demand and supply gap analysis in business plan

How To Perform A Gap Analysis In 5-Steps + Free Template

Most of us have at least a rough vision of where we'd like to take our organization. But sometimes, knowing where and how to begin can be challenging. This is where strategic gap analysis comes into play.

Gap analysis is a great strategic analysis tool  that gives us a broad framework for defining not just where we are today but, more importantly, where we want to be and how we're going to get there.

In this article we’ll cover:

What is gap analysis, what are the benefits of gap analysis, when to use gap analysis.

• Gap Analysis Examples

Types Of Gap Analysis

Complete gap analysis template (excel format), 5-step gap analysis process, gap analysis tools & frameworks, free gap analysis templates to download, use cascade to close the gap 🚀.

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Gap analysis is a method used by organizations to compare their current state to their desired future state . This process includes assessing the actual performance of your organization to determine whether business goals or objectives are being met and, if not, creating an action plan that will bridge those identified performance gaps .

It's a great tool for your company's  internal analysis . Almost all major businesses usually assign the completion of a gap analysis template to project managers or business analysts.

Conducting a gap analysis is actually quite simple, but it can also have its challenges. That’s why it’s useful to follow a step-by-step approach to ensure your  strategic planning  is well-structured and meaningful when assessing your business goals.

The gap analysis framework forces you to think about your current situation, your desired future state, the root causes of the gaps between the two, and the action plan to bridge that gap in a very structured and clear manner.

Think about it as the bridge that will get you from point A (your current state) to point B (your desired state).

But apart from that, it presents a  framework for collaborating  on creating a strategic plan and a common execution  roadmap  that is visible and aligned with all stakeholders. When multiple people are involved in strategic planning and execution, their different approaches can sometimes conflict with each other.

This framework can also be used to  analyze historical performance . The first time you run a gap analysis process, you will explicitly capture the current performance of your business (in both qualitative and quantitative forms) . So, the next time you do one, you will have a benchmark against which you can compare your most recent performance to efficiently set goals.

To streamline your process, we've developed a  free gap analysis template . This handy tool poses thought-provoking questions that guide you in your strategic planning journey, integrating all the pieces seamlessly.

Gap analysis is most useful when you need to:

• Create a new strategy for your team and want to understand where you currently sit
• Figure out the right areas of focus to achieve your business goals
• Develop a new product, understanding the gap between your current offer and what customers want
• Find out why you aren't meeting important KPIs and strategic objectives
• Develop a  change management strategy , but you need first to identify the gap between the current and desired state
• Identify opportunities to improve current processes or workflows
• Prepare for an audit and showcase how you are proactively addressing gaps
• Prepare  a strategic plan  and prioritize  resource allocation

These are, of course, just some use cases... This is a versatile tool that can be applied to many different scenarios. The best part is that it’s suitable for companies and teams of all sizes and industries.

Gap Analysis Example

Let’s check out some  “real-life”  scenarios where a gap analysis would be a great option:

Example 1: New Product Launch

A technology company plans to launch a new mobile app to expand its product offerings and reach a wider audience. To ensure the app's success, they conduct a gap analysis to evaluate their current app development processes, features, and user interface compared to competitors in the app market.

By identifying gaps and areas for improvement, they refine the app's functionalities, enhance user experience, and align it better with customer needs, positioning it as a standout solution in the competitive app market.

Example 2: Human Resources Strategic Planning

The Human Resources (HR) team at a medium-sized organization faces challenges with employee retention and satisfaction. To improve the department's performance, they conduct a gap analysis to assess their current practices, employee feedback mechanisms, and talent management strategies.

By pinpointing gaps between existing practices and desired outcomes, they develop a strategic action plan. This plan includes implementing effective employee engagement programs, talent development initiatives, and performance management systems, leading to improved retention rates and increased employee satisfaction.

Example 3: Digital Transformation In Manufacturing

A manufacturing company aims to undergo a digital transformation to enhance operational efficiency and adapt to evolving industry demands. They perform a gap analysis to evaluate their current technology infrastructure, data management processes, and workforce skills in relation to the digital transformation objectives.

By identifying gaps in technology and skills, they develop a comprehensive  digital transformation strategy . This includes upgrading technological capabilities, implementing data analytics systems, and providing relevant training to employees, facilitating a successful transition to an advanced and digitally enabled manufacturing environment.

In each of these scenarios, gap analysis plays a crucial role in identifying areas for improvement and guiding strategic decisions. By bridging the identified gaps, these organizations can effectively meet their goals, improve their overall performance, and stay competitive in their respective industries.

As you can probably imagine from the previous examples, this method comes in different forms, and each serves a unique purpose to tackle specific challenges and opportunities within an organization.

Here are some types of gap analysis you might find helpful:

• Performance Gap Analysis : Evaluates the difference between an organization's current performance and its desired state to identify areas for improvement and enhance overall efficiency and effectiveness.
• Market Gap Analysis : Focuses on analyzing the gap between customer expectations and the products or services offered by a company, helping to identify opportunities to meet market demands and gain a competitive edge. ‍
• Product Gap Analysis : Assesses the features, pricing, and qualities of a product or service against customer needs and expectations to identify gaps and prioritize improvements or innovations.
• Skills Gap Analysis : Analyzes the existing skill sets of employees in an organization and compares them with the skills required to meet organizational goals, leading to targeted training and development initiatives. ‍
• Compliance Gap Analysis : Evaluates an organization's adherence to relevant laws, regulations, and industry standards, identifying areas of non-compliance and guiding efforts to meet legal requirements. ‍
• Financial Gap Analysis (or Profit Gap Analysis) : Compares an organization's current financial performance with its financial objectives, uncovering discrepancies and guiding financial planning and decision-making . ‍
• Technology Gap Analysis : Assesses an organization's technology infrastructure, systems, and capabilities, comparing them with the technology required to support its strategic goals and initiatives. ‍
• Environmental and Social Gap Analysis : Focuses on an organization's environmental and social impact, identifying gaps in sustainability practices and providing insights for implementing responsible and eco-friendly strategies.

A gap analysis template visualizes the differences between actual performance and potential or desired performance, helping you identify and address areas of improvement. It serves as a structured tool for conducting an effective gap analysis, allowing organizations to compare their current state with their desired goals and develop strategic action plans to bridge the gaps.

So, before we discuss the steps to implement your analysis, grab your  free Gap Analysis Template . Armed with this effective gap analysis tool, follow the step-by-step guide below, fill the template with your own data, or use it as a reference to build your own template.

Step 1: Define your focus areas

To create an effective gap analysis, start by clearly defining the scope. Instead of vague ambitions like "I want to be the biggest and best company in Asia," focus on specific areas for improvement.

Common focus areas include:

• Financial growth
• Customer excellence
• Employee happiness
• Community impact

These focus areas should succinctly describe what you aim to improve through your gap analysis.

🤓  Want to dive deeper?  Read our go-to guide on how to define focus areas.

Step 2: Identify your desired future state

Contrary to most gap analysis guides, we recommend starting with your desired future state instead of the current state. Why? Because your organization doesn’t have a single current state—it has many, varying by team, measure, and individual.

Defining your current state without knowing your goals can be futile and confusing. Therefore, begin with the future state, leveraging your strategic focus areas. For instance, if 'Innovation' is a focus area, frame your aspirational future state broadly.

Example: "To be recognized as one of the most innovative SaaS platforms in the industry."

Keep this high-level—avoid specific KPIs for now. Here are more examples for various focus areas:

• Customer Excellence : "To achieve market-leading customer retention and referrals."
• Community Impact : "To make lasting and meaningful changes in the community."

With high-level desired future states defined, you're ready to move to the next stage of the analysis process.

Step 3: Assess your current state

Next, understand your current state. Use the focus areas defined in Step 1 to scope your analysis, starting high-level and getting specific in Step 4 .

For each focus area, write a realistic summary of your current state using similar language to your desired future state.

• Innovation : "We are not currently known for innovation; however, our software does contain a couple of unique features."
• Customer Excellence : "We have high customer satisfaction and retention in our Enterprise segment, but our smaller customers are significantly less satisfied."
• Community Impact : "Most members of the local community are not currently aware of our presence."

Be honest about your strengths and weaknesses. You might already know your current state due to specific problems, but thorough assessment is crucial.

🔎 Use gap analysis tools like SWOT Analysis, PEST, and McKinsey 7-S to assess your current state. These tools help diagnose your company and detect gaps, complementing your gap analysis. We’ll cover some of these tools in the following section: Gap Analysis Tools & Frameworks .

Step 4: Apply metrics / KPIs to your gap analysis

Now, specify what you want to achieve and how, by adding Key Performance Indicators (KPIs) for each focus area. Here’s how to select the right KPIs:

• Choose KPIs you can measure and decide on your measurement approach.
• Select KPIs with existing baselines for easy gap measurement.
• Use both leading and lagging KPIs for a comprehensive set of measures.

Here are specific KPI examples for your gap analysis. Define targets for your desired future state and compare them to your current state.‍

Focus Area: Innovation

Leading KPI : Dedicate at least 50% of developer resources to creating new features. ‍

• ‍ Current State : <10% of developer resources are on creating new features.

Lagging KPI : Achieve an 'Innovation' score of over 80% on at least one customer review website. ‍

• ‍ Current State : 'Innovation' score on G2Crowd is less than 60%.‍

Focus Area: Customer Excellence

Leading KPI : Achieve an average customer NPS score of at least +7. ‍

• ‍ Current State : NPS score is less than 3 on average.

Lagging KPI : Decrease overall gross customer churn to less than 10% per annum. ‍

• ‍ Current State : Gross customer churn is greater than 20% per annum.

Focus Area: Community Impact

Leading KPI : Raise community awareness to 70%. ‍

• ‍ Current State : Community awareness is less than 20%.

Lagging KPI : Get directly involved in at least 3 major political initiatives. ‍

• ‍ Current State : Not participating in any political initiatives currently.

The "gap" in your gap analysis is the variance between the KPIs of your current state and your desired future state. For example, you have a gap of 50% between your current community awareness (20%) and your desired future state (70%).

Step 5: Create an execution-ready action plan and roadmap

Creating a gap analysis leads to the crucial step of formulating an action plan and roadmap to address the gaps you identified. This involves defining strategic projects for each focus area, aiming to close the gaps identified in Step 4.

Think of your gap analysis action plan as a series of projects that directly contribute to achieving the Key Performance Indicators (KPIs) set for each focus area.

Here are specific project examples for each focus area:

• Project 1 : Hire four additional developers dedicated to new feature development.
• Project 2 : Implement an 'Innovation Check' for all new features to ensure they meet the definition of innovation.
• Project 1 : Launch an automated survey to gather reasons for customer cancellations.
• Project 2 : Establish a dedicated retention team in customer service to handle cancellation requests.
• Project 1 : Launch a local TV advertising campaign.
• Project 2 : Increase online advertising spend by $5,000 per month.

Typically, you'll have at least two projects for every gap. Use your judgment to ensure these projects are likely to close the gap.

Now, let's discuss the roadmap.

As you create the action plan, establish a clear timeframe for each project with realistic deadlines and milestones. This roadmap will guide your organization on the sequence of actions, resource allocation, and expected timeframes for achieving significant milestones. A well-defined roadmap keeps your team focused, organized, and motivated throughout the implementation process.

🎁 Bonus step: Execute, monitor, and adapt your plan

Congratulations! You've developed your action plan and set targets and KPIs to measure success. Now, it’s time for execution —the heartbeat of your plan.

Ensure everyone in your organization is on board and has clear visibility over the plan. Share the big picture and provide clarity on the specific actions needed to close the gaps identified. Encourage a collaborative spirit where different teams are accountable for the KPIs that drive progress.

The secret to success is continuous monitoring and being open to adaptation. Keep a close watch on progress, and if things don’t go as planned, be ready to tweak your plan swiftly to stay on track.

While spreadsheets can monitor and track results, they may not be sufficient for keeping everyone on the same page and adapting quickly. Our suggestion? Check out  Cascade  😉

Cascade is your organization’s brain. It is the only platform that spans the entirety of your ecosystem to understand the relationships between your business inputs (e.g., metrics, initiatives, investments) and outputs (e.g., expected results, forecasted revenue, margins, etc.).

For example, Cascade helps you to monitor progress toward your targets and identify performance gaps before it’s too late. And even though it has tracking functionalities that allow you to track your progress in real time, like  dashboards and reports , it’s not  just  another tracking tool like the ones out there... It’s the key to  centralized visibility  over your execution engine.

👉🏻 Learn more about strategy execution software  here !

Want to take Cascade for a spin? Sign up today for a free forever plan or book a guided 1:1 tour with one of our Cascade in-house strategy execution experts.

The  gap analysis template  that we've created is a great starting point. However, there are a few different frameworks and tools that you can also use to help you get more specific about the gaps you're trying to resolve.

These frameworks are conceptual approaches that you can 'layer' onto your organization to help you categorize your activities and more easily identify gaps.

SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats. It assesses both internal and external factors, providing insights into current and future opportunities. SWOT analysis offers a comprehensive snapshot of your organization's current state by focusing on real-life evidence and contexts.

👉🏻 Learn more about SWOT analysis and get a free SWOT Analysis Template here .

PESTLE/PEST Analysis

Understanding industry threats and opportunities can be challenging without proper industry knowledge. PESTLE (Political, Economic, Social, Technological, Environmental, Legal) analysis enhances your understanding of external factors. This framework is particularly valuable in guiding strategic decision-making and identifying gaps related to changes in the external environment.

👉🏻 Check out  this article  to learn more about PESTLE analysis.

McKinsey 7-S Framework

The McKinsey 7-S framework assesses seven interconnected elements within your organization to understand its effectiveness and alignment. These elements include strategy, structure, systems, shared values, skills, style, and staff. When conducting a gap analysis using the McKinsey 7-S framework, you can identify discrepancies in how these elements are aligned and how they impact company performance.

👉🏻Check out  this article  to learn more about McKinsey 7-S framework.

Nadler-Tushman Model

The Nadler-Tushman model focuses on inputs, transformational processes, and outputs to assess organizational effectiveness. By examining how inputs are transformed into outputs, organizations can identify inefficiencies leading to performance gaps.

Fishbone Diagram

Also known as the Ishikawa or cause-and-effect diagram, the fishbone diagram helps identify potential root causes of a problem or gap. This tool is useful for mapping out complex and interconnected factors contributing to the identified gap.

McKinsey’s Three Horizons

Another framework for complementing your gap analysis could be  McKinsey's Three Horizons  of Growth.

This framework helps organizations think about business progression over time-based horizons, isolating business-as-usual activities from innovative growth drivers. The three horizons are:

• Horizon 1: Maintain and defend the core business
• Horizon 2: Nurture emerging business
• Horizon 3: Create genuinely new business

By using this framework, organizations can detect gaps in their growth plans and ensure a balanced approach to innovation and sustainability.

👉🏻Check out  this article  to learn more about McKinsey’s Three Horizons.

Balanced Scorecard

A  balanced scorecard  categorizes business activities into outcome-focused quadrants: financial, customers, process, and people. By using the balanced scorecard for gap analysis, organizations can identify gaps in each perspective, understand how they relate to the overall strategy, and prioritize actions to address these gaps effectively.

👉🏻Check out  this article  to learn more about the framework.

Note these frameworks are not substitutes for performing a gap analysis, but can rather add an additional layer of depth on top of your gap analysis.

The following are additional gap analysis templates you may find useful, depending on your needs:

Gap analysis template for business process improvement

Gap analysis is often used to improve business processes. However, the framework needs some adjustment. This gap analysis template focuses on a slightly different approach that’s best for optimizing business processes.

👉🏻 Download the free Gap analysis template for business process improvement

Skills gap analysis template for your team

A skills gap analysis helps organizations uncover team gaps and set career development goals. It quickly identifies underdeveloped skills at the organizational level. Once identified, you can implement training plans or adjust your hiring strategy.

👉🏻 Download the free skills gap analysis template here!

Product or market gap analysis template

Product or market gap analysis is used to highlight the gap between your product and customers’ expectations. It will help you prioritize the next steps and meet those expectations set in the first place.

👉🏻  Download the product gap analysis here!

Financial gap analysis template

Financial gap analysis pretty much follows the standard template. However, we added some finance-related examples for easier navigation.

👉🏻  Download the financial gap analysis here!

Gap analysis is a great tool for detecting gaps and deciding what you should do to improve performance. However, it’s only half the work!

Once you've conducted the analysis, identified gaps, and created a well-crafted action plan and roadmap, the real work begins. You need to execute those projects and make steady progress toward the metrics and KPIs that will lead you to achieve your business goals  - ultimately closing the gap.

The most important thing is to remember that no matter how good your action plan is, it's the strategy execution that counts the most .

So here are our recommended steps to ensure an effective strategy execution process to make sure you close those gaps:

• Download your  FREE gap analysis template  to streamline your gap analysis process
• Put your action plan into  Cascade  (for FREE!)  to achieve centralized observability and effective execution

By combining a well-structured action plan with robust execution through tools like Cascade, you equip your organization with the resources needed to close the gap and achieve your desired outcomes.

What is a ‘needs analysis’ and how is it related to gap analysis?

A  need gap analysis  identifies specific requirements and deficiencies within an organization to address challenges and meet objectives. It focuses on understanding what is lacking or needs improvement.

While both needs analysis and gap analysis assess the current situation compared to the desired state, their focus differs. Needs analysis pinpoints specific needs and improvement areas. In contrast, gap analysis develops action plans to close the gaps between the current and desired states.

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• Analyzing the Gap Between Demand and Supply

13 Analyzing the Gap Between Demand and Supply

After planning the resources your plans require (demand) and the resources that you expect to be available to meet those demands (supply), you can see how well they match up by looking at the gap between demand and supply. Then you can take action to minimize those gaps.

To view the supply and demand summary data and their variance, click Supply vs Demand . In the top left form, you can view the data. In the charts, you can review the trends.

To view the difference between supply and demand headcount, click Supply vs Demand Headcount . This information helps guide you in addressing the gap by updating your hiring or training plans. Examples:

Transfer people from non-strategic jobs to strategic jobs.

Add training courses to build strategic skills.

Hire people that have needed strategic skills.

Create incentive programs to retain people with strategic skills.

