases

• Let’s say you launched a new product in the market with minimal sales. A gap analysis can help you identify why your sales projections weren’t met. The results can help you modify your current marketing strategy to obtain better results.
• Your company continuously deals with productivity issues, customer complaints, and frequent returns. A gap analysis will help you identify the problems of manufacturing, shipping, or delivery processes. Based on the results, you can make necessary changes to improve overall results.
• You can also use gap analysis to identify your employees’ current performance, the areas they lag, and the improvements needed to reach the set standards.

Types Of Gap Analysis

Gap analysis is classified into the following four different types:

Concrete Gap Analysis

As the name suggests, a concrete gap analysis deals with solid facts and data. It focuses only on events that occurred instead of making assumptions.

Conceptual Gap Analysis

Conceptual gap analysis runs by taking hypothetical situations in mind. Educated assumptions are made about data to reach the final findings.

Strategic Gap Analysis

A strategic gap analysis focuses on cross-organizational and deals with planning and executing future strategies. It generally targets higher levels in the organization.

Operational Gap Analysis

An operational gap analysis is centered around day-to-day operations and targets specific departments.

Benefits Of Conducting A Gap Analysis

Let’s look at the major reasons why businesses must consider conducting a gap analysis:

• Assists in the decision-making process and helps management set their priorities straight.
• Provides an in-depth review of your current processes to check their effectiveness. Some strategies might have given excellent results in the past. But it’s crucial to identify and eliminate outdated practices.
• Identify rapid problems that need a quick solution.
• It provides a different view of your business you were yet to see, depending on the depth of the analysis.

Remember that gap analysis only helps identify the gap in the evaluated areas. It doesn’t provide the steps required for a lasting solution. Based on the analysis, you must work on devising strategies that tackle specific issues. Also, the analysis might miss out on external factors directly affecting the processes.

How To Conduct A Gap Analysis?

Let’s now look at the steps required to conduct a gap analysis successfully.

Step 1: Identifying The Current State Of The Concerned Process

Start by identifying the important areas in your department or organization. What are the core metrics you consider? For instance, the sales team focuses on lead generation and conversion rates while the accounts department targets accuracy.

Step 2: Work On Formulating Future Goals

Set specific, measurable, achievable, relevant and time-sensitive, SMART goals.

• It’s crucial to be specific for narrowing down your immediate needs.
• The tasks should be measurable to keep up with the progress.
• Setting practical and achievable goals is important to avoid frustration and a lack of motivation.
• Relevant goals help you cater to the overall needs of the organization.
• Time-sensitive goals help you work harder and smarter to obtain the desired results.

Step 3: Identification Of Existing Gaps In The Process

Let’s say you conducted a sales analysis and identified you are 20K away from achieving your set target. This identified gap must follow actionable steps to reach the target. Dwell on why the gap exists to devise strategies required to overcome it. Make your team question all relevant areas for successful identification.

Step 4: Devising An Improvement Plan

The final step focuses on devising strategies to introduce improvement. Use the obtained root cause information to incorporate relevant fixes. For instance, incorporate a training module for improvement if your team lacks the necessary skills to tackle certain processes.

Lastly, make sure you assess the cost required to introduce improvements. You can still introduce changes if you don’t have the required budget. Focus on finding less-costly alternatives to save the day.

Gap Analysis Frameworks

Presenting the gap analysis results becomes the next crucial step after successfully conducting it. There are various tools and Gap Analysis PowerPoint templates that assist in a successful presentation. Here are some examples of gap analysis frameworks you can use:

Mckinsey 7S Framework

The Mckinsey 7S framework is suitable for analyzing the interplay between different parts of your organization. Its focus remains intact on organizational structure and alignment of the seven core internal elements within a company.

PESTEL Framework

The PESTEL framework focuses on the external factors affecting business productivity. Marketing departments use it for devising strategies based on continuous changes.

SWOT Analysis

Every company needs to conduct a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis to identify where it stands. It’s a simple brainstorming session that helps companies take necessary future actions based on current standing.

Final Words

You cannot expect exceptional growth if you fail to identify gaps in your plans and processes. Use the steps mentioned above to conduct a gap analysis and devise strategies for business growth.