How to perform a GAP analysis and why you should


A GAP analysis can let you know where your company is struggling and help you move in the right direction.

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Image: z_wei, Getty Images/iStockphoto

How can you know if your business is performing as expected? One reliable way is perform a GAP analysis.

If your company is looking for a way to evaluate its current processes and make improvements that help achieve desired business goals, performing a GAP Analysis may be the answer. 

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What is GAP analysis?

A GAP analysis is a method of comparing the actual business performance to a desired level of performance and can relate to business processes, policies, projects, or other metrics. GAP analysis helps your company identify whether its business needs are being met. GAP stands for Good, Average, Poor, or the possible outcomes of the analysis. 

Why is GAP analysis important?

Before your company can determine what needs to change, it has to develop a clear understanding of the current state of things. Without this understanding, your company can’t be certain that things have changed, where things have changed, or how any changes make a difference. 

3 reasons your company should perform a GAP analysis

GAP analysis gives your leadership team increased visibility into its entire operations and how well each area is working to meet objectives. Once initiated, it helps your company better meet its business goals by identifying areas like the following three, where deficiencies might exist.

1. Product or service gaps

Being able to identify potential areas for product or service improvements opens up opportunities that may not have existed before. These opportunities translate into increased profitability and help your company become more competitive. This is even more important during times of uncertainty. As an example, the personal safety or personal protective equipment (PPE) market is estimated at $6 billion and increasing in demand. During COVID-19, many businesses around the world like Flowfold, Eddie Bauer, Outdoor Ranch, DaleBoot, and others identified PPE gaps and seized upon opportunities to develop products for hospital and frontline workers. 

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2. Operational gaps

Gap analysis is well-known for helping companies improve performance in areas like finance, human resources, marketing, innovation, IT, sales, education, engineering, and more. Recently during the COVID-19 disruption, supply chain and logistics are areas that have also experienced significant operational gaps. Companies that performed gap analysis were more likely to survive the disruption while those that didn’t may have found themselves at risk of not surviving the pandemic. 

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3. Talent gaps

Another challenge most companies, regardless of industry, faced during the pandemic was talent shortages. Performing a GAP analysis allows your company to identify where employees are needed the most. It ensures your hiring practices meet your demand and allows you to shift talent to the right areas. Without talent gap analysis, most companies are likely to struggle to deliver on their products or services. 

How to perform a GAP analysis 

Effective GAP analysis takes time and relies on closely following these steps.

Identify and document your company’s current state

To do this, your company will need to identify, gather, and document all relevant information about its current business processes. Key types of information might include procedures, resources used, participants, and current technologies. It’s a good idea to walk through each process to ensure nothing gets missed. Often there are many steps and many sources of information that just become intuitive, and some of the steps or materials can easily slip through the cracks.  

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Determine your company’s desired state 

Whether it’s about improving your company’s processes, technologies, or policies, your company has to determine what its desired state should look like. This is about setting end goals that help your company achieve optimal results. 

Identify any gaps between your current and desired state

Determining where potential gaps exist relies on performing an analysis of the two states. This will involve mapping the two states and identifying where the gaps exist between the two. Gaps may be in the processes, your people or other resources, vendor capabilities, technologies that your company uses, or other areas. At the end of the analysis, the gaps are the areas where potential improvement opportunities exist. Once your company bridges these gaps, it will be able to achieve its desired goals.  

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Measure and monitor success

Making changes isn’t enough. As changes to your company’s internal and external environment take place, it’s also important to monitor performance. Some external changes might be tax, legal, regulatory, client, or vendor changes, while internal changes might involve your talent pool, management views, or policies. Your company will need to identify the right key performance indicators (KPIs) to measure performance. Depending on where the changes have been made, some metrics might focus on human resources, marketing, customer, financial, or other types of performance. As internal or external factors change, there will be a need to develop and implement corrective actions to ensure the current state still meets your company’s desired goals. 

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