The Complete Guide to Gap Analysis

By Joe Weller | October 17, 2018 (updated September 17, 2023)

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A gap analysis is a tool that can help businesses identify where they aren’t living up to their potential, and then use that information to plan ways for improvement. Learn how gap analyses work, find examples, and follow our step-by-step guide to perform one for your company.

What Can a Gap Analysis Do for You?

A gap analysis measures actual against expected results to identify suboptimal or missing strategies, processes, technologies, or skills. Use the results of a gap analysis to recommend actions that your company should take to meet its goals.

By comparing the current state with the target state, companies, business units, or teams can determine what they need to work on to make their performance or results better and get on the right path quicker. Companies can also use the gap analysis process to elevate individual or team performance, and look at attributes such as task competency, performance level, and productivity. Other names for the process include need-gap analysis, needs analysis, and needs assessment.

As opposed to a risk assessment , which tend to be forward-looking, a gap analysis examines the current state. ANSI (American National Standards Institute), ASIS (American Society for Industrial Security), and RIMS (Risk and Insurance Management Society) standards say that risk assessment includes the identification, analysis, and evaluation of uncertainties to objectives and outcomes of an organization.

You can also look at a gap analysis as a means of comparing performance to potential. In other words, how far did a person, group, or product fall from their capacity? Did the resources fall short of the needs?

Gap analysis is a process that, when applied to other business processes, becomes a reporting process used for improvement. When applied to manufacturing or production, a gap analysis can help balance the allotment and integration of resources from their current allocation level closer to an optimal level. Those resources can be time, money, material or human resources.

Concrete vs. Conceptual

You can perform a concrete gap analysis thats looks at the real world, or a conceptual one that examines hypothetical scenarios. While you can use the same template in both exercises, when performing a conceptual gap analysis, you’ll need to make assumptions about which parameters to use. Conversely, use real facts and data for a concrete analysis.

Strategic vs. Operational

A gap analysis can be strategic and focus on the overall organization and the planning and execution at that level, or it can be operational and focus on the day-to-day work of a team or department. Since both methods are based on real-world situations, there’s no need to make assumptions.

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Gap Analysis Examples

Many business departments use the gap analysis process, including accounting, sales, customer service, and human resources. Below you’ll find a few specific examples of scenarios in which a company can use a gap analysis:

New Product Launch : After a company launches a new product, they might do a gap analysis to determine why sales didn’t meet forecasts.

Productivity : When a factory’s productivity is not meeting expectations, targeted customer needs, or the set of business requirements that were laid out a gap analysis can help determine what process to fix.

Supply Management : If a hospital finds itself running short of supplies on a regular basis, they could perform a gap analysis to identify the reason why.

Sales Performance : A manufacturer can look at the sales performance of their catalog of products to make sure they are producing the right mix, and use the result to maximize their production–possibility frontier.

Individual Assessment : A team leader at an accounting firm can have each member perform a gap analysis on themselves, and use those results not only to find targets to improve each person’s performance, but also to draw out the best practices that everyone can adopt.

Product Evaluation : A software company might perform a gap analysis of their product to ensure that all features and functions outlined in the business requirements are present and working as expected.

Why Do Businesses Perform a Gap Analysis?

Businesses perform gap analyses to identify the difference between where they are with where they want to be. You can use a gap analysis to evaluate those differences, identify the causes, and inform the steps needed to bridge the gap.

In project management, the difference between the way a company is performing a task or activity and the ideal way it could be performed is called CΔV (pronounced “C delta-V”), or the current gap vision . The difference between a target for a metric and the actual metric performance is called AΔT (pronounced “A delta-T”), or the actual gap target .

Below are some reasons that a company might perform a gap analysis:

Benchmarking : Comparing results against external criteria. A computer company may want to see where they stand against industry performance criteria, or a candy company may want to compare their reputation with their competitors.

Portfolio Analysis : Examining their product portfolio to look for new sales opportunities, a company can use a gap analysis to identify new products to sell. In the opposite direction, they can also look for existing products that are not selling well, use a gap analysis to find out why, then promote them (e.g. feature them more promentilty in marketing or put them on sale), change them to better meet customer needs, or remove them from their portfolio.

Profits : If a forecast profit percentage isn’t reached, a company can use a gap analysis to determine what went wrong, and whether it was in planning or execution. Was the organization paying higher-than-expected expenses for materials, or having to lower prices due to unexpected competition?

Processes : A gap analysis can help reveal the shortcomings of processes, so that the real outcomes match the expected outcomes. A shipping firm could examine their AP process to see why so many of their vendors are not getting paid on time, or examine their billing processes to see why many of their suppliers don’t get their invoices until after the due date.

Performance Indicators : A gap analysis can also be applied to key performance indicators like new customer acquisition, average order amount, or return on investment (ROI) . A mobile carrier could look for the reasons that caused them to miss their customer acquisition goal, or a seafood company could seek the reasons they didn’t process as much salmon as expected.

Usage Gaps : A usage gap is the difference between current market size for a product or service, and the potential market size. A gap analysis in this area can help an organization see why they are not reaching the full potential. Is a company's reputation pushing down sales? Or did management misread the demand for a product?

What Is a Market Gap Analysis?

A market gap analysis is a method of researching sales opportunities where the demand outweighs the supply. An organization can use these analyses, which can be performed internally or externally, to make decisions based on market facts, rather than opinion.

A market gap analysis differs from market research in that it’s proactive rather than reactive. Business to consumer (B2C) companies take advantage of this process often. The market they might investigate can be geographic (there’s nobody selling anything like our product on the west coast), product based (there was a time when no one was selling mobile phone cases that doubled as wallets), service based (there may a lot of dogs in a city, but not many dog walkers or other pet care businesses), or look for a way to better utilize existing resources (think of Uber launching Uber Eats).

What Is a Strategic Gap Analysis?

A strategic gap analysis compares a company’s strategy to that of its competitors. A business can then adopt the top-performing aspects of its competitors’ approaches and integrate these aspects within the most successful parts of its own existing strategy.

When to Perform a Gap Analysis

A company can perform a gap analysis at any time, but be thoughtful about timing to maximize its effectiveness. Conduct gap analyses on a regular basis, before a period of strategic planning, or whenever a department or venture is underperforming.

A gap analysis is often a key part of strategic planning , which is a process that helps an organization define a strategy to accomplish its goals. By looking for issues via a gap analysis, the business can adjust its strategy to better fit the situation, or update the company's processes to align with the strategy.

When an organization is looking for problems with their performance, a gap analysis can be a key tool in identifying where things are falling short. For example, if a company wants to start a marketing campaign to improve their reputation or apply for a loan, they could perform a market gap analysis to help determine their impact on the their local economy and use that data as part of their campaign or loan application. Similarly, when a company is preparing for an audit or other oversight activities, a gap analysis is a proactive way of showing the auditors which regulations the company is complying with, and that it has a plan to meet the rest.

Benefits and Challenges of a Gap Analysis

Gap analyses benefit organizations in many ways, such as identifying growth opportunities and prioritizing resources. They can also be difficult and time consuming, and require in-depth knowledge of the department they’re targeting. We’ve outlined the top benefits and challenges below:

Insight into areas that need improvement, such as efficiency, products, profitability, processes, customer satisfaction, performance, participation, and competitive advantage

Ensuring that project requirements have been met

Finding areas of weakness and shortcomings to address

Uncovering differences in perception vs. reality

Providing information to guide decision makers, which can lead to better decisions

Finding the best places to deploy resources and focus energy

Prioritization of needs

If performed well, the results of a gap analysis are clear and easy to understand

While valuable, gap analyses are not perfect. Some challenges related to the gap analysis process include the following:

Successful completion depends on knowledge and persistence of the people involved in the process.

While the process may expose some causes, if it doesn't go deep enough, the proposed resolutions will not address the real root cause or can miss the complexities behind them. For example, when evaluating sales performance, an analysis might conclude that sales reps are not offering a new product enough, but may not find out why. Are they not familiar enough with the product? Are customers unwilling to change from an exsisiitng product? Or does the new product not work as advertised?

The analysis can be inaccurate, as the ground is constantly shifting (especially in large organizations or in fast-moving industries)

How to Perform a Gap Analysis

Performing a gap analysis is straightforward. First, identify the area to evaluate and state its ideal outcome. Next, analyze its current state. Compare that with the ideal results, and quantify the difference. Finally, make a plan to bridge the gap.

In larger organizations, the gap analysis process is generally the responsibility of business analysts, project managers, process improvement teams, or management. But with a little training, and a well-designed gap analysis template , anyone can work through the process.

Some organizations may already have a process outlined that you can follow. However, the basic steps for performing a gap analysis are explained below.

Identify the area to be analyzed and identify the goals to be accomplished . For example, you may want to figure out why your factory is not meeting its output target. The goal will be to discover the causes that contributed to targets not being met, and recommend how to remove the causes.

Establish the ideal future state . If everything worked according to plan, where would you be?

Analyze the current state . What causes contributed to the targets being missed? For example, were the workers not trained well enough? Was the production floor short-staffed? Were required materials consistnelty available? Did the layout of the production floor slow things down?

Compare the current state with the ideal state . How far from the target was actual production? For example, did you expect to produce 1,000 units per hour, but only managed to produce 800 units per hour?

Describe the gap and quantify the difference . In the unit production example (described in step 4), there would be a 20 percent shortfall. After researching the potential causes, outline the contribution of each to the gap. In this example, we may find that insufficient training caused 5 percent of the gap, staffing problems caused 7 percent, material shortages caused 2 percent, and inefficient layout of the factory floor caused 14 percent. Companies can use other ratings systems to quantify the difference that can be as basic as simple terminology like good, fair, and poor, to something more detailed like a 1-50 scale.

Summarize the recommendations and create plan to bridge the gaps . Decide what needs to be changed and determine what steps need to be taken to fix things. In this example, the team performing the analysis may decide the layout issue is the easiest to tackle and will have the greatest impact, so they might recommend ways to address it. Then they could work with the supply chain and staffing teams to create recommendations for those issues as well. They would summarize their ideas and present it to management to begin planning the improvements.

Gap Analysis Best Practices

When performing a gap analysis, be thoughtful about which areas, items, and processes to analyze, and which recommendations to adopt. Understand that the changes you make may affect others. Ensure your goals are specific, measurable, achievable, relevant, and time-bound (SMART).

Back up your recommendations with supporting data from your analysis to increase the likelihood that your company will adopt them. Use charts to illustrate your data and make it easier to understand. It’s also imperative to consider cost, resources, and consequences when recommending problems to address and solutions. Remember, if a solution is out of reach, the company is unlikely to adopt it.

Assign an owner to each part of the process to ensure that you complete each step. By digging deep into the proposed solution, you’ll find it might not be easy to achieve. Look beyond the obvious to see if there are other possible solutions. 

Learn more about how creating SMART goals can ensure that your gap analysis is as effective as possible.

Frameworks for Gap Analysis

You can use a framework for your gap analysis, like the Nadler-Tushman Model and the PESTEL framework, to simplify the process. Use each framework listed below as an organizing principle for both the causes you discover and your proposed solutions.

McKinsey 7Ss Framework The McKinsey framework has seven categories: strategy, structure, systems, shared values, skills, style, and staff. The first three are considered “hard” and the rest are considered “soft.”

An example of a misalignment might be if a production line requires 20 people to operate at full capacity, but the graveyard shift only has 15 people available. In this case, there's a misalignment between systems and staff.

Nadler-Tushman Congruence Framework This model breaks a company's’ performance into four areas: work, people, structure, and culture. Note each area’s strengths and weaknesses, and then compare them to the other areas. The goal is to find out if the work being done in each area supports the others. For example, if a compliance group is performing their tasks at a high level and finds areas where the company is not following certain laws and regulations, but the company’s organization doesn't have any way to implement these changes, the people and structure are not congruent.

SWOT Framework SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. While some experts see gap analysis and SWOT analysis as separate tools, SWOT is a useful tool for organizing both the the causes and the recommendations. However, the threat portion veers into risk assessment, and as mentioned previously, a gap analysis is not a risk assessment.

Download a free SWOT analysis template to get started with this framework.

PESTEL Framework PESTEL is another acronym and stands for political, economic, social, technological, environmental, and legal. While it can be a standalone analysis, a company can also use it as a gap analysis framework.

Fishbone Framework The fishbone diagram is a tool created by Kaoru Ishikawa, a Japanese quality control expert. The method is designed to identify problem causes and divide them into categories, similar to the other frameworks above. While the image above illustrates six categories that are used in manufacturing, there are other sets of categories that other business areas use. A couple of these are outlined below.

The 8 Ps of Product Marketing

Physical evidence

Performance

The 4 Ss of Service

Surroundings

What Is a Gap Analysis for a Bank?

In the banking sector, a gap analysis evaluates risk by looking at the balance of assets and liabilities. The analysis determines if there is a negative gap (when liabilities exceed assets) or a positive gap (when assets exceed liabilities).

The banking gap analysis doesn’t take potential interest rate changes into account, and generally focuses on near-future time periods (one month out, three months out), so it is a limited tool.

What Is a Gap Analysis in the Pharmaceutical Industry?

A gap analysis (also known as validation gap analysis ) in the pharmaceutical industry looks at the difference between regulatory requirements affecting a company, and the practices and processes that a company currently uses.

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Supply & Demand Analysis

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The Concept of Supply & Its Uses in Business

What happens to price when supply decreases, relationship between level of prices and demand.

• What Can Make a Demand Curve Shift?
• What Is the Market Analysis of a Supply and Demand Curve?

A demand and supply analysis is a vital tool used in economics to inform business decisions. When it is done accurately after considering factors such as trends and seasons, a supply and demand analysis can anticipate the effects of market shifts.

What Is Demand and Supply Analysis?

At the core of a supply and demand analysis are two laws: the law of demand and the law of supply. According to The Business Professor , the law of demand stipulates that the quantity of demanded goods and services lowers with the rise of prices. Conversely, the law of supply stipulates that the number of goods and services supplied increases with a rise in price.

Britannica explains that a supply and demand analysis indicates the relationship between the quantity producers want to sell at various price points and the quantity consumers will buy. Including a demand and supply analysis in a business plan is one of the best tools business owners can use to predict their next moves. By analyzing various factors that affect supply and demand, businesses can predict the amount of product they should produce at a particular price point to yield the most profit.

How to Interpret Supply and Demand

In a graph, the demand curve is represented by a downward curve based on the relationship between what consumers want and what they can pay. As prices rise, demand decreases. If consumers cannot afford a product, they won’t be interested in buying it. When plotted on a graph with price on the vertical axis and demanded quantity on the horizontal axis, the demand curve slopes downward as price increases and quantity decreases. The steepness of the curve depends on the current influences on demand.

In a supply analysis, the supply curve is plotted onto the same graph – with prices on the vertical axis and quantity on the horizontal – as an upward sloping curve. Based on the number of goods produced, the supply curve factors in input resources, labor, technology and regulations to accumulate its data.

The equilibrium is the point where the two curves meet. This point indicates where the market balances and the quantity supplied matches the demand. Businesses can adjust their prices or supply to find the equilibrium point and use workforce planning to meet an upcoming predicted demand.

Supply and Demand Influences

Many factors influence supply and demand trends. Five common factors that influence demand are consumer preference, income level, substitute prices, complementary goods and future expectations.

Many products become popular based on trends; However, trends don’t last forever. As consumer preferences shift, demand for formerly popular products will likely decrease. Similar to trends, future expectations also influence buyer habits. For example, if the consumer expects prices to decrease, they may wait to purchase later, such as buying holiday decorations after the holiday season has ended.

However, complementary goods, which are items that are traditionally bought together, affect demand differently. If one item becomes cheaper, such as pancake mix, the demand for maple syrup is more likely to increase. Production costs, technology advances, the number of suppliers and government regulations can all affect supply trends. For example, advances in technology can influence supply by cutting costs in the production chain, making it cheaper to produce more product.

• The Business Professor: Demand-Supply Analysis - Explained
• Britannica: Supply and Demand

Danielle Smyth is a writer and content marketer from upstate New York. She has been writing on business-related topics for nearly 10 years. She owns her own content marketing agency, Wordsmyth Creative Content Marketing, and she works with a number of small businesses to develop B2B content for their websites, social media accounts, and marketing materials. In addition to this content, she has written business-related articles for sites like Sweet Frivolity, Alliance Worldwide Investigative Group, Bloom Co and Spent.

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What Is A Gap Analysis? Definition & Guide

Updated: May 29, 2024, 4:04pm

As a business leader, you know that you need to improve certain areas of your business to achieve higher goals. But understanding the roadmap on how to get there requires understanding what’s missing from your operations to get it done. This is where a gap analysis comes in. It compares where you are to where you want to be and investigates why a gap exists so that you can develop reasonable goals to fill it.

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Gap Analysis Defined

A gap analysis looks for the reasons you aren’t achieving certain business goals. It considers where you are, where you want to be and looks for the reasons preventing your success. With that information, you are able to create an action plan that closes the gaps.

In many ways, a gap analysis is an efficiency tracker and looks to improve what you don’t do well. You can use a gap analysis in any department in your organization. For example, a sales team might not hit desired sales numbers or a customer service department may spend too much time on each call, causing long waiting periods. These would be specific gaps that need to be addressed.

When Is a Gap Analysis Necessary?

A gap assessment is a useful tool that helps you identify why certain goals are not being reached. Most business leaders are good at setting goals. But when goals aren’t achieved, it’s important to understand why. By digging in with a gap analysis, you can get very specific about problems and come up with solutions that move you closer to goals.

Types of Gap Analyses

Let’s explore the four types of gap analyses.

Market Gap Analysis

This is also called a product gap analysis and looks at the actual sales versus the budgeted sales. This can be done internally or externally by an analyst. Product gaps look for opportunities where supply is less than the demand. A company will use a market gap analysis to discover underserved markets that it can capitalize on.

Strategic Gap Analysis

The strategic gap analysis is also called a performance gap analysis. It measures the actual performance versus the anticipated performance. This analysis often benchmarks the company to competitors to see what you are doing versus what they are doing, to seek out opportunities to add services or products that fit the overall mission of your business.

