Gap Analysis: Definition
Gap analysis is defined as a method of assessing the differences between the actual performance and expected performance in an organization or a business. The term “gap” refers to the space between “where we are” (the present state) and where “we want to be” (the target state). A gap analysis can also be referred to as need analysis, need assessment or need-gap analysis.
Consider hypothetically, as an organization you have manufactured a product A. This product has reached the target audience in the market. Product A has all the qualities to excel in the market, the right features, pricing margin, and demand. Yet for some reason, the product didn’t perform well in the market.
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Gap analysis can be performed on:
- A Strategic Level- to compare the condition or level of your business with that of the industry standards
- At an Operational Level – To compare the current state or performance of your business with what you had desired.
Here is where a gap analysis would play a crucial role in understanding where the product is and what it lacks, where the product needs to be in order to make its place secure in the market and give a tough fight to any other competitor who might be offering a similar product.
In this blog, you will read in details about the 5 gap analysis tools that your business might need to learn and identify the gaps in your business and excel by analyzing the data collected by following steps on how to a gap analysis. Let us first understand the tools needed to conduct a gap analysis.
Gap Analysis Tools
If you are a business owner, ask yourself how far have you come from the work you had planned at the beginning of the year? What products or services that you had promised to roll out, are they already on the floor? Do you have an idea about what worked and what didn’t? And why?
Gap analysis can help you compare your businesses or project’s actual performance as against the performance you had planned to achieve. This way you can figure out what worked for you and what didn’t, what decision you made right and what was not so right!
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Here are the 3 gap analysis tools you can use when doing a gap analysis for your business or organization:
SWOT focuses on Strengths, Weaknesses, Opportunities, and Threats in the internal and external environment respectively. SWOT analysis helps you determine your current position within the industry or the market.
How to carry out SWOT to analyze Gap?
- Gather a team of experts from the relevant department so that their expertise will help you identify the problem and the gaps immediately.
- Create a SWOT analysis matrix.
- Next list down all the internal strengths and weaknesses of your business.
- Note down the opportunities and threats that might be caused to your business from an external environment.
- Rearrange each bullet point in an order of highest priority right at the top and the least important ones at the bottom.
- Analyze how you can use your strengths to minimize weaknesses and use the best available opportunities to avoid or get rid of the threats.
Fig: SWOT Analysis Matrix
Learn more: Strategic Analysis for business research
- McKinsey 7s
McKinsey 7s can help you with the following gap analysis purpose:
- To help you understand that gaps that are evident and that may appear in your business
- To help you identify the areas to optimize and to boost business performance
- To align the respective processes during a merger or an acquisition, if you have had recently or are planning to have.
- Helps you examine the results of future changes within the business.
Learn more: How to do Market Research for a Business Plan
The 7s refers to the key interrelated elements of an organization. They are:
- Shared values
These elements are divided into two distinct groups: hard elements (tangible factors, that can be controlled) and soft elements (intangible factors, that cannot be controlled)
Hard elements are as follows:
- Strategy – the plan that will help your business gain an advantage over any of your competitors.
- Structure – the plan or the layout that will define your entire organizational structure.
- Systems – business and technical knowledge your employees already use to complete their daily tasks.
Learn more: Employee Evaluation Survey
Soft elements are as follows:
- Shared values – these are the set of beliefs or traits that the organization values.
- Style – A leadership style that defines the organization’s culture.
- Staff – people who are the backbone or the asset of an organization.
- Skills – The tool that the employees have to help your business succeed.
How to apply McKinsey 7s?
- Start with gathering a competent team.
- Look for gaps and weaknesses in the business and align the relationship between the elements.
- State where the elements will be optimally aligned. When we speak about elements we are referring to the 7s.
- Come up with a suitable plan of action to realign the elements.
- Implement the changes or the solution you have come up with and reduce the gap.
Learn more: Human Resource Surveys
- Nadler-Tushman’s Congruence Model
This model is based on the principle that a business performance is the result of 4 key elements: work, people, structure, and culture.
How to apply to this model?
- First and foremost gather all the data that point you towards any or all symptoms of poor performance.
- Specify inputs i.e whether its environment, resources or history that is causing these poor performances.
- Identify which outputs are required at the organizational level so that the organization can meet all strategic objectives.
- Now assess the degree of congruence among all the mentioned components.
- Strategize and put down a plan of action.
Learn more: Qualitative Market Research
How to Do a Gap Analysis: A 5 Step Template with Example
In the business world, there is no set process to carry out a gap analysis since it needs to be customized to suit the business needs. In this section, we consider an example of a ketchup manufacturing business which intends to conduct a Gap analysis.
The following steps can be followed to analyze and identify gaps in your business:
Step 1: Identify the area to focus on- You need to know where to focus, that will be your primary requirement. Whether the issue is finances, product quality or marketing etc. Be specific, so that you can focus better.
For example, if you want to identify the gaps in your ketchup business, you need to decide whether to focus on product quality or marketing to identify and eliminate those gaps.
Step 2: Identify what Goals you want to achieve- Now that you know the area to focus on, set your target or goals. Set realistic smart goals and make sure to align them with your business needs.
For instance, the goal of your ketchup manufacturing business is to produce and sell 162000 units of ketchup in the next year in comparison to 120000 being sold this year.
Step 3: Know your current state- Before you go any further, know where you stand currently. By looking into your business reports you will know your current position in the market, brainstorm and gather as much data as possible on what is your business’s current performance.
In this case, your ketchup brand currently sells around 100000 units a month.
Step 4: Determine where you want to be in future- Define your parameters, remember you have set smart goals, by achieving those goals you will be able to achieve the desired position for your business in future.
For instance, for your ketchup brand, answer the following question at this step:
Where do you foresee your ketchup manufacturing business in the next year? – The answer can probably be such as a 35% increase in unit sales per month.
Step 5: Understand the gaps between two states- Now that you have a clear understanding of the attributes of where you stand currently (present state) and where you desire to be in future (desired state), it is now easy for you to identify as to what is stopping you from achieving you your targets. After you have identified your gaps, make yourself equipped to close those gaps.
You need to understand your drawbacks in your current situations in comparison to your aspirations. Understand factors such as: What are the efforts being made to achieve success? Or Are attempts being made to improve the quality of the product? Or What are the marketing activities being conducted to hike up the sales volume?
To sell 135000 units a month in comparison to the existing 100000 units, a significant number of teams have to work in unison. The production needs to ramp up along with a boost in marketing and sales activities. The marketing managers need to develop effective strategies for improvement on the basis of the identified strengths, weaknesses, opportunities and threats in the business.
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Gap Analysis using QuestionPro Survey Software
QuestionPro market research survey software is a platform that helps you identify gaps in your business by making available the gap analysis template. A new question type has been added to the QuestionPro survey system to specifically run comparisons between expectation and delivery. In most cases, this realizes itself by asking customers/potential respondents to rate different attributes (Customer Service, On-Time delivery etc.) on an importance as well as satisfaction rating scale.
We are calling this the side-by-side matrix question (the alternative name is a multi-dimensional matrix) — this is basically two (or more) matrix questions placed next to each other. Follow these simple steps in order to run gap analysis.
How can you access Gap Analysis?
- Login » Surveys » Reports » Choice Modelling
- Select GAP Analysis.
Select the question from the drop-down menu and select the Gap analysis option.
Once you have analyzed the question, you can also download the report in excel, powerpoint or even print it.
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