Gap Analysis

A gap analysis is a method for comparing a business's current performance to its desired performance. It's a strategic tool that helps companies identify discrepancies and improve their operations.?

A gap analysis is the process that companies use to compare their current performance with their desired, expected performance. This analysis is used to determine whether a company is meeting expectations and using its resources effectively.

A gap analysis is the means by which a company can recognize its current state—by measuring time, money, and labor—and compare it with its target state. By defining and analyzing these gaps, the management team can create an action plan to move the organization forward and fill in the performance gaps.

Types of Gap Analysis

Market Gap Analysis

Also called product gap analysis, market gap analysis entails making considerations about the market and how customer needs may be going unmet. If a company is able to identify areas where product supply is not meeting consumer demand, then the company can take measures to personally fill that market gap. This type of analysis may be performed by external consultants who have more expertise in these areas of business in which the company may not currently be operating.

Strategic Gap Analysis

Also called performance gap analysis, strategic gap analysis is a more formal internal review of how a company is performing. The analysis often entails comparing how a company has done against long-term benchmarks such as a five-year plan or a strategic plan.

A strategic gap analysis may also be performed to compare how a company is faring against its competitors. This type of analysis may unearth ways that other companies are utilizing personnel or capital in more strategic, resourceful ways. This type of information may be hard to come by, especially if departed employees have signed nondisclosure agreements and the company does not publicly disclose much information about processes.?

Financial/Profit Gap Analysis

A company may choose to directly analyze where its company may be falling short compared to competitors by looking specifically at financial metrics. This may include pricing comparisons, margin percentages, overhead costs, revenue per labor, or fixed vs. variable components. The ultimate goal of a profit gap analysis is to determine areas in which a competitor is being more financially efficient. This information can then be used in further, broader gap analysis types.

Skill Gap Analysis

Instead of looking at the financial aspects of a company, a business may choose to look at the human element instead. A skill gap analysis helps determine if there is a shortfall in knowledge and expertise with current personnel. A skill gap analysis must clearly define the goals of the company, then map how current laborers may fit into that design. A skill gap analysis may lead to the recommendation of simply training existing staff to incur new skills or seeking outside expertise to bring in new personnel.?