Profit Gap Analysis

This is a common gap analysis that looks at the profit goals compared to the actual profits. By analyzing the gap, the company does a deeper dive into why the goals are not being met rather than just looking at the numbers on their own. It’s a way for a business to correct its course of action where necessary.

Skills Gap Analysis

This is sometimes called an HR gap analysis because it looks at the company’s personnel resources to determine whether or not it has enough people with the right skills to meet the goals of the company. The gap would be the makeup of the current workforce versus the workforce needed to succeed.

How To Perform a Gap Analysis

There are four primary steps to a gap analysis:

• Identify the important metrics you want to look at.
• Create S.M.A.R.T. goals .
• Evaluate the gaps between where you are and where your goals should take you.
• Establish a plan to address the gaps.

For example, a financial service firm can’t understand why it isn’t having success in selling the latest annuity rollout. Sales in the office are otherwise good, so the manager wants to find out what the issue is with the new product. Sales are currently at $500,000 a month but he expects that they should be closer to $1 million based on other product rollouts. He investigates this gap.

He begins by surveying his financial advisors . With a detailed anonymous questionnaire, he discovers that the advisors don’t feel comfortable with the product because they don’t understand it completely. He sets a new monthly goal of $750,000 to make it achievable in the first month and schedules several training sessions on the product to help advisors become more comfortable with it.

If you’d like to conduct an analysis of your own, you can download our free gap analysis template.

Frequently Asked Questions

What is an example of gap analysis.

Jessica runs a tax filing office and feels that her staff is not very efficient in doing each return, thus hindering bottom-line performance. The average time of her staff to complete a tax return is 55 minutes. She compares this to other tax filing offices where their average time is 35 minutes per return. She sets a S.M.A.R.T. goal of reducing tax return preparation time.

Once she knows the goal with a gap of 20 minutes per return, she starts to ask why her staff takes so much longer than other offices. She realizes that they are not utilizing all the software tools available to them that expedite each filing. Jessica decides to implement a training program that will teach her staff how to use the resources available to them to shorten the time to prepare each return.

What does the gap analysis tell you?

The gap analysis tells you where you want to be in relation to where you are and how to get there. It digs deep into why you aren’t meeting certain goals so that you can develop a plan to overcome deficiencies.

What is the first step of a gap analysis?

The first part of the gap analysis is to determine what you want to measure. This is then used as the foundation to create S.M.A.R.T. goals where you can see the gap between where you are and where you want to be.

Why is a gap analysis important?

When you evaluate data, you need to understand why there are certain shortcomings in the results. It’s not enough to know that you didn’t hit your sales goals; you need to know why and develop a plan to fix it. This is what the gap analysis does.

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• > Economics

A Guide to Demand and Supply Analysis

• Yashoda Gandhi
• Feb 15, 2022

Introduction

The study of how buyers and sellers interact to determine transaction prices and quantities is known as demand and supply analysis. As we'll see, prices reflect both the value of the next (or marginal) unit to the buyer and the cost to the seller of that unit. 

The most basic set of microeconomic tools in private enterprise market economies, which are the primary concern of investment analysis , is demand and supply analysis.

Consumers (or households) and firms are the two types of private economic units classified by microeconomics. The theory of the consumer and the theory of the firm are two branches of study based on these two groups. 

The consumer theory is concerned with utility-maximizing individuals' consumption (demand for goods and services) (those who make decisions to maximise satisfaction from current and future consumption).

The firm theory is concerned with profit-maximizing firms' provision of goods and services. The consumer and firm theories are important because they help us understand the underlying principles of demand and supply. The theory of the consumer and the theory of the firm will be the focus of subsequent readings.

What is Supply and demand analysis ?

Two laws are at the heart of a supply and demand analysis: the law of demand and the law of supply. According to  The Business Professor , the law of demand states that as prices rise, the quantity of desired goods and services decreases. The law of supply, on the other hand, states that as prices rise, so does the number of goods and services available.

A technical assessment of securities based on factors influencing supply and demand for a specific security or for securities in general. The purpose of the supply-demand analysis is to see if there is or will be an imbalance between supply and demand for securities. 

For instance, if a security's supply is expected to exceed demand, the security should be sold or avoided because its price is likely to fall. New stock offerings, government borrowing, pension fund contributions, mutual fund cash balances, and a variety of other similar factors are all factored into the supply-demand analysis.

Also Read |  Factors affecting the supply of a product

When to apply Supply and demand analysis ?

With a few exceptions, the law of demand states that as the price of a good or service rises, so does the quantity demanded. The law of supply states that as a supplier's price rises, so does the quantity supplied. Demand is often a downward sloping curve in the price-quantity plane, whereas supply is an upward sloping curve.

The market equilibrium is defined as the intersection of the supply and demand curves, which determines the equilibrium levels of price and quantity of a particular good (or service) in the economy. Excess demand describes a situation in which the current demand for a good (or service) in the economy exceeds the equilibrium quantity.

In a similar vein, excess supply is defined. Changes in supply and demand (and thus the equilibrium price and quantity) of any good or service can be influenced by a variety of factors, including policy changes, unexpected economic shocks, business cycle fluctuations such as a recession or a boom, or even simply over time (long run versus short run).

It also depends on the market's characteristics (whether the market is perfectly competitive or monopolistic etc.). The study of supply and demand, or simply 'Demand-Supply Analysis,' could be applied to all of the above. (source)

Supply-demand analysis tool

A comprehensive strategic planning approach includes supply and demand analysis. Because the market and consumer habits are rapidly changing, it's all about making sure you're always responding in the best way possible to the needs of the customers you're trying to serve.

This tool will give you a solid foundation for a supply and demand analysis, which can then be used to inform a more comprehensive strategic planning process.

The Supply/Demand Analysis feature is a chart that is directly embedded in the scenario. The graph shows the supply and demand planning data over time in a combined view.

The supply data is shown as a stacked bar graph, with the area stacked vertically according to the building or lease. The demand data is shown as a line graph that is superimposed on the bars. This graph depicts how an organization's space or area supply compares to its demands.

You can use this tool to interactively analyse scenario options to match forecasted business demand to portfolio space supply over time. The graphical analysis tool can assist you with the following:

Visually identify supply-demand gaps that necessitate action planning to meet demand or maximise portfolio utilisation.

Consider what-if supply-side scenarios for lease contract options, new building expansions, and portfolio consolidations.

Examine the effects of demand-side changes in order to match supply or close gaps.

Also Read |  11 Types of Economic Theory

Importance of demand and supply analysis

Demand analysis.

For a new business, the analysis can determine whether there is a significant demand for the product/service, as well as other information such as the number of competitors, size of competitors, industry growth, and so on. It aids in determining whether a company can enter a market and generate sufficient returns to sustain and grow its operations.

Demand analysis aids in identifying key business areas with the highest demand and areas that require attention, as low demand can indicate a variety of issues, such as customers not being aware of the product/service, which necessitates increased advertising and promotion, or customer needs not being met by current product/service, which necessitates improvements, or competitors have sprung up with better offerings, among other things.

Supply analysis

Supply analysis aids manufacturers in determining the impact of changes in production and policies on the increase or decrease in finished goods supply. 

For example, newer upcoming technology can aid in the production of more goods in the same amount of time. The results of the analysis can be used to determine whether or not this new technology should be adopted. 

Is there a demand for more products if this technology can help produce more? What effect will it have on the current labour market, and how will it affect supply?

Another example is the impact of market wage increases on supply. The cost of labour will rise, and with it, the cost of goods will rise as well. 

If the supply must be maintained at the same level, the costs must be maintained at the same level, and if the supply must be maintained at the same level, the supply must be reduced, driving up prices if the demand remains constant. These are some of the questions that supply analysis aims to address.

Also Read |  What is Scarcity in Economics?

Demand analysis parameters

Price of similar products.

As we discussed in the first two points about price and purchasing power, the price of a competitor's product or service enters the equation and can influence demand. If a competitor's price is lower, demand for that product will be higher, and vice versa. In the case of luxury or niche products, the situation may be different.

Customer preferences and requirements

Consumer behaviour must be taken into consideration. The product or service must match the preferences of the customer; otherwise, there will be no demand for it.

Price set by the product itself

In demand analysis, the product's price is very important. Demand will be affected if the price is too high in comparison to competitors or what the customer can afford. It can be low or high, depending on the product or service's price point.

Profits from customers

Customer purchasing power has a significant impact on product demand. If a product or service is offered at a price point that is higher than a customer group's affordability, demand will be low, so customer income must be considered.

Customers in the market

Customers drive demand, so the potential market is an important parameter for demand analysis. If the customer base is too small for a viable business, even if the first five points are favourable, demand will never rise because the customer base is too small.

Expectations

Based on the overall industry landscape, the customer may have expectations for a new or existing product. For example, if every competitor in the market provides free warranty service but one company does not, that company is unlikely to meet customer expectations. (source)

Example of demand-supply analysis in tariffs

A tariff is a tax imposed on goods from other countries that are sold in the United States. Assume that foreign-made automobiles are subject to a 10% tax.

Who would be the ones to bear the brunt of this tax? Assume that a Japanese car and a similar American car both sell for $25,000 in the United States.

According to the source , with the ten per cent tax ($2,500) on Japanese cars, the Japanese company wants to raise the price to $27,500. The tariff will be imposed on Japanese automobile manufacturers.

A tariff on a foreign product with very elastic demand is referred to as an optimal tariff in technical terms. In the United States, the price of a foreign product rises very slowly.  

Also Read |  Law of Diminishing Marginal Utility

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A simple guide to gap analysis

Looking for a way to streamline the growth of your business?

A gap analysis could be just what you need.

When used correctly, a gap analysis helps you elevate your business from where it is now to where you want it to be. It allows you to identify the quickest and most efficient way to reach your goals.

In this article, we’re outlining what a gap analysis is, the benefits of using it, and some of the drawbacks you should be aware of, too. We’ll also talk you through how to perform a gap analysis for your business.

Try Miro’s Gap Analysis Template

What is a gap analysis?

A gap analysis compares actual performance with desired performance. As a result, businesses can determine the most efficient and effective ways to reach their goals.

There are various situations where a gap analysis is helpful. It forecasts and predicts profits, identifies new sales and marketing opportunities, and reveals areas of improvement in your processes.

There are four main types of gap analyses that businesses can use, which we’ll cover in detail later. But no matter what type, the end goal remains the same: to find out how you can move from where you are now to where you want to be.

• How do you structure a gap analysis?

A gap analysis template is an outline used by businesses to structure their investigation. It should outline your current state, desired state, the gaps, and how you plan to close them.

Take a look at our template as an example:

The template contains all four major columns, with each row assigned to a different goal. Businesses can use this template to outline their plan to close the gaps and reach their desired state.

After using this template to complete a gap analysis, you might want to conduct a SWOT analysis to identify broader strengths and opportunities, too. This will give you a well-rounded picture of how to successfully grow your business.

• What are the types of a gap analysis?

There are four main types of gap analyses. These include:

• Performance

Let’s look at each of these in more detail.

Performance gap analysis

A performance gap analysis measures employee and company performance in comparison to expected performance. Sometimes called strategy gap analysis, it’s the most popular version of gap analysis.

How does performance gap analysis work?

Businesses measure their performance against competitors in the marketplace and in line with established benchmarks and industry standards. Using this information, companies can predict what acceptable performance should be and identify any gaps and areas of improvement.

When should you use performance gap analysis?

A performance gap analysis should be used if you want to improve your internal processes and employee performance.

Let’s say your sales team isn’t reaching its targets. You could use performance gap analysis to figure out why this is and identify a plan of action to get sales back on track.

Whether that’s training your employees, hiring more employees in new roles, or changing existing job responsibilities, the gap analysis will show you how to get from where you are now to where you want to be.

Product gap analysis

Also known as a market gap analysis, a product gap analysis measures areas where demand is greater than supply. In other words, it helps you identify under-serviced markets. With this information, you can expand your product line to a new audience to meet customer demand.

Unlike market research, this approach is proactive instead of reactive. Businesses seek out areas of demand rather than waiting for feedback from consumers.

How does a product gap analysis work?

You’d start by investigating new markets where your service might be in demand, such as new locations or demographics.

You could also think about launching into new service areas. This would mean offering an altered version of your existing product or service to provide something new for your consumers. Uber launching Uber Eats is a good example.

They started as a modern taxi service, and they launched a food delivery service off the back of it.

Once you’ve identified demand for your product in a new market, you can use the analysis to figure out how to get from point A to point B.

When should you use a product gap analysis?

If you’re looking to expand your business but don’t have the time or budget to create a new product or service, a product gap analysis could be just what you need. It helps you find new markets for your existing product so that you can grow your business without having to invest a lot of money upfront.

If you’re a new business, product gap analysis is also a great way to make sure you’re not entering an overly-saturated market.

HR gap analysis

An HR gap analysis measures your current workforce in relation to the amount of work required. It analyzes the capacity and size of a team to make informed decisions about budgeting and staffing.

It’s sometimes called a skills gap analysis or workforce gap analysis.

How does an HR gap analysis work?

You start by outlining your goals. When these are clear, you can analyze the key skills employees need to help the business achieve these goals. Then, you turn your attention to your workforce.

You’ll review their professional skills and their workload, making a note of their experience level in each key skill. By the end of the process, you should be able to identify how and where you can fill in the gaps and help the organization reach its goals. Whether that’s investing in training or restructuring your workforce, you’ll have a clearer picture of what to do next.

You also might consider creating an organizational chart to help with this process. This will make it clear who’s on the team and the role they uphold.

You can use the above template if you want to create an intuitive and shareable chart in a matter of minutes.

When should you use an HR gap analysis?

If you’re concerned that your current workforce can’t hit the goals you want to reach, an HR gap analysis could be helpful. It’ll clearly outline your current team’s skill sets and capacity, allowing you to fill the gaps and help the company succeed.

Profit gap analysis

A Profit gap analysis measures your actual profit alongside your target profit. It shows businesses why their forecasts haven’t been met, what went wrong along the way, and what they can do differently going forward.

How does a profit gap analysis work?

When conducting a profit gap analysis, you’ll review your target profit and your actual profit. By doing so, you’ll be able to pinpoint areas where your business didn’t reach the targets you set and why they weren’t reached.

Was your budget unrealistic? Did you have to lower prices because of your competition? Did your product not sell as well as you’d hoped?

Whatever the issue, the gap analysis will bring it to light. As a result, you can make the appropriate adjustments for the future.

When should you use a profit gap analysis?

There’s a lot to consider when it comes to profit. Market trends are constantly changing, and macro factors are out of your control.

All of these elements have an impact on the financial success of your business. But this is where profit gap analysis can help.

If you have specific revenue or profit goals for the future, or if you haven’t been able to hit financial goals in the past, a profit gap analysis is for you. It’ll break down your finances and allow you to easily find areas of improvement.

• What are the benefits of a gap analysis?

We already know that a gap analysis helps businesses get from where they are now to where they want to be.

But are there any other benefits?

In short, yes. Depending on the type of gap analysis you use, there are multiple ways a gap analysis will benefit your business.

Let’s take a look at some of the main benefits.

Get a unique insight into how your company operates

Conducting a gap analysis gives you an in-depth perception of how your business operates. It shows you how your company processes work, what resources you have, and where your shortcomings are. It outlines all the key aspects of your business in one location.

You also get a better understanding of how your business performs in the marketplace in relation to your competitors.

All of this information offers a deeper understanding of your business — an understanding that you might not have been aware of had you not conducted the analysis.

With this information, you can make informed decisions about how your business operates and its areas of growth and opportunity.

Align your company strategy

No matter which gap analysis you perform, you always have an end goal in mind — a goal that feeds into your company strategy. This means that when you do your analysis, you’re also making sure that your business activity aligns with your strategy.

Alignment is a pretty key part of business growth. If your activities aren’t aligned with your strategy, you risk losing direction and never reaching your desired state.

But with a gap analysis, you make sure that everything your company does is aligned with your strategy. It also gives you a clear perspective of what your company strategy should be and how you’re going to achieve it.

Proactively fix problems

Gap analysis helps you find areas of improvement in your workflow. This means you can get ahead and make changes before the problems get worse.

Think about your website content as an example.

With a content gap analysis, you identify the areas of improvement for the existing content across your website. As a result, you can make the necessary changes to improve your content strategy going forward.

But if you hadn’t performed the analysis, who knows when you would have noticed these areas of improvement?

And that’s why using the analysis is a good thing. It allows you to be proactive about your problems and put things right.

Increase efficiency

A gap analysis helps you find areas of improvement in your current business processes. And when you improve your processes, your entire business becomes more efficient.

Think about it. If your processes are streamlined, you spend less time working on tasks that aren’t necessary and more time achieving company goals.

Improved processes also mean that you can get more done with fewer resources, allowing you to focus your efforts on other areas of the business.

• Are there any limitations to using gap analysis?

Although there are benefits to using gap analysis, there are some drawbacks to be aware of.

Not enough detail

A gap analysis is great for a lot of things, but it doesn’t cover everything you need to know.

For example, you can’t do a competitor analysis within the existing framework. If you want detailed information about your competitors, you’d have to do a separate competitor analysis and integrate the information.

Because of this limitation, it also means that you might not get to the root of your problem with just a gap analysis. Chances are, you’d need some other framework or model to get into the nitty-gritty of your problem.

Simply put, you can’t do everything with a gap analysis. You’ll need other frameworks to bulk out the details and analyze other areas of your business. It’s not the end of the world, but it does impact the efficiency and effectiveness of gap analysis, so keep this in mind.

The process could be time-consuming and costly

Part of the gap analysis process involves creating solutions to get you from your current state to your desired state.

But what happens if you don’t have the time or money to perform a gap analysis in the first place?

For some businesses, doing the gap analysis in the first place requires additional time and money that simply isn’t available. There’s also a chance that the solutions you find might be costly. And if your budget won’t stretch, you’ll probably have to compromise on your solution.

If that’s the case, was the gap analysis worth it in the first place?

This is something to think about ahead of doing the analysis. Take stock of your resources, and see what time you can realistically spend on the analysis and what your budget is for the analysis and the solutions you create.

• How do you perform a gap analysis?

Performing a gap analysis varies from business to business. But there are some steps you should follow to make sure you get the most out of your analysis.

1. Analyze your current state

First things first, you need to pinpoint your current state. This will be your baseline to figure out how to get from where you are now to where you want to be.

