GAP Analyis

 

A gap analysis is the process companies use to compare their current performance with their desired or  expected performance. It is the means by which a company can recognize its current state—by measuring time, money, and labor—and compare it to its target state. A range of factors including the time frame, management performance, and budget constraints are looked at critically in order to identify shortcomings. Strategic gap analysis aims to determine what specific steps a company can take to achieve a particular goal. The analysis should be followed by an implementation plan. A gap analysis may also be referred to as a needs analysis, needs assessment or need-gap analysis.

The "gap" in the gap analysis process refers to the space between "where we are" as a part of the business (the present state) and "where we want to be" (the target state or desired state). If an organization does not make the best use of current resources, or forgoes investment in capital or technology, it may produce or perform below an idealized potential. This concept is similar to an economy's production being below the production possibilities frontier.

 Gap analysis identifies gaps between the optimized allocation and integration of the inputs (resources), and the current allocation-level. This reveals areas that can be improved. Gap analysis involves determining, documenting and improving the difference between business requirements and current capabilities. Gap analysis naturally flows from benchmarking and from other assessments. Once the general expectation of performance in an industry is understood, it is possible to compare that expectation with the company's current level of performance. This comparison becomes the gap analysis. Such analysis can be performed at the strategic or at the operational level of an organization.

Gap analysis provides a foundation for measuring investment of time, money and human resources required to achieve a particular outcome (e.g. to turn the salary payment process from paper-based to paperless with the use of a system). Note that "GAP analysis" has also been used as a means of classifying how well a product or solution meets a targeted need or set of requirements. In this case, "GAP" can be used as a ranking of "Good", "Average" or "Poor". 

Gap analysis applications

 

Gap Analysis is a general tool and as such it can be used at different granularities, for example, at an organization level, as part of project management, or for strategy development. Gap analysis is a formal study of what a business is doing currently and where it wants to go in the future. The gap analysis also helps in benchmarking actual business performance so it can be measured against optimal performance levels.

Performance gaps can be measured across multiple areas of the business, including customer satisfaction, revenue generation, productivity and supply chain cost. Small businesses, in particular, can benefit from performing gap analyses when they're in the process of figuring out how to allocate resources. Gap Analysis will often focus on one or more of the following perspectives:

1.      Organization (e.g., Human Resources) : What skills or roles are missing or lacking? In human resources (HR), a gap analysis can be done to examine which skills are present in the workforce and what additional skills are needed to improve the organization's competitiveness or efficiency.

2.    Business Direction: Is there a gap in the product or a gap in the market that is not fulfilled by the product?

3.     Business Processes: How we do things be made more efficient?

4.     Technology: are there systems we are missing or are there incompatibilities between systems?

5.   Compliance Initiatives:  A gap analysis can compare what is required by certain regulations with what currently is being done to abide by them.

6.   Software Development : Gap analysis tools can document which services or functions have been accidentally left out; which have been deliberately eliminated; and which still need to be developed.

7.     Information Technology: Gap analysis reports often are used by project managers and process improvement teams as the starting point for an action plan to produce operational improvement.

       8.      Marketing : There are four types of GAP analysis conducted.

1) Product/Market gap

Product or market gap can be defined as the difference between the actual sales performed and budgeted sales.

2) Performance Gap

The performance gap can be defined as the gap between the actual performance and expected performance.

3) Manpower Gap

The manpower gap can be defined as the difference between the actual strength of the organization and quantity and the required number of workforces.

Benefits of Gap Analysis

Gap analysis, when used correctly, can be applied to a wide variety of situations where a business wants to improve. It is especially important for business leaders who want to make plans months and years into the future.

There are many advantages of a gap analysis, for your company now and in the future. Advantages of a gap analysis include:

·         An in-depth look at how your company currently operates.

·         A chance to assess if things are working as efficiently as possible at your company.

·         Forcing you to strategize around what you want your company to look like and how to get there.

·         Making better use of company resources and finances.

·         Allowing teams to quickly diagnose problems and create ways to solve those problems through integral changes in business practices.

The importance of performance gap analysis can vary by company or industry, but it is a worthwhile way to provide an in-depth look at your business to help it grow. The advantages of a gap analysis can be years of increased success for your company.

 

The Limitations of GAP analysis

Gap analysis is a useful tool for conducting an initial general assessment of the current situation. It can be used to identify weak points early on and implement the necessary corrective actions.

However, the range of possible factors associated with this analysis is so great that further research is necessary in order to apply these findings to the strategic direction of the company. Yet another problem is that factorsexternal to the company are not considered. Therefore, any projections for the future using current data are highly speculative.

As long as these limitations are kept in mind when conducting gap analysis, it can be a helpful starting point for the strategic planning of a company.