So spend some time reviewing your current situation. Take a look at your position in the marketplace, review your competitors, and analyze anything else that’ll tell you how your business is performing. This will help you identify areas of improvement.

We’ve got existing templates that’ll help you review this information as quickly as possible. Take a look at our Executive Summary Template as an example.

By the end of this process, you’ll understand the reality of how your business is performing in the marketplace. You’ll also have a better idea of what your strategic goals should be and how to achieve them, which leads us nicely to the next step.

2. Outline your business goals

Now that you have a clear picture of your current performance, it’s time to think about the future. More specifically, about your business goals.

Ask yourself this: If everything went to plan, where would your business be?

By establishing the goals that you want to achieve, you can start to identify the improvements needed to reach them. In other words, you start to identify gaps.

So spend some time outlining what your goals are. This is the foundation you need to envision your future state in comparison to your current reality.

When creating your goals, make sure they’re realistic. If they’re not, a gap analysis won’t help, as you’ll never reach your goals.

That’s why we’d suggest creating SMART goals. This will guarantee that your goals are achievable and measurable, among other things. Take a look at our SMART Goals Template for more information about the framework and how to use it.

This template can also be altered and customized based on the information you want to find. You can change the text , add shapes , and add visual notes .

3. Compare what you have with what you want to achieve

Throughout the previous two steps, you’ve outlined your current and desired states. Now, it’s time to compare the two and perform your gap analysis.

This involves figuring out how far you are from your target state and how to get there. You need to find the gaps, think about how you can fix them, and make sure you don’t make the same mistakes in the future.

This is where using a ready-made template can help. With the right template, you can view your current and desired states in one location. This makes it easier for you to visualize how to fill the gaps and reach your goals.

If you’re spread too thin across various platforms, it’ll be harder for you to plot areas of improvement.

Don’t forget — we have a ready-made Gap Analysis Template that you can use. And we’ve got a range of tools and features that allow you to customize it however you like.

4. Create a strategic plan of action

You’ve done the work and identified how to get from your current state to your desired state. What next?

You need to put all the information into your gap analysis. This will serve as your plan of action going forward.

You also might need to create separate plans for specific parts of the gap analysis. For example, let’s say one of your actions from the gap analysis is to improve the online user experience.

This isn’t an overnight job, and it requires a lot of planning to figure out the logistics. You need a detailed plan with timelines, deliverables, and delegation of responsibilities. Our Workflow Template and Action Plan Template are good examples.

So when your gap analysis is complete, think about creating separate plans to manage each stage of the journey. This extra layer of planning and detail will make sure everyone on the team knows what they’re doing and how they’re going to do it.

• Start your gap analysis today with Miro

So there you have it — a simple guide to gap analysis. You know the different types of gap analyses, the steps you need to take to perform them, and which platform you can use to create the template (that’s us).

There are a lot of gap analysis tools out there to choose from. With Miro, performing a gap analysis and sharing it with your team is easy. Using our simple whiteboard tool , you can adapt our existing template for any industry. You can also create your own template from scratch or customize existing templates with our additional features.

You can sign up for free , select the template, and start creating. It’s as simple as that.

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What is Gap Analysis? Steps, Template, Examples

Appinio Research · 02.11.2023 · 34min read

Are you striving to bridge the divide between where your business currently stands and where you aspire it to be? Gap Analysis holds the key to unlocking your organization's full potential. In this comprehensive guide, we will delve into the intricacies of Gap Analysis, unraveling its significance, methodologies, and real-world applications.

Whether you're seeking to enhance performance, seize market opportunities, or fortify your competitive edge, this guide equips you with the tools and knowledge to navigate the path toward your desired future state.

What is Gap Analysis?

Gap Analysis is a strategic planning tool used to assess the difference, or "gap," between the current state of a business or organization and its desired state. It involves evaluating existing processes, performance, capabilities, and outcomes against predefined goals and objectives.

The goal of Gap Analysis is to identify areas where there is a discrepancy between the current state and the desired state, enabling organizations to make informed decisions and develop action plans to bridge those gaps.

Importance of Gap Analysis

Gap Analysis is crucial for several reasons:

• Strategic Alignment: It ensures that a business's strategies and objectives are in alignment with its current capabilities and resources. By identifying gaps, organizations can adjust their strategies to be more realistic and achievable.
• Decision-Making: Gap Analysis provides a data-driven foundation for decision-making. It helps organizations prioritize initiatives and allocate resources effectively based on identified gaps.
• Continuous Improvement: It fosters a culture of constant improvement by highlighting areas that need attention and enhancement. This promotes ongoing growth and development.
• Risk Mitigation: Gap Analysis helps identify potential risks and vulnerabilities within an organization. By addressing gaps, businesses can proactively mitigate risks before they escalate.
• Competitive Advantage: Understanding where a business stands compared to competitors is essential for maintaining a competitive edge. Gap Analysis helps organizations identify ways to outperform their rivals.
• Resource Optimization: It allows organizations to allocate resources efficiently, avoiding unnecessary expenditures in areas where there are no significant gaps.

Purpose and Goals of Gap Analysis

The primary purposes of Gap Analysis are as follows:

• Strategic Planning: Gap Analysis serves as a critical component of strategic planning by helping organizations set clear and achievable goals that are aligned with their capabilities and resources.
• Performance Improvement: It identifies areas where performance falls short of expectations and provides insights into how to enhance performance.
• Resource Allocation: Gap Analysis guides organizations in allocating resources effectively to address the most critical gaps and achieve strategic objectives.
• Risk Management: By identifying gaps, organizations can proactively address vulnerabilities and reduce the likelihood of unexpected issues arising.

The goals of Gap Analysis can vary depending on the specific context and objectives, but they typically include:

• Identifying Gaps: The primary goal is to identify and document gaps between the current state and the desired state in various aspects of the business, such as processes, performance, or capabilities.
• Setting Objectives: Gap Analysis helps establish clear and measurable objectives and goals that are realistic and attainable.
• Developing Action Plans: It facilitates the creation of action plans to bridge the identified gaps. These plans outline the steps, resources, and timelines needed for improvement.
• Monitoring Progress: Gap Analysis supports ongoing monitoring and measurement of progress toward closing the gaps, ensuring that initiatives remain on track.
• Optimizing Resource Allocation: It assists in optimizing the allocation of resources by directing investments to areas that will yield the greatest impact.

Benefits and Advantages of Conducting Gap Analysis

Conducting Gap Analysis offers numerous benefits and advantages for organizations:

• Informed Decision-Making: Gap Analysis provides data-driven insights that enable informed decision-making, helping organizations prioritize actions and investments.
• Strategic Focus: It helps businesses align their strategies with achievable goals and objectives, reducing the risk of pursuing unrealistic targets.
• Resource Efficiency: By pinpointing areas where resources can be most effectively allocated, Gap Analysis optimizes resource utilization, minimizing waste.
• Continuous Improvement: Gap Analysis fosters a culture of continuous improvement by identifying areas that require enhancement and providing a structured approach to achieving progress.
• Risk Mitigation: It helps organizations identify potential risks and vulnerabilities early, allowing for proactive risk management and mitigation.
• Competitive Advantage: Gap Analysis enables organizations to outperform competitors by addressing weaknesses and capitalizing on strengths.
• Enhanced Performance: By addressing identified gaps, organizations can improve their overall performance, customer satisfaction, and stakeholder value.
• Transparent Communication: Gap Analysis facilitates transparent communication within the organization and with external stakeholders, ensuring everyone understands the strategic direction.
• Measurable Results: It provides a basis for measuring the success and impact of improvement initiatives, ensuring that progress is quantifiable and measurable.

Overall, Gap Analysis is a valuable tool that empowers organizations to identify, address, and bridge gaps, leading to improved performance, strategic alignment, and sustainable growth.

Types of Gap Analysis

Gap Analysis can take on various forms, each tailored to address specific aspects of your business. Let's explore the four main types in detail:

Performance Gap Analysis

Performance Gap Analysis focuses on evaluating the performance of your business processes, teams, or individuals against predefined standards or benchmarks. This type of analysis helps you identify areas where your business is falling short of expectations or industry norms.

Example: Consider a manufacturing company that produces electronic devices. They set a benchmark of making 100 units per hour on their assembly line. After analyzing their actual production rate, they discover that they are only achieving 80 units per hour. This performance gap indicates inefficiencies in their assembly process.

Market Gap Analysis

Market Gap Analysis centers around understanding the gap between the demand for a product or service in the market and what your business currently offers. It helps you identify opportunities to meet unfulfilled customer needs.

Example: Imagine you run a coffee shop in a neighborhood where the majority of customers prefer specialty coffees. Your analysis reveals that you offer a limited range of specialty coffees compared to customer demand in your area. This market gap suggests an opportunity to expand your specialty coffee menu to cater to local preferences.

Competitive Gap Analysis

Competitive Gap Analysis involves comparing your business's performance, products, or services directly against those of your competitors. It helps you pinpoint where your business outperforms competitors and where it lags behind.

Example: Suppose you operate a retail clothing store, and you want to assess your competitiveness. After analyzing pricing, product quality, and customer service, you find that your prices are higher than those of your main competitors, but your product quality and customer service are superior. This competitive gap analysis suggests that you may need to reevaluate your pricing strategy while maintaining your focus on quality and service.

Product Gap Analysis

Product Gap Analysis focuses on evaluating the gap between your existing product or service offerings and what customers seek in the market. It helps you identify opportunities for product development or improvement.

Example: Let's say you own a software company that produces a project management tool.

Through product gap analysis, you discover that your competitors offer mobile app versions of their project management tools, but your product is only available as desktop software. This product gap indicates an opportunity to develop a mobile app to cater to the growing mobile-oriented market.

In summary, understanding the different types of Gap Analysis allows you to tailor your approach to the specific challenges or opportunities your business faces. Whether it's improving internal processes, addressing market demand, outperforming competitors, or enhancing your products or services, Gap Analysis provides a structured framework for decision-making and strategic planning.

How to Prepare for Gap Analysis?

Before diving into Gap Analysis, it's crucial to adequately prepare for the process. The success of your analysis depends on how well you set the stage. Here are the key steps in preparing for Gap Analysis:

1. Identify the Scope and Focus

Scope refers to the specific area of your business you intend to analyze. It could be a department, a process, or even the entire organization. Focus narrows down your analysis to particular aspects within that scope.

• Define Your Scope: Start by clearly defining the boundaries of your analysis. What aspect of your business do you want to examine? It could be marketing, sales, customer service, or any other area.
• Set Your Focus: Within your chosen scope, identify the specific elements or processes you want to analyze. For instance, if you're looking at the sales department, you might focus on lead generation, conversion rates, or customer retention.
• Align with Goals: Ensure that the scope and focus align with your overall business goals. Your analysis should directly contribute to achieving those objectives.

2. Gather Necessary Data and Information

Accurate and relevant data is the lifeblood of Gap Analysis. Gathering the right information is critical for making informed decisions.

• Data Sources: Identify the sources of data you'll need for your analysis. This may include internal sources like financial reports, customer feedback, and employee performance records, as well as external sources like market research and industry benchmarks.
• Data Quality: Ensure that the data you collect is accurate, up-to-date, and reliable. Inaccurate data can lead to misguided conclusions.
• Data Organization: Create a systematic process for collecting, organizing, and storing data. Consider using digital tools and databases to streamline this process.
• Data Accessibility: Make sure that team members who will be involved in the analysis can access the data they need easily and securely.

3. Assemble a Gap Analysis Team

Gap Analysis is not a one-person job; it requires a diverse team with various skills and perspectives. To build an effective Gap Analysis team:

• Skill Diversity: Select team members with a range of skills and expertise relevant to the scope of your analysis. For example, if you're analyzing customer service, include customer service representatives, data analysts, and process experts.
• Clear Roles: Define clear roles and responsibilities for each team member. Ensure that everyone understands their contributions to the analysis.
• Team Collaboration: Foster a collaborative environment where team members can freely share ideas, insights, and concerns. Effective communication is essential for success.
• Leadership: Appoint a team leader or project manager who can oversee the analysis process, keep the project on track, and make decisions when necessary.

4. Set Clear Objectives and Goals

Without clear objectives and goals, your Gap Analysis can quickly become aimless. Here's how to set clear goals for your analysis:

• Specificity: Make your objectives as specific as possible. Instead of a vague goal like "improve sales," aim for something like "increase monthly sales revenue by 15% within the next year."
• Measurability: Ensure that your goals are measurable. You should be able to track and quantify your progress. Use key performance indicators (KPIs) when possible.
• Relevance: Your objectives should directly relate to the scope and focus of your analysis. They should address the specific gaps you want to bridge.
• Timeframe: Set a realistic timeframe for achieving your objectives. This helps create a sense of urgency and keeps the analysis on schedule.

By effectively preparing for Gap Analysis, you lay a strong foundation for the rest of the process. Remember, the success of your analysis hinges on the clarity of your scope, the quality of your data, the synergy of your team, and the precision of your objectives. These preparatory steps ensure that your Gap Analysis is both insightful and actionable.

How to Conduct Gap Analysis?

With the preparatory work completed, it's time to delve into the core of Gap Analysis. We will guide you through the essential steps in conducting Gap Analysis effectively.

1. Data Collection and Analysis

Data is the backbone of any Gap Analysis. This phase involves gathering, organizing, and analyzing the data you've collected.

• Data Verification: Begin by verifying the accuracy and reliability of the data you've collected. Ensure that it's up-to-date and relevant to your analysis.
• Data Cleansing: Cleanse the data to remove duplicates, errors, or inconsistencies. This step is critical for ensuring your analysis is based on quality information.
• Data Organization: Organize the data in a structured manner, making it easier to work with. Consider using spreadsheets or data visualization tools to assist in this process.
• Data Analysis Tools: Utilize data analysis tools and techniques to extract insights from the data. This may involve statistical analysis , trend identification, or data visualization.
• Identifying Patterns: Look for patterns, trends, and anomalies in the data. These patterns can provide valuable insights into the current state of your business.

You can streamline your data collection and analysis processes with the assistance of advanced technology. Appinio , a cutting-edge research platform, offers robust tools for data gathering and analysis, helping you collect insights efficiently. With our platform, you can verify data accuracy, cleanse information, and organize it seamlessly. Additionally, Appinio's data analysis capabilities enable you to identify crucial patterns and trends that inform your Gap Analysis.

Take your data-driven decision-making to the next level. Book a demo now to explore how Appinio can elevate your Gap Analysis efforts and empower your business to bridge those critical gaps effectively!

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2. Identify Current State

Before you can bridge the gap, you must have a clear understanding of where you currently stand. This step involves assessing and documenting your business's current state.

• Process Mapping: Create process maps or flowcharts to visualize how critical processes operate within your business. This helps identify bottlenecks and inefficiencies.
• Performance Metrics: Evaluate relevant performance metrics in your chosen scope. For instance, if you're analyzing customer service, assess metrics like response times, resolution rates, and customer satisfaction scores.
• Stakeholder Interviews: Conduct interviews or surveys with key stakeholders to gather qualitative insights into the current state. Employees, customers, and suppliers can provide valuable perspectives.
• Strengths and Weaknesses: Identify the strengths and weaknesses within the scope of your analysis. Understanding these aspects is crucial for setting improvement goals.

3. Determine Desired State

Having a clear vision of where you want to be is essential for Gap Analysis. Define your desired state:

• Goal Setting: Clearly define the goals and objectives you aim to achieve through the Gap Analysis process. Ensure that these goals align with your overall business strategy.
• Benchmarking: If applicable, benchmark your desired state against industry standards or competitors' performance. This provides a reference point for your goals.
• Customer Expectations: Consider the expectations of your customers and stakeholders. What do they expect from your business, and how can you meet or exceed those expectations?
• Long-Term Vision: Think beyond immediate improvements. Consider your long-term vision for the business. What should it look like in the next three, five, or ten years?

4. Analyze the Gap

This is the heart of Gap Analysis, where you identify and quantify the gaps between your current and desired state.

• Quantification: Use metrics, KPIs, or scoring systems to quantify the gaps. This makes it easier to prioritize areas that need improvement.
• Root Cause Analysis : Investigate the root causes of the identified gaps. What factors or issues are contributing to the discrepancies between the current and desired states?
• Impact Assessment: Assess the potential impact of each gap on your business. Determine which gaps have the most significant consequences and should be addressed first.
• Risk Analysis: Consider the risks associated with each gap. What are the potential risks if you don't bridge these gaps? Understanding the risks can inform your decision-making.

By diligently following these steps in conducting Gap Analysis, you'll gain a comprehensive understanding of your current business state, a clear vision of where you want to go, and a quantified view of the gaps that need your attention. This analysis provides the foundation for making informed decisions and developing effective action plans to bridge those gaps.

Gap Analysis Tools and Techniques

To conduct effective Gap Analysis, you can leverage a range of tools and techniques. These methods provide structured approaches to gather insights, identify gaps, and make informed decisions. Let's explore these tools and techniques in detail.

SWOT Analysis

SWOT Analysis is a widely used tool for assessing the Strengths, Weaknesses, Opportunities, and Threats associated with your business or a specific aspect of it. It helps you gain a holistic view of your current state and potential future directions.

• Strengths: These are the internal attributes and resources that give your business an advantage. They are what you do well and can capitalize on.
• Weaknesses: Weaknesses are internal factors that hinder your business's performance. Identifying weaknesses allows you to address areas in need of improvement.
• Opportunities: Opportunities are external factors or trends that your business can leverage to its advantage. Recognizing opportunities helps you prioritize strategic initiatives.
• Threats: Threats are external factors that can negatively impact your business. Being aware of threats allows you to develop mitigation strategies.

SWOT Analysis is a versatile tool that can be applied to various aspects of your business, from marketing and sales to operations and product development.

Benchmarking

Benchmarking involves comparing your business's performance, processes, or practices against those of industry leaders or competitors. It allows you to identify performance gaps and best practices that can be adopted to improve your own operations.

• Internal Benchmarking: This involves comparing different departments or teams within your organization to identify areas where one can learn from the other.
• Competitive Benchmarking: Here, you analyze how your business stacks up against direct competitors in terms of key performance metrics.
• Functional Benchmarking: Functional benchmarking compares specific business functions, such as customer service or supply chain management, with those of other organizations, even outside your industry.

Benchmarking provides valuable insights into where your business stands relative to others and highlights opportunities for improvement.

Root Cause Analysis

Root Cause Analysis is a technique used to identify the underlying causes of problems or gaps within your business. It goes beyond surface-level symptoms to uncover the fundamental reasons for issues.

• Cause-and-Effect Analysis: Also known as the Fishbone Diagram or Ishikawa Diagram, this technique helps you visualize the various factors that contribute to a problem or gap. It's particularly useful for exploring complex issues.
• 5 Whys Technique: This method involves asking "why" multiple times (usually five) to drill down to the root cause of a problem. It's a simple yet effective way to dig deeper into issues.
• Fault Tree Analysis: This technique is more structured and is used for complex problems, especially in high-risk industries like aerospace and nuclear power. It traces events back to their root causes.

Root Cause Analysis is essential for addressing issues at their source rather than just treating symptoms, leading to more effective and sustainable solutions.

Fishbone Diagrams

The Fishbone Diagram, also known as the Ishikawa Diagram or Cause-and-Effect Diagram, is a visual tool used to identify potential causes of a problem or gap. It helps you explore various factors that could contribute to an issue and discover their interrelationships.

• Categories of Causes: The diagram typically includes categories like People, Process, Equipment, Materials, Environment, and Management (the 6 M's). These categories serve as branches on the fishbone diagram.
• Identifying Causes: Under each category, you list potential causes or factors contributing to the problem. This brainstorming process encourages a comprehensive examination of the issue.
• Visual Representation: The diagram resembles a fish's skeleton, with the main problem at the "head" and the potential causes branching off like "bones."

These Gap Analysis tools and techniques provide structured approaches to gather data, analyze information, and make strategic decisions. Depending on the nature of your analysis and the complexity of the issues you're addressing, you can choose the most appropriate tool or combination of tools to support your Gap Analysis process.

Gap Analysis Template

A Gap Analysis template is a structured framework that provides a systematic approach to conducting Gap Analysis within your business. It serves as a roadmap, ensuring you cover all the necessary steps and elements during the analysis process.

Here, we'll provide you with a Gap Analysis template and tips on utilizing it effectively.

Components of a Gap Analysis Template

A well-designed Gap Analysis template typically includes the following components:

Scope and Focus

• Clearly define the scope of the analysis. What aspect of your business will you examine?
• Specify the focus within the chosen scope. Which specific elements or processes will you analyze?

Data Collection and Analysis

• Outline the sources of data and information required for the analysis.
• Provide guidance on how to gather, verify, and organize the data.
• Include sections for data analysis techniques and tools to be used.

Identifying Current State

• Define the methods for assessing the current state within the chosen scope.
• List key performance indicators (KPIs) and metrics to evaluate.
• Offer guidance on documenting strengths and weaknesses.

Determining Desired State

• Specify the criteria for setting clear objectives and goals.
• Explain how to align goals with the scope and focus of the analysis.
• Encourage the inclusion of long-term visions for the desired state.

Analyzing the Gap

• Provide guidance on quantifying gaps and discrepancies.
• Offer tools and techniques for identifying the root causes of gaps.
• Include sections for assessing the impact and potential risks associated with each gap.

Recommendations and Action Plan

• Outline the format for presenting recommendations to bridge the gaps.
• Encourage the development of a comprehensive action plan.
• Include sections for resource allocation, timelines, and responsibilities.

Monitoring and Adjustments

• Describe the process for tracking progress and measuring success.
• Explain how to make necessary adjustments to the action plan.
• Emphasize the importance of continuous assessment and feedback loops.

Benefits of Using a Gap Analysis Template

Utilizing a Gap Analysis template offers several benefits:

• Structured Approach: Ensures a systematic and organized analysis process from start to finish. and provides a clear framework that guides users through each step.
• Consistency: Promotes consistency in conducting Gap Analysis across different areas or departments within the organization and helps maintain a standardized approach to data collection and evaluation.
• Efficiency: Saves time by eliminating the need to create analysis guidelines from scratch and streamlines the documentation process, making it easier to communicate findings and recommendations.
• Clarity: Helps clarify the objectives and goals of the analysis and ensures that all stakeholders have a shared understanding of the analysis process and its outcomes.
• Customization: Allows flexibility for tailoring the template to the specific needs and nuances of your business and enables the inclusion of industry-specific metrics and benchmarks.

Tips for Creating an Effective Gap Analysis Template

When creating a Gap Analysis template, consider the following tips:

• Collaborate: Involve team members and stakeholders in the template's development to ensure it aligns with your business's unique requirements.
• Simplicity: Keep the template straightforward and user-friendly. Avoid unnecessary complexity that might hinder its usability.
• Flexibility: Make the template adaptable to different types of Gap Analysis, whether it's performance, market, competitive, or product analysis.
• Documentation: Include sections for documenting assumptions, data sources, and references to maintain transparency and credibility.
• Training: Provide training and guidance on how to use the template effectively to ensure consistency in analysis processes.
• Version Control: Implement version control to track updates and revisions to the template over time.

By creating and utilizing a well-designed Gap Analysis template, you empower your organization to conduct thorough and consistent analyses, enabling informed decision-making and continuous improvement across various facets of your business.

How to Interpret and Report Gap Analysis Results?

After conducting a Gap Analysis, it's essential to interpret the results effectively and communicate them to relevant stakeholders. This section will guide you through the steps in analyzing and reporting Gap Analysis findings:

1. Present Gap Analysis Results

Showcasing your Gap Analysis results in a clear and compelling manner is crucial for decision-making. Consider the following when presenting your findings:

• Visual Aids: Utilize charts, graphs, and visuals to make complex data more accessible and understandable. Visual representations can help stakeholders grasp critical insights at a glance.
• Narrative Explanation: Accompany visuals with a narrative that explains the significance of the findings. Describe the current state, desired state, and the gaps identified.
• Key Highlights: Highlight the most critical gaps or issues that need immediate attention. Focus on those that have the most significant impact on your business goals.
• Benchmark Comparisons: If applicable, compare your findings to benchmarks or industry standards to provide context and emphasize the gaps.

2. Identify Priorities and Action Items

Not all gaps are created equal. Some may have a more substantial impact on your business than others. Here's how to identify priorities and action items:

• Impact Assessment: Assess the potential impact of each gap on your business's performance, goals, and objectives. Prioritize those with the most significant consequences.
• Urgency: Consider which gaps require immediate attention due to their urgency or potential to escalate if left unaddressed.
• Feasibility: Evaluate the feasibility of closing each gap. Some gaps may be more straightforward to address, while others may require significant resources or time.
• Cost-Benefit Analysis: Weigh the costs of closing each gap against the expected benefits. Focus on those gaps where the benefits outweigh the costs.

3. Create an Action Plan

Once you've identified priorities, it's time to develop a comprehensive action plan to bridge the gaps.

• Specific Goals: Clearly define the goals and objectives associated with each gap. Make sure they are specific, measurable, achievable, relevant, and time-bound (SMART).
• Tasks and Responsibilities: Break down the action plan into specific tasks and assign responsibilities to team members. Everyone should know their role in closing the gaps.
• Timelines: Establish realistic timelines for completing each task or milestone. Ensure that there are clear deadlines to keep the action plan on track.
• Resources: Identify the resources, including budget, personnel, and technology, required to implement the action plan successfully.

4. Communicate Findings to Stakeholders

Effective communication with stakeholders is essential to ensure alignment and support for your action plan:

• Stakeholder Engagement: Identify all relevant stakeholders, including executives, employees, investors, and customers, and engage them in the process.
• Transparency: Be transparent about the findings, priorities, and action plan. Provide stakeholders with a clear understanding of the rationale behind your decisions.
• Feedback Mechanisms: Establish feedback mechanisms that allow stakeholders to provide input and ask questions. Address concerns and adapt the action plan if needed.
• Regular Updates: Keep stakeholders informed of progress. Regularly update them on milestones achieved and any changes in the action plan.
• Celebrate Success: When you successfully bridge a gap, celebrate the achievement with your team and stakeholders. Recognizing success boosts morale and motivation.

Effectively interpreting Gap Analysis results and reporting them to stakeholders ensures that everyone is on the same page regarding the identified gaps and the plan to address them. This transparency and collaboration are essential for achieving the desired outcomes and fostering a culture of continuous improvement within your organization.

How to Implement Gap Analysis Recommendations?

Implementing the recommendations generated from Gap Analysis is the critical phase that turns insights into action and results. Here, we'll explore in-depth the steps involved in effectively implementing Gap Analysis recommendations:

1. Allocate Resources

To bridge the identified gaps successfully, you must allocate the necessary resources, including budget, personnel, and technology.

• Resource Identification: Based on the action plan developed during Gap Analysis, identify the specific resources required for each task or initiative. This may include financial resources, additional personnel, or access to particular technology or tools.
• Resource Allocation: Allocate resources efficiently to ensure each task has what it needs to succeed. Prioritize resources based on the urgency and impact of each gap.
• Budget Planning: Develop a budget that outlines the costs associated with closing the gaps. Consider both direct and indirect costs, and ensure that your financial plan aligns with your business's financial capabilities.
• Personnel Deployment: Assign responsibilities to team members or departments, making sure that individuals with the necessary skills and expertise are leading each initiative.
• Technology and Tools: If your action plan involves adopting new technology or tools, ensure that you have the proper systems in place and provide adequate training to your staff.

Effective resource allocation ensures that you have the means to execute your action plan efficiently and achieve the desired outcomes.

2. Monitor Progress

Once you've allocated resources and initiated the action plan, it's crucial to continuously monitor progress to stay on track.

• Key Performance Indicators (KPIs): Define and track KPIs specific to each initiative. KPIs should be measurable and aligned with the goals set during Gap Analysis.
• Regular Reporting: Establish a reporting cadence to track progress and share updates with stakeholders. This can be weekly, monthly, or as needed, based on the complexity of the initiatives.
• Performance Metrics: Continuously assess the performance of your action plan against the predetermined goals and objectives. Are you achieving the desired results?
• Issue Identification: Be vigilant in identifying any roadblocks, obstacles, or issues that may impede progress. Address these challenges promptly to keep the plan on course.
• Feedback Loop: Encourage feedback from team members involved in implementing the recommendations. Their insights can help fine-tune the approach and overcome hurdles.

Monitoring progress ensures that you're moving in the right direction and allows you to make timely adjustments when needed.

3. Make Necessary Adjustments

Flexibility is vital when implementing Gap Analysis recommendations. Be prepared to make adjustments along the way.

• Continuous Assessment: Regularly review the effectiveness of your action plan. Assess whether it's achieving the desired outcomes and closing the identified gaps.
• Feedback Integration: Act on feedback from stakeholders and team members. If they provide insights or suggestions for improvement, incorporate them into the plan as appropriate.
• Adaptation: Be open to adapting your approach if circumstances change. External factors, market dynamics, or unexpected events may necessitate adjustments.
• Resource Reallocation: If certain initiatives are not progressing as expected, consider reallocating resources to more promising areas or revising the action plan.

Making necessary adjustments ensures you remain agile and responsive, increasing the likelihood of successfully closing the gaps.

4. Measure Success and Impact

Ultimately, the success of your Gap Analysis recommendations should be measured by their impact on your business.

• Goal Achievement: Evaluate whether you've met the specific goals and objectives outlined in your action plan. Assess the degree to which the gaps have been closed.
• Performance Improvement: Measure the improvements in key performance metrics that were targeted during the Gap Analysis process. Compare current performance to the baseline.
• Stakeholder Feedback: Solicit feedback from stakeholders to gauge their satisfaction and perception of the changes made as a result of the recommendations.
• Long-Term Impact: Assess the sustainability of the improvements over time. Are the changes enduring, or do they require ongoing efforts to maintain?

By measuring success and impact, you not only validate the effectiveness of your Gap Analysis recommendations but also gain valuable insights into the long-term benefits and areas where further adjustments may be necessary.

Gap Analysis Examples

To gain a deeper understanding of how Gap Analysis is applied in various business scenarios, let's explore a range of real-world examples. These examples will illustrate how Gap Analysis can be a versatile tool for identifying and addressing gaps in different aspects of your organization.

Scenario: A retail company wants to improve its inventory management processes to reduce carrying costs and stockouts.

Gap Analysis:

• Current State: The company conducts an analysis of its existing inventory management practices and identifies inefficiencies, such as overstocked items and frequent stockouts.
• Desired State: They set a goal to maintain optimal inventory levels by implementing just-in-time inventory management.
• Gap: The gap analysis reveals a significant discrepancy between the current state and the desired state in terms of inventory management efficiency.

Recommendations: The company's action plan includes investing in inventory management software, providing employee training, and optimizing supplier relationships to bridge the gap.

Scenario: An e-commerce startup is looking to expand its product offerings and wants to identify untapped market segments .

• Current State: The startup analyzes its existing customer base and product offerings, noting gaps in its product range.
• Desired State: They aim to target specific demographics and offer products tailored to those segments.
• Gap: The analysis reveals that there is a significant gap between their current product offerings and the preferences of their target market segments.

Recommendations: The action plan includes market research to understand customer preferences, product development to fill the gaps, and marketing strategies to reach the new target segments .

Competitive with Gap Analysis

Scenario: A software company wants to enhance its competitiveness in the market.

• Current State: The company assesses its product features, pricing, and customer support in comparison to key competitors.
• Desired State: They aim to offer a more feature-rich product at a competitive price point with superior customer support.
• Gap: The analysis reveals that their product features and customer support fall short compared to their competitors.

Recommendations: The action plan includes product development to add missing features , pricing adjustments, and investing in customer service training and resources.

Scenario: An automobile manufacturer wants to introduce a new electric vehicle (EV) to the market.

• Current State: The company evaluates its existing product lineup and identifies the gap in EV offerings.
• Desired State: They set a goal to develop and launch an electric vehicle to meet the growing market demand for eco-friendly options.
• Gap: The analysis shows a gap between the current product lineup, which lacks an EV, and market demand for such vehicles.

Recommendations: The action plan includes research and development for the EV, securing the necessary supply chain for batteries, and marketing strategies to promote the new product.

These Gap Analysis examples demonstrate how businesses can apply this versatile tool to various scenarios, including performance improvement, market expansion, competitive positioning, and product development. By conducting Gap Analysis in these contexts, organizations can make informed decisions, set clear objectives, and develop action plans to bridge the identified gaps and achieve their strategic goals.

Gap Analysis is a powerful compass that guides your business from where it is to where it wants to be. By identifying gaps, setting clear goals, and taking action, you can steer your organization toward success. Remember, the journey of improvement is ongoing, and Gap Analysis is your trusty navigator on this path.

So, use these insights, tools, and techniques to continually assess, adapt, and thrive. As you bridge the gaps and achieve your objectives, you'll not only enhance performance but also foster a culture of progress and innovation within your organization. With Gap Analysis as your strategic ally, the possibilities for growth are limitless.

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How to perform a business gap analysis

Find out why to conduct a business gap analysis. Discover business gap analysis types, frameworks, benefits and limitations.

12 January 2024

If you’re looking to grow your business but not sure where to start, you need to do a gap analysis.

 A business gap analysis will help you understand where you’re currently at and what you need to do to move forward; basically how to “fill the gap” between where you are, and where you want to be.

Here’s what you’ll learn: 

What is a gap analysis?

Why and when should you perform one?

The 4 types of gap analysis.

The benefits and limitations of gap analysis.

How to perform a gap analysis.

5 gap analysis examples.

4 common gap analysis frameworks.

Let’s dive in.

What is a business gap analysis?

A business gap analysis considers 3 key elements:

The current state or performance.

The ideal state or potential.

How to “bridge the gap” from current to ideal state.

The “gap” is the difference between your current and ideal situations. Other names for gap analysis include: 

Need-gap analysis.

Need analysis. 

Needs assessment.

By comparing the current state with the ideal state, companies, business units, or teams can determine how to improve their processes, products and performance quicker. They can also optimise how to spend time, money and human resources in a business.

A gap analysis is different from a risk assessment, which focuses on threats and uncertainties that can impact the objectives and outcomes of an organisation.

Why perform a gap analysis?

Businesses conduct a gap analysis to pinpoint what’s holding them back, and devise an improvement plan.

Here are 4 ways a gap analysis can benefit your business:

Benchmark against external factors

Businesses may want to compare and benchmark their results against external factors such as their competitors or industry performance criteria.

Identify portfolio opportunities

Companies can use a gap analysis to examine their portfolio and identify new opportunities and products to sell. They can also use a gap analysis to identify products that aren't selling well and decide whether to promote them more, adapt them to meet customer requirements, or remove them altogether.

Assess profitability issues

Businesses can use a gap analysis to assess profitability and evaluate why they failed to hit their target. For instance, was it down to poor planning and execution, did materials cost more than expected, did they have to drop prices to beat unexpected competition, or was there another factor at play?

Evaluate forecasting gaps

Companies can also use a gap analysis to evaluate forecasting gaps – i.e. the difference between the forecasted and actual amount. For example, did management misread the demand for a product, or did other factors reduce expected sales?

When should businesses perform a gap analysis?

Businesses can perform a gap analysis at any time, but they usually coincide with particular events, such as strategic planning, performance reviews and audits.

Strategic planning

Companies can use gap analysis to identify issues and adjust their strategies to fit the situation or update processes to align with the plan.

Performance review

Organisations can use a gap analysis to identify where they’re falling short in performance.

Businesses can use gap analysis to show auditors which regulations they currently comply with and how they plan to comply with the rest.

How to perform a gap analysis

You can break down the gap analysis process into 5 steps: 

1. Analyse your current state

The first step of a gap analysis is to choose which area of your business you want to focus on and analyse its current state using the relevant type of gap. You’ll need to know what you’re looking for and how to record all the metrics and qualitative feedback.

In other words, it’s a 3-step process: 

Decide what you want to analyse.

Determine what gap analysis method to use.  

Record all the variables that are currently impacting the chosen business area. 

Depending on what you’re analysing, you may want to use: 

Sales figures.

Employee interviews.

Customer feedback.

Internal process documentation.

2. Determine the ideal future state

Next, you’ll want to determine where you want to be – your ideal future state.

How you define success could include:

Existing business goals and objectives.

Specific profit or revenue figures.

Growth targets.

Market expansion.

When considering your ideal future state, you can be as specific or generic as you want. It’s more important to understand how you can translate that ideal state into specific actions or processes in your organisation.

3. Compare the current and future state

Next, you need to determine the gap between where you are and where you want to be. Compare and match the factors from steps 1 and 2 to identify the gaps. Consider what you’re doing wrong and what you could be doing better.

As you compare the current and future state, you might discover you have a large or a small gap to bridge. On the other hand, you might be exceeding your targets. If that’s the case, consider how you achieved these results to understand what contributed to your success.

Regardless of your performance, there’s always room for improvement.

4. Quantify the gaps and solutions

Next, you’ll need to quantify the gaps and decide how to tackle them. Here are some questions to consider:

What did we do well?

What could we have done differently?

What were the key events and critical decisions that led up to this?

What do we need to modify or change?

What resources do we require to bridge the gap?

Make sure you document your observations as clearly as possible, linking current to ideal factors.

5. Create a plan to fill the gaps

After you’ve listed the possible ways to bridge the gap and decided which would be best, you’ll need to create a plan.

Define a clear strategy and set actionable objectives to help you prepare for your transition within a specified time frame. Also, consider if you have the resources to implement the changes.

Types of gap analysis

There are several types of gap analysis, including:

Performance (or strategy) gap: the difference between the actual and expected performance.

Product (or market) gap: the difference between actual and budgeted sales.

Profit gap: the difference between actual and target profit.

Workforce gap: the difference between the workforce’s actual strength and quantified performance and the required workforce.

Let’s take a look at each one:

Performance (or strategy) gap

The most common type of gap analysis is the performance gap.

It covers a high-level analysis of company goals, including how the company has reached completed goals and what it needs to do to achieve the remaining ones.

It’s also called the “strategy gap”, as it highlights the difference between a company’s current performance and its desired performance as stated in its mission, values and strategic objectives. The "gap" represents the threat to the company's future performance indicators, growth rate and even survival.

Product (or market) gap

The product gap looks at sales opportunities to identify and capitalise on underserved markets where demand is greater than supply.

A product gap analysis allows businesses to make logical, evidence-based decisions instead of just following observations and opinions.

Product (or market) gap analysis ensures you remain ahead of the market and don’t allow sudden, unexpected changes to influence your strategy.

Profit gap analysis helps you understand what went wrong when you miss profit forecasts.

For instance, profit forecasting issues may relate either to planning or execution – or even both. Various factors affect profitability, including changing market conditions, fierce competition, or unexpected political events.

A profit gap analysis can help determine the root cause of the problem and the best course of action to prevent it from happening again.

Workforce (or HR) gap

Regardless of the size of the organisation, performing a workforce or HR gap analysis allows you to make more informed decisions about staffing and budgeting.

An HR gap analysis provides information on employee onboarding, offboarding, training, hiring, insourcing and outsourcing. These results can provide valuable insights into using employees’ skills to meet strategic and performance objectives.

It also provides management with a clear picture of workforce competencies and how they relate to the firm’s strategic vision.

Benefits of a gap analysis

The benefits of a gap analysis include:

Examines how your company operates currently.

Uncovers the difference between perception and reality.

Evaluates how efficiently things are running at your company.

Forces you to consider what you want your company to look like and how you can achieve it.

Maximises the use of company resources and finances.

Allows teams to diagnose problems quickly and implement changes in business practices to solve those problems.

Ensures you meet desired project outcomes.

Provides insight into areas that need improvement, such as processes, products, profitability, performance and customer satisfaction.

Determines the best places to focus energy and resources.

Provides information to make better-informed decisions and improve performance.

Limitations of a gap analysis

The limitations of a gap analysis include:

Lacks actionable steps on how to grow. 

Misses competitor actions in the market. 

Highlights the need for technological advances but doesn't explain how you can achieve these advancements. 

Fails to acknowledge the government or legal restrictions for expansion.

 Doesn’t necessarily account for seasonal fluctuations and trends.

Costs money to hire external consultants to perform the analysis.

Causes apprehension or suspicion among staff. 

Takes valuable time away from employees who participate in the project and managers who assess the results.

Depends on the persistence and knowledge of the people involved.

Outcomes can be wrong because the context frequently changes, especially in larger enterprises.

Gap analysis examples

You can use gap analysis in various situations and business areas. Here are 5 examples:

Productivity

You can use gap analysis when a business unit’s productivity level fails to meet expectations. It can help determine where to focus optimisation efforts and adjust existing processes and resources to improve productivity .

New product launch

If you’ve launched a new product, you can run a gap analysis to compare the current feature set with design goals or assess why sales weren’t as good as expected.

Sales performance

You can run a sales gap analysis to examine every step of the sales funnel from the sales and buyer perspective.

For example, there may be a missed opportunity to provide buyers a product demo when they’re in the consideration stage.

Supply management

In a fast-moving environment like supply chain management, you can conduct a gap analysis to optimise it.

For example, a gap analysis could pinpoint the underlying reasons a store runs out of supplies frequently. Maybe they’ve selected the wrong vendor, or they should have outsourced logistics. 

Software evaluation

You can run a gap analysis to determine if all the functions and features of a  software application meet your business requirements and expectations. If there’s a gap between what you need and what’s available, you can look at workarounds or change your business processes to fit the software.

Common gap analysis frameworks

Here are 4 gap analysis frameworks you can use to help organise current and future states and show you how to “bridge the gap”.

SWOT analysis

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It’s a helpful tool for analysing your business’ current state. 

Similar to a gap analysis, the idea behind a SWOT analysis is to gain insight into the current state and use that insight to improve things. It helps identify qualitative and quantitative aspects of a project or part of your business.

However, the threat section is more like a risk assessment, which is outside the scope of a gap analysis.

Fishbone diagram

The Fishbone diagram, also known as the cause-and-effect diagram or the Ishikawa diagram (after its creator Kaoru Ishikawa ), visualises the cause and effect of potential problems. 

It’s useful when analysing your current state and identifying the factors that prevent you from achieving the ideal state.

McKinsey 7S framework

The McKinsey framework has 7 categories: 

shared values 

When you examine these interconnected categories, you’ll better understand how they apply to your organisation. Every category should support the others. If you find one that doesn’t, you need to focus on improving that one.

Nadler-Tushman model

The Nadler-Tushman model assesses a company’s performance in 4 areas: 

Similar to the SWOT analysis, the Nadler-Tushman model identifies the strengths and weaknesses of each area and compares them to the others.

The goal is to determine if the work effort is equally distributed across each area and supports the others.

Fill operational gaps with MYOB

A business gap analysis helps you understand where you are and what you need to do to move forward. 

By comparing the current state with the ideal state, companies, business units, or teams can determine how to improve their processes, products and performance quicker.

For instance, you could use MYOB’s business management platform to fill operational gaps in invoicing , accounting and payroll . 

Try MYOB’s Online Accounting Software For Free

Disclaimer:  Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.

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How to use a gap analysis to achieve business goals

A gap analysis is the process of comparing your actual business performance with your desired performance to see what’s missing. You can use these analyses to create company strategies and identify possible shortcomings in your business. Learn how a gap analysis can help fortify your business goals and the four steps to perform your own.

Here's a scenario: your team is about to start their strategic planning initiatives for the next year, but they don't really know where to start. What do you do next?

A gap analysis (also known as a needs analysis) is the process of comparing your current business performance with your desired performance. It helps you identify the "gap" between where your business currently stands versus where you want your business to be. In short, you’re looking for what’s missing.

What is a gap analysis?

A gap analysis (also known as a needs analysis) is the process of comparing your current business performance with your desired performance. The "gap" in a gap analysis is where your business currently stands versus where you want your business to be. 

Creating a gap analysis can help your business in a few ways. Here's how:

Brainstorm strategies . Creating a gap analysis can help strategic teams figure out potential action plans they can use to hit their goals. 

Identify weak points . If your business didn't perform as expected, using a gap analysis can help your team figure out the root cause of certain performance gaps. 

Benefits of using a gap analysis

Creating a gap analysis is a way to review your current strategies to see what’s working, and what’s still needed. Performing one can help your business in a number of ways, including:

Identifying weak points . If your business didn't perform as expected, you can use a gap analysis to help your team figure out the root cause of performance gaps. 

Measuring current resources . If your team has a surplus of resources at the end of the year, a gap analysis can help identify specifically how resources were allocated so they can be used more efficiently in the future.

When to perform a gap analysis

A gap analysis is a useful project management tool to help you identify how to get from point A to point B. While a gap analysis can be used at any time, you can get the most out of your analysis when you apply it strategically to a specific project or initiative. Here are a few scenarios where using a gap analysis can help you gather the contextual data you need to improve your business.

During strategic planning

If your team is looking to create a strategic growth plan, using a gap analysis early ‌in the strategic planning process can help give your team a good starting point. A gap analysis provides data-driven guidance on how your team goes from their current state to a specific end goal. For example, if you’re planning next quarter’s strategy, you can use a gap analysis to review what you achieved in the current quarter. Compare that to the goals you had originally set and you’ll be able to identify opportunities to improve in the coming months.

When you encounter performance issues

If your team is unexpectedly underperforming, a gap analysis can be a useful tool to identify any shortcomings. Once you identify the root cause of the gap in your current situation, your team can improve processes to fix the issue without interrupting production. For example, a project manager at an assembly line may notice that production is not meeting expectations. After completing a gap analysis, they find the root cause to be an issue with some machinery. Now they know exactly what to fix to improve production.

When stakeholders need additional context

If your team is compiling business information for investors or for other business requirements, a gap analysis can be an extremely helpful tool. A gap analysis is useful in this situation because it provides more contextual information than just hard numbers. If management is worried that your team is underperforming for whatever reason, a gap analysis can quell any worries with a detailed plan of how your team is going to close the gap. 

Gap analysis examples

The best time to use a gap analysis is when you’re looking for ways to improve, or you’ve realized something isn’t working quite as expected. In practical, real-life examples, here’s what that might look like:

Software development: Gap analyses can show you missing items in your software, helping you to potentially catch errors before you go to market.

Project management : Use gap analyses during the project planning or review stages of project management to show you the areas that aren’t up to speed with the rest of your project. Then, you can make requests for and allocate resources to that work as needed.

Human resources: If you’re on an HR team, you can use a gap analysis during the hiring processes to show you what’s lacking on a team, which in turn, you can look for in a new candidate. 

Team leads : As a lead, you’re often looking at the big picture problems. So sometimes, details slip through the cracks that can cause delays or issues down the line. A gap analysis can help you identify when you may have overlooked something, and it might be able to catch them before they create a bigger problem.

Competitive research: Competitive analyses are important tools to boost customer satisfaction. One way to perform the necessary competitive research is through a gap analysis, where you look at the market gap for your industry and strategize ways that your business can fill it.

The 4 steps of a gap analysis

While it may seem complex, using the gap analysis process is not as complicated as it seems. Try this four-step process to create a gap analysis for your team.

​1. Define your business goals

In order to compare current performance to desired performance, you first need to define what your ideal future state looks like, or, in other words, set goals. Any goal setting methodology works. If you don’t already use one, try using objectives and key results (OKRs) or key performance indicators (KPIs) to create targeted, specific metrics and business goals . Regardless of which goal type you use, make sure your objectives are SMART: specific, measurable, achievable, realistic, and time-bound. The goals you're setting here define how you’ll measure performance and represent the desired state you want for your business.

2. Benchmark your current business performance

Use goals, historical data, and past gap analyses to benchmark your current business performance , processes, or workflows , and set the standard for how you work. 

At the same time, evaluate your current processes with a business process analysis (BPA). If you're aiming to make process improvements as part of your strategy, looking at the current state of your business process is important. This can help you identify which process improvement methodology your team should use to reach the desired target state.

3. Analyze gap data

Remember that the “gap” in a gap analysis is the difference between where your business currently stands and where you want your business to be. Now that you understand the difference, it’s time to hypothesize different strategies and tactics your team will need to close that gap. 

The next step in this process is to ensure your goals are actually achievable, and not too far out of your team’s reach. You don’t want to set a goal so high that it feels impossible. In the same vein, it’s important to ensure that your team is able to complete their goal in the set time period. If you make changes to your current performance strategy, will your team still be able to achieve the goals you set based on the desired time frame?

It's during this step when you meet with your stakeholders to brainstorm strategic planning initiatives to hit your goals. 

4. Compile a detailed report

Once you've solidified all of your numbers and business goals, create an action plan that clearly dictates how your team plans to close the gap. It's important to use both quantitative data, like the benchmark data you compiled in step two, in addition to qualitative data, such as current processes and past process improvement strategies. 

What is the difference between a gap analysis and a SWOT analysis?

A SWOT analysis is a type of gap analysis that’s commonly used in project management to identify strengths, weaknesses, opportunities, and threats for a business. Usually, people complete a SWOT analysis via a 2x2 matrix.

Once this matrix is filled, use it to identify gaps that come to light as your team brainstorms each quadrant of the matrix. 

Other common gap analysis tools

Mckinsey 7s model.

Developed by Robert H. Waterman and Tom Peters, the McKinsey 7S framework is a management model that is often used for organization analysis. The idea is that an organization needs seven elements that are all aligned and reinforcing one another. If one part of the seven elements is off, it can affect the entire business. 

The seven S's in this model stand for:

Structure : How your business is organized. This could mean how activities are divided and how teams communicate with each other. 

Strategy : The hard set of plans that your team uses to move the business forward. 

Systems : How performance is measured, along with procedures the team uses to do business.

Skills : The competencies your team members provide for your business. 

Style : The behavior patterns of certain groups within your business.

Staff : The individuals that work for you. This also refers to their characteristics and ways the company nurtures and develops their team.

Shared values : Values are the core principles that define how your company approaches work. 

You can use this model by testing the relationship between each of the seven S’s. When you change something in strategy, how does that affect systems? Performing a gap analysis here can give you concrete answers to how each of these facets of your organization relate to each other. 

Nadler-Tushman congruence model

The Nadler-Tushman congruence model is a business management tool that identifies the root cause of performance issues. It was developed by organizational theorists David A. Nadler and Michael L. Tushman in the early 1980s. 

The idea of the Nadler-Tushman model is that there are four main elements to a business and they each have unique relationships to one another. 

Those four main elements are:

Work : All of the individual tasks that make up your business's performance. There are two different perspectives on how to look at work: what is done and how that work is processed. 

People : The interaction of individuals during work. Some examples of this include a manager and their direct report, or a team lead and a contractor.  

Organizational structure : How your business organizes itself, like how work is delegated , what teams work on what, and how processes are built. 

Culture : This is how your team implements group norms , best practices, ideals, and shared values throughout your company.

The Nadler-Tushman model then pairs each of these elements off into six different combinations, so teams can analyze how their business is performing. Those six pairs look like this:

Work and people : This looks at which employees are doing what work. Are the right people completing the right tasks?

Work and structure : This is how your team develops processes to complete work. Is there enough structure and organization that clearly dictates what work needs to be completed?

Work and culture : This focuses on the environment that's created. Does your company culture promote habits that are beneficial to performance?

People and structure : This identifies the organizational structure of your team. Is your team organized in such a way that individuals can produce their best work?

People and culture : This focuses on the attitudes of employees. Are your employees working in a culture that is productive for them? Are they able to identify resources to help themselves be successful at work? 

Culture and structure : This pair relates to how culture and company organization may affect one another. Does the organization of your business compete with the company culture , or help it? 

Similar to the McKinsey 7s model, when you pair off each of the elements of the Nadler-Tushman model, you can see how those two relate to each other and how changing one facet can affect the other.

Craft gap analyses with a work management tool

Gap analyses work best when shared with stakeholders in a convenient and organized manner. A work management tool like Asana can help your team organize information and streamline communication with stakeholders, so everybody is on the same page. Learn more about how you can use Asana to assist with work management. 

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5 Gap Analysis Tools to Identify and Close the Gaps in Your Business

Updated on: 5 January 2023

How far have you come from the work you planned at the beginning of the year? Do you have any idea about what worked and what didn’t?  And why?

Gap analysis can help you compare your business’s or project’s actual performance against the performance you planned for. This way you can figure out what actually worked for you and what didn’t.

We have listed 5 gap analysis tools you can use when doing a Gap analysis. Scroll down to find out,

What is Gap Analysis?

How to do a gap analysis, mckinsey 7s.

• Nadler-Tushman

Burke-Litwin Causal Model

Gap analysis is used to compare where you are against where you would like to be.  This helps you identify the gaps between these two states, and come up with an action plan to close them.

Basically, it helps you find solutions to issues that are holding you back from growing as a business.

It can be performed on

• A strategic level – comparing the condition of your business with that of the industry
• Operational level – comparing the current state of your business performance with the state you desire

Note: It is also known as a need-gap analysis, need analysis or need assessment

There’s no standard process for doing a Gap analysis since it should usually be tailored to meet your business needs. But here are the steps a typical Gap analysis would follow.

Step 1: Pick an Area to Focus on

First of all, you need to know where to focus on during the analysis.

Whether it’s from finance, product quality, marketing etc., pick that specific problem area you need to drill down on. For example, if it’s marketing, a specific area would be social media marketing.

Being specific will help you focus better during the Gap analysis.

Step 2: What are Your Targets/ Goals?

Now that you know the area you need to improve, it’s time to set goals or targets. Not only these goals should be realistic, which mean that they should be achievable within a certain time limit you set, but they should also align with your business goals.

These goals you set will help you define the future state in the 4 th step.

Step 3: Determine the Current State of Things

Before you step forward, you need to know where you are standing. In this step, you’ll figure out the current state of things.

By looking into reports or process documentation , doing interviews, brainstorming etc. gather as much data as possible to clarify how you are performing at present.

Step 4: Determine the Future State of Things

Remember the goals you set in step 2? Achieving these goals will help you get to the future state or the desired situation you want your business to be in.

Define what the parameters of the ideal state of your business are.

Step 5: Identify the Gaps between the Two States

Now you have an understanding of the attributes of your current state and the future state, it is easier to identify what is stopping you from reaching your goals.

After identifying these gaps, come up with the steps you need to take to close them.

Gap Analysis Tools

Once you have identifies what the gaps are, you need to look into why they exist and what you can do about them. There are a few gap analysis models you can use for this task. Following we have listed a few Gap analysis tools that you can use.

SWOT analysis focuses on Strengths and Weaknesses in the internal environment and Opportunities and Threats in the external environment. It helps you determine where you stand within your industry or market.

How to do it;

• Gather around a team from relevant teams/ departments
• Create a SWOT analysis matrix; you can either use the one below or choose from these SWOT analysis examples
• List down the internal strengths and weaknesses of your business
• Note down the opportunities and threats present in the industry/ market
• Rearrange each bullet point in the order of highest priority at the top, and lowest at the bottom
• Analyze how you can use your strengths to minimize weaknesses and fight off threats, and how you can use the opportunities to avoid threats and get rid of weaknesses

Check out this resource to learn how to use SWOT analysis effectively .

Click on the template to edit online

Fishbone diagram, also known as cause and effect diagram or Ishikawa diagram , helps you identify the root cause of an issue or effect. It lists the 6 Ms (listed in the diagram below) and helps you see how they relate to the central problem.

Here’s a quick guide on fishbone diagram to help you understand how to do a cause and effect analysis.

Click to edit the template online

Get more fishbone diagram examples .

McKinsey 7S can help you with any of the following purposes

• To help understand the gaps that may appear in the business
• Identify which areas to optimize to boost business performance
• Align processes and departments during a merger or acquisition
• Examine the results of future changes within the business

The 7s refer to key interrelated elements of an organization. They are as follow,

These elements are divided into two groups; hard elements, which are tangible as they can be controlled, and soft elements which are intangible as they cannot be controlled.

Hard elements

• Strategy – the plan of actions that will help your business gain a competitive advantage
• Structure – the organizational structure
• Systems – business and technical infrastructure employees use to do their daily tasks

Soft elements

• Shared values – a set of beliefs or traits the organization upholds
• Style – the leadership style of the organization and the culture of interaction
• Staff – the general staff
• Skills – key skills of employees

How to apply it;

• Gather around a competent team
• Check whether the elements are properly aligned with each other (look for gaps and weaknesses in the relationship between the elements)
• Define the state where these elements would be optimally aligned
• Come up with an action plan to realign the elements
• Implement the changes and continuously review the 7s, moving forward

Here’s a more detailed look at how to apply the McKinsey 7s model .

Nadler-Tushman’s Congruence Model

The Nadler-Tushman’s congruence model is used to identify performance gaps within an organization.

It is based on the principle that a business’s performance is a result of these 4 elements; work, people, structure and culture. The higher the compatibility among these elements, the greater the performance will be.

• Gather all data that points at the symptoms of poor performance
• Specify and analyze inputs which include the environment, resources and history. And define your organization’s strategy.
• Identify which outputs are required at individual, group and organizational levels to meet the strategic objectives
• Figure out the gaps between desired and actual output and the problems associated with it (and mark down the costs associated with them as well)
• Collect data on and describe the basic nature of the 4 major components of  the organization
• Assess the degree of congruence among these components
• See how poor congruence and problems related to outputs are correlated. Check if the poor ‘fit’ of the 4 major components are related to  the problems
• Come up with action steps to deal with the problem causes

Check out this resource for more in-depth instructions on how to apply the Congruence model.

This tool helps you understand the different components of an organization relate to each other when going through a period of change. There are 12 components that are interrelated and they are as follow,

Click the template to edit it online

How to apply it:

• Find out where the need for change is coming from; whether from the external environment, transformational factors etc.
• Identify which of the elements in each group is responsible for the situation
• Examine the key element along with the other 11 elements; pay special attention to those that are closely linked to the identified element
• Figure out the changes you need to make to the main element along with the other few elements it is closely linked to

Learn more about the 12 drivers of change, the Burke-Litwin highlights here .

What’s Your Take on Gap Analysis Tools?

Gap analysis is a great way to figure out the parameters of your next project or your process improvement efforts. We’ve covered 5 types of Gap analysis tools that you can use to identify gaps in your business and determine what you should do next.

Let us know what other Gap analysis tools you use during a Gap analysis process at your organization.

And if you are looking for Gap analysis templates, we’ve got you covered! Check out this compilation of useful Gap analysis templates that you can use for multiple scenarios

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

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I know about the SWOT and Fishbone. I did not know about the other three tools. I really needed this information for my project. Thank you for writing this article.

Excellent piece of work. I learnt alot from this

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A beginner’s guide to gap analysis

How does this sound?

A business improvement tool that:

• Works across the entire organization
• Never gets outdated
• Helps you spot shortcomings with ease

Too good to be true, you say?

Well, it’s not. This tool does exist — and it’s called “gap analysis.”

In this quick guide, we’ll show you everything you need to know to perform your first gap analysis — including every requirement of the process.

Let’s start with the basics.

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First things first: what’s a gap analysis?

Put simply, a gap analysis compares actual results with predicted results. This allows organizations to easily figure out if they’re on track to achieve their goals — and if not, they can quickly spot how to get back on the right path.

It’s a great way to fill any gaps, so to speak. As a result, it allows businesses to improve their processes, structures, skills, technologies… the list goes on.

In simple terms, a gap analysis is used to identify any improvements that need to happen to ensure company goals are met.

What are the types of gap analysis?

There’s more than one way to perform a gap analysis. But don’t fret — we’ve broken it down here to give you a simple overview of each method.

#1. Performance (or strategy) gap analysis: Actual performance vs. expected performance

This is probably the most well-known interpretation of gap analysis.

Performance gap analysis is the top-level analysis of general company goals or objectives. 

This means looking at which goals have been achieved — otherwise known as current performance — and what needs to happen to reach the future goal.

It’s also referred to as “strategy gap analysis”, which refers to the differences between the company mission and strategic objectives. In this context, the gap represents any threat to the company’s growth rate, future KPIs, and, ultimately, their success as a business.

In a lot of ways, this is similar to a SWOT analysis (one of several marketing models ) — and in fact, a SWOT analysis can be a pretty helpful gap analysis tool. Especially when it comes to strategy planning.

Using a SWOT analysis allows businesses to identify their own strengths and weaknesses, finding the root cause of any performance gaps in the current workflow.

#2. Product (or market) gap analysis: Actual vs. budgeted sales

Product gap analysis is the process of identifying areas where demand is greater than supply. 

This is a great way for businesses to capitalize on under-serviced markets, and to spot those products or services that are in demand but not available.

By performing product/market gap analysis, organizations make informed business decisions about where to invest their time and money.

But this sounds really similar to market research. What’s the difference?

Good question.

Market research is typically conducted as the result of a business need. It’s reactive.

Market gap analysis, however, is done proactively. It helps businesses keep one step ahead of the game in the marketplace, making sure that the organization can withstand any unexpected changes.

#3. Profit gap analysis: Actual vs. target profit

Profit gap analysis identifies why profit forecasts haven’t been met, and what went wrong along the way. 

Shifting market trends and macro factors — such as new competitors, or political and societal changes — can all have a knock-on effect when it comes to profit.

Using profit gap analysis allows businesses to identify what’s happening around them, and what needs to change to keep the business profitable. It helps businesses reach their desired outcome — business growth.

#4. HR gap analysis: Number/performance of workforce vs. the work required

It’s all well and good performing a gap analysis, but what happens if you don’t have the resources or capacity to do the work that’s needed?

That’s where HR gap analysis can help.

HR gap analysis is the process of analyzing the capacity and size of your team in order to make decisions about budgeting and staffing. 

And as a result, companies have the required intel to make decisions about hiring, outsourcing, and any skills gap within their current workforce.

Once the analysis has been complete, companies have a clear overview of their workforce competencies and how this fares in relation to the future goals and company objectives.

How do you perform a gap analysis?

Now that you understand what a gap analysis is, let’s show you how to perform one in your organization.

We’ll keep it short, sweet, and to the point.

#1. Describe the focus area of analysis

Before you do anything else, you need to identify the area in which the gap analysis will take place. A simple but important part of the process.

Whether that’s a specific project — or a particular area of work — make sure that you’re clear on exactly what you’re going to analyze before you go any further. Without this clarity, it’ll be hard to pinpoint the gaps you want to address.

For example, let’s say you want to improve the content on your company website. First thing’s first, you’ll need to identify “content” as the area of analysis before proceeding to conduct a full content gap analysis.

#2. Determine the goals

Ask yourself the following question:

If everything went smoothly and according to plan, where would you be?

By establishing the goals that you want to achieve, you can identify the improvements needed to reach them.

For example, you might be looking to achieve a certain amount of profit throughout the next quarter. So your goal will be to increase profit and identify how you’re going to make that happen.

By identifying your goals, you’re giving yourself a benchmark for the future gap analysis.

Top tip from monday.com: Be realistic when it comes to setting goals. The last thing you want is an unreachable goal — that’s no fun for anyone. Check out our blog ‘ Effective project objectives: how to define (and achieve) success ’ to find out how to set SMART goals and objectives.

#3. Analyze the current state

Now that you’ve taken a look at the desired future state of your company, it’s time to bring it back to the present.

Spend some time reviewing and analyzing your current situation. This will help you identify any areas of improvement that could help you achieve your goals.

Reviewing where you currently are will allow you to identify how to get where you want to be — which leads us nicely onto our next step.

#4. Compare what you have now with what you want to achieve

Time to compare the current state with the ideal state.

This involves reviewing how far you are from the actual target. In doing so, you’ll be able to spot the gaps and areas of improvement.

And voilà – there’s your gap analysis. You’re able to figure out why you didn’t meet your target. As a result, you can avoid the same problems in the future.

So what should you do with all this information?

#5. Create an action plan

The final stage involves putting everything you’ve learned so far into an official gap analysis.

So what should your gap analysis look like? 

Here’s an example:

( Image Source )

Or — if you want to make the process easier and more intuitive — you might want to think about using work management software , like monday.com.

Our software makes the entire gap analysis much more efficient, streamlined, and — let’s face it — easier. And we don’t want to brag, but we even have a pre-made gap analysis template ready for you to use.

Okay, so maybe we do want to brag. But only because we know our software will make your life easier.

Using monday.com for your next gap analysis

There are two ways to perform a gap analysis: the hard way and the simple way.

The hard way is to do it manually.

The simple way is to do it with work management software.

Using a work management platform like monday.com not only improves the gap analysis process, but it makes it easier to tweak if needs be.

Our platform is super intuitive and easy to use, making it ideal for organizations that are looking for quick, fast, and efficient ways to make changes to their current processes.

Sounds ideal, right? We think so. But if you still need convincing, let’s look into it in more detail.

Why monday.com?

So why should you bother using monday.com? And how can it improve the gap analysis process?

Both very good questions — and we’ve got the answers you’re looking for

Let’s take a look at some of the features and benefits that monday.com provides, and how we can help you streamline your next gap analysis:

#1. Automate your processes

With monday.com, automation is a piece of cake. We want our platform to cater to your needs, so automation has always been something that we’ve encouraged our users to do.

Whether that’s using one of our pre-made automations — or creating your own as part of your gap analysis process — our automations make your life easier, and your workflow more efficient.

Pretty handy when you’re trying to conduct a gap analysis. No need to worry about manually having to check in on how things are progressing in relation to your targets. Simply set up an automation to alert you of any changes, and Bob’s your uncle.

#2. Collaborate with your team

Our software is built with collaboration in mind. We want to make it as easy as possible for teams to communicate and work together.

So if you need to work with someone else in your team on a gap analysis, monday.com is the perfect platform to collaborate. Whether that’s sharing files , adding comments to tasks , or creating documents — we’ve got you covered.

#3. Integrate your favorite tools

Already working with a variety of platforms? Great! At monday.com, our platform is integration-friendly .

In fact, our software integrates with over 40 third-party platforms — including Zapier , which means you have access to all of their integrations too.

So whether you’re using Slack for instant communication, Google Drive to store your files, or Shopify to host your website — with monday.com, external platforms seamlessly integrate into your workflow.

It’s perfect if you’re already using different systems but want to integrate them all in one place to conduct your next gap analysis. Or even to create a gap analysis report!

#4. Increase organization-wide transparency

With monday.com, everything is hosted in one place. It’s easy to see who’s doing what, how far along things are progressing, and what resources you have available.

For this reason, it’s a pretty nifty way to manage your gap analysis. You’ll easily be able to conduct your analysis, comparing what’s happening so far with what needs to happen going forward. No need to trawl through endless documents or paperwork — it’s all there in one place.

Ready to perform your first gap analysis?

By now, you’ve got all the information you need to perform your first gap analysis. No need to thank us — you’re more than welcome.

As a result of this newfound knowledge, you’ll be able to make sure you’re making the most out of your next gap analysis.

Whether you’re doing it for the first time — or looking to improve the process you’ve been using for the last 10 years — this article should’ve given you all the information you need to maximize your gap analysis efforts.

And don’t forget — if you want to make the process quicker — you can use monday.com’s gap analysis template to get things moving as fast as possible. We’re not saying it’ll provide you with a successful gap analysis, but it sure will help you get there.

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Gap Analysis 101: Steps, Tools & Templates

Author & Editor at ProProfs

Shivani Dubey specializes in crafting engaging write-ups and exploring the intricacies of customer experience management. She covers vital topics such as customer feedback, voice of the customer (VoC), NPS, emerging UX and CX trends, and sentiment analysis.

Only in a utopian world would a business flourish without differences in where they are and where they want to be, what they envision to deliver, and what customers are actually delivered.

Unfortunately, that’s not the reality. There are many internal and external factors at play that affect a company’s performance and create gaps between where a company stands in comparison to what it wants to achieve at a specific point in time.

That leaves us with only one solution to save the day — Identify the gaps and stop them from expanding further. 

That’s where gap analysis plays a life-saving role in organizations.

In this post, we’ll cover what it is, its types, why you need to do it, when you need to do it, how to do it, and more. Stick to the end to know the types of gap analysis templates you can use to patch the gap in your business. 

Let’s begin.

What is a Gap Analysis?

It is a business strategy planning tool used by all companies to compare their current business standing vs. the standard service quality. 

Why is it performed?

The purpose of gap analysis is to evaluate where they are now and how far they are from where they want to be, along with how they will cover this distance.

When is it performed?

The analysis is generally performed during the transition or implementation of a management system to compare it to the standard. It is the reason why gap analysis can also be referred to as Pre-Audit. 

Another reason why you might need to perform it is because of certain shortcomings in the performance and results. These shortcomings may be from your sales team, customer support personnel, quality assurance, product development, and so on. 

Even individuals such as proactive leaders can perform it to improve their performance.

One analysis that’s very popular and worth looking into is the gap analysis model for customer service. Here’s how it looks in brief.

Gap Analysis Model for Customer Service

Besides the service quality, such analysis is effectively applicable for the management of customer satisfaction . It’s a great way to gauge the distance between what customers expect and what’s delivered to them.

The tool SERVQUAL developed by Berry, Parasuraman, and Zeithaml is based on the model they developed.

The two primary purposes of the tool are to:

• explore gaps between customer expectations and perceptions 
• improve overall customer satisfaction

There are five identified gaps in customer service quality. They are:

• The Knowledge Gap
• The Delivery Gap
• The Policy Gap
• The Customer Gap
• The Communication Gap

Benefits of Gap Analysis: Why It Matters

With a clear understanding of what the analysis entails, it becomes apparent why organizations use this model to growth-hack their business. Here’s a look at why gap analysis is useful in detail for you to clearly understand why you should conduct it for your business. 

Increased Productivity = Increased Profits

Gap analysis helps identify gaps in employees’ performance , productivity, the efficiency of processes, etc. If a company knows what to improve at the right time, it can help make processes more efficient and increase productivity, which will positively impact your revenue. 

Helps Identify and Improve Weakness

It lets you analyze the efficiency of your project without having to wait until it’s completed. It focuses on the situation today, identifies the gaps that may come in the future, and takes a proactive approach in making sure all the obstacles can be solved.

Efficiently Reallocate Resources

The analysis also helps companies review their current resource allocation practices. It allows you to identify misallocated resources and how the lack of some resources affects the business and revise the allocation. 

Help Make Informed Decisions

When the management is aware of a business’s current situations and position, it removes the risk of making an uninformed decision. With awareness through the analysis, making informed business decisions becomes easy.

It can be something like creation of a buyer persona by collecting information from prospects and existing customers to understand who the buyers are and what they want.

It can even be something like creating a customer journey map to find out how customers interact with your business and how to improve their experience at every touchpoint.

Discover how a logistics company used the Qualaroo feedback survey tool as part of their gap analysis strategy to identify what users need in certain locations so the company can improvise accordingly. 

Case Study: Lalamove

As the company rapidly expands, there’s always a need to know where to go and what to do. One of the survey questions asked by the company is related to how customers find out about their business. Based on that, the company designs its launch strategies factoring in the demographics and city information.

They also use the tool to know which features garner more favors from users and which do not.

Learn how Lalamove made high-impact product decisions using customer feedback loops .

The Right Time to Perform Gap Analysis

So far, we know why conducting this analysis is seen as crucial for businesses and has become a popular practice among many industries. 

Before we discuss how to conduct gap analysis, we are still left wondering when one should do it. So, let’s get it out of the way first.

Here are a few scenarios that ask for an effective gap analysis to improve business performance. Some of the examples are industry-specific to give you a better idea. 

• When You Want to Benchmark Performance

You can perform  it when you want to compare results with external criteria such as competitors.

• When the Profits Do Not Reach a Set Mark

It can help identify the factors that led to lower profits than the forecast percentage. Once you know what went wrong, i.e., if you spend more on specific resources than needed or incur unanticipated expenses, it’s easier to fix and bridge the gap for the future.

• When You Want to Perform Portfolio Analysis

You can use gap analysis to identify new product opportunities and also review the performance and relevance of existing ones. 

If you think there’s a market for a specific product type, you can start the development process, but if you think a product isn’t popular, you can put it on sale or remove it from the portfolio.

• When You Want to Identify Usage Gaps

The difference between your potential market size and actual market size in known s usage gap. Implementing gap analysis helps companies realize that the usage gap exists and its reasons; for example, management may have misread demand for certain products and then find ways to overcome it.

• When You Want to Review Supply Management

Companies or institutions such as hospitals can conduct a gap analysis to know when they are short on supplies or if the process needs to be reviewed

• When You Want to Perform an Individual Analysis

With gap assessment, teams can perform an individual assessment to improve their performance and even explore best practices in the process. 

Types of Gap Analyses To Perform For Your Business

There are multiple types of gap analyses businesses perform to improve their business processes and performance. They are as follows:

Manpower Gap Analysis

As the name suggests, this type of analysis focuses on the gap between the ideal manpower required and the one a business currently has. This way, if a company is low on the workforce, i.e., understaffed, it can go on a hiring drive and vice versa if the case is opposite.

Performance Gap Analysis

Also known as strategic gap analysis, it is concerned with the difference in expected performance and the achieved results. So, if specific goals are not met, performance gap analysis from different perspectives will prove effective.

Profit Gap Analysis

As the name suggests, profit gap analysis helps assess the difference between the anticipated profit percentage and the achieved results. 

Market Gap Analysis 

Also known as product gap analysis, the analysis focuses on analyzing the position of a company in the marketplace to evaluate the gap between current and budgeted sales.

Skills Gap Analysis

As suggested by the name, this type of gap analysis evaluates the skills and capabilities of the staff and employees. If the staff is not performing at the top of their potential, a company can conduct workshops and training sessions to increase productivity and skills. 

IT Gap Analysis

Companies perform this gap analysis to evaluate and assess their current IT resources and what areas need more upgradation. For example, which processes can be digitized or simplified using different software. 

One example can be a better alternative to human customer support – live chat support that’s available 24×7 and costs less and is more effective.

How to Conduct Gap Analysis Effectively: Steps to Follow

Since every industry works differently, the process or steps involved in performing analysis also differ. Irrespective of it, there are some basic steps that are crucial. So, let’s 

discover how to do gap analysis of your business efficiently.

Step 1: Examining the Current State of Your Company

The first step in the gap analysis process is to establish the area you want to analyze; is it the customer experience? Performance of customer support? Annual sales? Marketing strategies? 

There are so many areas for which you can perform your analysis; you just need to start somewhere. 

So, understand your priorities and pick any one of them. For instance, say you want to improve the overall customer experience .

Here, you need to start with finding how your customer support is currently performing, how the customers perceive your product or service, what kind of experience your website visitors or app users have. 

For this, you need to get close and personal with your customers. Collect their feedback using online pop-up surveys that help you ask customers without hampering their experience ( We’ll discuss the tools for gap analysis later in the article ).

So, all in all, this step involves identifying the obstacles or shortcomings in your businesses’ process and getting to their root cause.

Analyze all activities related to the area of your observation, i.e., whatever you are currently doing to see if they work or you need to change your game. Here’s an example:

Step 2: What the Future Ideal State Looks like for You

Once you know the dynamics of the current situation and how your business functions, you can set realistic, promising goals that offer growth. When setting goals, you don’t have to reach for the sky yet; set multiple milestones that lead to your ultimate goal.  

For instance, say you currently outsource your marketing. Upon closer inspection, you found out that it costs you more than having an in-house team to handle your content, designing, and marketing. 

So, you found out the root cause in the previous step, set out a goal, i.e., want to shift marketing in-house for better results and efficiency. Now, on to the next step.

Step 3: Identify Gaps to Come up with Solutions

Now, when it comes to gaps, they are certainly not easy to identify, but since you have your problems and their causes all laid out in front of you, it would become a little easier. You can brainstorm to choose the best solutions to bridge the gaps. 

For instance, take the example from step 1. Say, to improve the overall customer experience, you took customer feedback and found out that they are not happy with your customer support. 

Upon closer inspection, you found that the CRM you use does not correctly show tickets or that you need to review the staff or maybe rehire. 

Based on the problem and the gap it has created in your expectations and reality, you can choose any solution that meets your requirements based on many factors such as costs, resources it requires, and your organizational priorities. It may even be something as simple as choosing a better customer relationship management tool .

Step 4: Implement Your Solution

With everything figured out, all there is left to do in the gap analysis process is to properly implement your solution. You can re-perform the analysis to see if your solution is working or if you need to take a new approach. 

Techniques to Apply While Performing Gap Analysis

Now that you know the correct steps to perform the analysis, it’s only natural to wonder what methods you can apply to perform this analysis. Below are the most popular gap analysis techniques used to conduct the analysis successfully.

SWOT Analysis

SWOT is an acronym that refers to:

S: Strengths

W: Weakness

O: Opportunities

T: Threats  

It is one of the most popular and tried and tested gap analysis techniques in the books that benefit in multiple ways. It helps you gather both quantitative and qualitative insights , including internal and external threats to an organization. 

It also helps judge an organization based on how well it stands against its competitors. So, now the question is – how do you perform SWOT analysis? Here’s a brief account of the whole process:

• Create a team of niche experts from all departments.
• Design your customized SWOT analysis matrix.
• Map out your strengths as well as weaknesses, opportunities, and threats from external factors or forces.
• Organize these points based on long-term priority.
• Now, brainstorm with the team for ways to utilize your strengths and improve your weaknesses.

Fishbone Diagram

Also known as Ishikawa, cause-and-effect, or herringbone diagrams, the fishbone diagram is named after the structure the framework makes. It contains six Ms:

• Measurement 
• Mother Nature

The purpose of this diagram is to get to the root cause of any problem an organization may be currently facing. You can choose the categories central to your issues and identify where you need to improve.

Nadler-Tushman Model

This model helps in identifying how one aspect of an organization’s process affects other areas. The model aims at discovering processes that affect the overall efficiency of the company.

For example, you may have an excellent work culture, but if the company’s structure is unclear, you won’t get optimized results.

PEST Analysis

Along the same lines of SWOT analysis is the PESTLE analysis. The acronym stands for:

P: Political

E: Economic

S: Sociological

T: Technological

E: Environmental

This method helps take a proactive approach to identify threats and nip them in the bud, along with utilizing opportunities along the way. It does so by evaluating the factors mentioned above.

PESTLE analysis assists in identifying and closing gaps due to current issues and minimizes future risks for organizations. If you want to use a shorter version of this method, you should just try PEST.

Gap Analysis Frameworks and Tools to Use

Besides the methods we discussed above, here are some gap analysis tools and frameworks you can use.

Qualaroo feedback software is a helpful gap analysis tool. It helps you create custom surveys that you can add to your website, mobile app , and prototype and ask your customers for feedback to evaluate their satisfaction level and expectations.

Its AI-powered gap reporting feature works intuitively to produce results that can be turned into actionable insights.

McKinsey 7S Framework

McKinsey 7S framework was developed by a consulting company that goes by the same name. The framework aims to explore if an organization is meeting its customers’ expectations.

The framework consists of seven 7s, as shown in the figure above. It evaluates which factors crossover and how they may affect each other. 

Microsoft Power BI

Microsoft’s Power BI is a cloud technology that allows businesses to gather customer insights. You can conduct analysis with this tool for customer service and discover where you are as a company. It has features like built-in AI functionalities, data visualization, custom data connectors, and many more.

HubSpot is a marketing, sales, customer support automation tool that helps perform analysis with features like knowledge base, data quality automation, and analytics. You can also run inbound marketing campaigns using advanced CRM features.

Examples of Efficient Gap Analysis

Organizations from different industries conduct such analysis in a way suitable for them. So, to increase your understanding of the whole process and how it looks for different industries, here are a few gap analysis examples to consider. 

Example 1: Information Technology

IT gap analysis is generally conducted by project managers and process improvement teams in the Information technology industry. It is treated as a starting point for action plans that lead to operational improvements.

It allows these teams to benchmark the current performance and measure them against ideal performance milestones. 

Example 2: Real Estate 

In real estate, gap analysis helps measure current annual sales, based on which companies can set SMART goals. The analysis also helps find out the hiccups that hinder the company from achieving its goals.

For example, a real estate company has set a goal to increase sales by 15%, and they start assessing the business’s current standing with gap analysis. Soon, they find out they need to connect more with the customers to truly understand what the potential customers need from the company. 

Example 3: Compliance Initiatives 

Gap analysis in compliance initiatives compares what is needed by specific regulations and what methods are used by the company to adhere to them. 

Example 4: Human Resources 

Skills required for specific job positions are ever-evolving. For this, human resources conduct an analysis to evaluate what skills the personnel currently possess and what skills they should acquire. It helps the HR teams organize suitable webinars and arrange courses to take and build up the relevant skills. 

Example 5: SEO Gap Analysis To Boost Visibility

Ranking high on Google searches brings a lot of opportunities and prospects to small businesses. Of course, it’s only possible when the SEO strategy of the business is working. 

A simple analysis will give small businesses insights into what they can improve upon to see better results and rank higher in the searches.

{Read more: The Ultimate Guide to SEO for UX Designers }

Gap Analysis Templates To Get You Started

Here are a few gap assessment templates that may help you kickstart your analysis. You can, of course, customize the templates whichever way it works for your company.

With everything covered, we hope you can push your limits, identify your shortcomings, and create solutions that actually work. 

With analysis that consists of listening to your customers, identifying where they are not satisfied, and then closing the gap with perfect solutions, you can achieve whatever goal you set. 

Still, as Ryan Lilly, the author of Write Like No One’s Reading , says “The focus of gap analysis should be getting to the other side. If you bend over to analyze a gap too long, you’ll probably fall into it.” 

So, do what’s needed and don’t spend too much time analyzing the gap so that you don’t have enough time to strategize new plans and implement them. 

The best way to begin is by learning what your customers or key stakeholders in a process are thinking of and working with a good feedback tool can help you “bridge the gap” to achieve that.

About the author

Shivani Dubey

Shivani Dubey is a seasoned writer and editor specializing in Customer Experience Management. She covers customer feedback management, emerging UX and CX trends, transformative strategies, and experience design dos and don'ts. Shivani is passionate about helping businesses unlock insights to improve products, services, and overall customer experience.

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• May 7, 2021

What is Supply Chain Gap Analysis? 6 Steps to Success

When analyzing methods of cost-savings for a restaurant group, a supply chain gap analysis can provide invaluable data around methods to negotiate better relationships with partners. But what is a supply chain gap analysis, and how can it be effectively leveraged to deliver results?

A gap simply implies a space between two things, a missing piece that breaks continuity. Similarly, a supply chain gap refers to the difference between your current supply chain performance and what you would like your performance to be in the future. For example, your vendor for your paper goods - straws, napkins, small cups - currently delivers your order in seven days from order entry. But for the same size order, you would like to take delivery in five days, resulting in a gap of two days between current and desired performance.

By analyzing your current situation in several critical areas of your business, assigning desired performance levels, and determining the gaps, you can then find the reasons for the gaps and research ways to close those gaps. Let’s take a closer look at a supply chain gap analysis for a restaurant.

Supply Chain Gap Analysis, in Six Steps

Some of the biggest mistakes in food service contracting are those made around an inability to negotiate contracts with your vendors. Restaurants depend on relationships to procure food and supplies

1. Choose Areas for Analysis

First, identify those areas you want to analyze . Are you ready to look at all areas of your supply chain or are you interested in focusing on one or two areas of weakness? You may feel your distributor is not delivering orders 100% complete, but you have not evaluated the reported order fill-rates from the distributor. What goal did you have in mind for the distributor’s performance?

2. Set Goals for the Future

For each area, determine the ideal performance goals you would like to achieve in the future . For example, you may not be getting the best prices on goods from your current contractors or receiving them in a timely manner. Alternatively, you might be looking to scale your business, and are seeking better deals in the future as you draw more from their business.

3. Analyze Your Current State of Business

After choosing the areas for analysis and setting goals for future performance, you must determine the current state of business . Regarding the example above, consider a restaurant chain that is looking to expand their number of physical locations. This group would want to look at their current contracts that are in place, and see how these can be leveraged to produce better rates.

4. Compare Your Current State of Business to Your Goal

Calculate the difference between the current state and your ideal goal for the future . Continuing our example, if a restaurant has several locations across one city or region and are looking to expand into another, how will they provide uniform consistency and quality among these areas? Should they consider new contracts in another area? Will this affect the flavor of their menu items?

5. Analyze the Gaps

Look at possible causes for the gaps . Does more than one factor contribute to the difference? In our example regarding an expanding restaurant chain, will using existing contracts contribute to higher costs that may impact profits for that region? Will new contracts provide better rates with a consistent product?

6. Plan a Response, and Execute

Determine what must change to eliminate gaps . You may find several possible solutions for removing gaps; each solution brings its own costs and benefits. After you have evaluated the possible actions to reduce or eliminate the gap in each area of analysis, develop a plan to adopt the improvements, and execute. Once this has been implemented, repeat the process as needed.

Tips for Supply Chain Gap Analysis

· Be realistic about the areas you are analyzing and the goals you are setting. Are these goals achievable? If achieving the desired goal involves hiring several additional staff or making a large-scale capital investment, are you prepared to strive for that goal?

· Be able to measure the current performance of each focus area. Set measurable goals, too. You may set a goal of delivering more flavorful food, but how will you measure that achievement?

· Be willing to work with your vendors or, if necessary, find new vendors to close gaps in supply chain goals.

· Be open to including your staff in developing a plan to close the gaps. They can also help you assess the current situation and recommend solutions for achieving goals.

Performing an effective supply chain gap analysis takes time. Finding the right framework to identify problems and analyze them may take the help of a third-party consultant who has both expertise and objectivity to do a productive analysis.

Not sure where to start? Contact Purchasing Partners today. Our team of experienced supply chain professionals can assist you in performing a supply chain gap analysis of your establishment and in developing an effective and achievable plan to reach your goals.

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Identifying Weaknesses: 2 Key Areas to Address During a Gap Analysis

Gap analyses are common, but oversight and readiness are often overlooked. here's why they are critical to greater business efficiency..

Leaders of all levels need this on their radar: Whether you're a  Fortune 500  executive or an  aspiring entrepreneur , you need to know how to identify your company's weaknesses. It's a crucial skill for maintaining competitiveness and driving continuous improvement in your organization. 

A gap analysis is a classic way to discover shortcomings in business operations. It's a methodical approach to identifying the difference between current performance and desired outcomes. There are multiple ways to conduct a gap analysis, starting with the traditional three-step process: identify your goals, analyze your current situation, and define your solutions. Some may even add extra steps, like  identifying pattern awareness  and conflict resolution, for further analysis.

I've found that operational readiness and oversight are two areas that are often overlooked when conducting a business gap analysis. A company might identify a gap in sales performance but also fail to consider whether their sales team has the necessary training (readiness) or if there's adequate management support (oversight) to improve results. 

So, let's explore how to best incorporate these elements and why they're so important.

The Importance of Conducting Oversight and Readiness Gap Analyses

When conducting a gap analysis, it's often tempting to focus on the big picture. Typically, you begin by defining your end goals. You'll identify action items to bridge any gaps and achieve them. 

That's great, but if business leaders want their gap analyses to be successful, they need to zero in on that middle step. Defining goals usually isn't a problem. It's the analysis part of the process that's so commonly misunderstood. 

You can analyze the specific ways you do things within your company, sure. But if you want to take concrete, effective steps to improve them, you also need to identify how you are overseeing and codifying those processes.

As you find areas of inefficiency within your organization, look beyond the specific behaviors or processes themselves to consider the oversight and operational infrastructure surrounding them.

Oversight involves leadership.  Consider how everyone from the C-suite to boots-on-the-ground team leaders impacts an area of weakness within your operational activity. 

Readiness is also a factor , albeit a more nuanced one. It includes things like the established processes and capabilities of your workforce. Do you have the procedures, documents, systems set up, and talent to meet your business goals at a high level? 

Don't rearrange how you do things as a company until you know you're actually doing them well. Sometimes, poor results come from the inability to execute, not the approach itself.

By looking at oversight and readiness during a gap analysis, you can drill down into specific areas of need. This opens the door to collaborating with leaders, employees, and even clients to address detailed gaps in business documentation, training, and standard operating procedures (SOP) adherence. 

Tips to Conduct a Quality Gap Analysis

It's always a good idea to structure your gap analysis efforts, especially in areas like oversight and inspection readiness. Conducting a single review at a random moment in time will yield limited results. Instead, consider how often and at what times a gap analysis will be most beneficial to your brand.

Oversight and organization of highly structured clinical trials are good examples of this in action. When conducting a clinical trial, the Trial Master File (TMF) is a compilation of documents that proves the clinical trial has been conducted following regulatory requirements. 

Since a trial's results and inspection readiness depend on the quality of the data collected, a TMF is a critical collection of records that must be properly controlled, especially when adding or organizing information. Poor document management practices can compromise the outcome of a regulatory inspection. 

Just In Time GCP recommends maintaining good clinical practice compliance and trial integrity by  conducting planned gap analyses, or completeness reviews , of TMF documentation throughout each study. These reviews should not be ad hoc but planned out at the beginning of each study. They should be scheduled based on the specifics of each study's TMF Plan as well as certain events or milestones over time.

Take a similar approach to your business. Consider the oversight and inspection readiness areas that are critical to your operation. Then, proactively identify the most important times and frequencies to check on them over time. It's important to consider what that analysis should entail for maximum benefit.

It's also wise to create and update clear, thorough SOP documentation for business activities. Workplace collaboration app Beekeeper.io points out that  an SOP creates consistency  and allows you to expect specific outcomes. It can also reveal the training needs (and skill gaps) within your staff.

If your business doesn't have SOPs, there will be no clear expectations. As you conduct a gap analysis, make sure you have thorough, helpful, and updated SOPs in place to guide your actions. 

Closing the Gap: Enhancing Organizational Strategy

Conducting a gap analysis is essential to effectively pinpoint weaknesses within your company. However, for this analysis to be successful, it's crucial to include a comprehensive assessment of oversight and readiness capabilities within your organization. 

This approach helps uncover critical gaps in processes and documentation, potentially revolutionizing your organizational strategy. This method allows you to dig deeper than surface-level issues, addressing root causes of inefficiencies and bottlenecks. As a result, you can significantly enhance your efficiency in closing gaps and achieving goals.

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How to Solve to 5 Major Gaps in U.S. Hydropower Supply Chain

A new report from the U.S. Department of Energy makes actionable recommendations to address five gaps in the domestic hydropower supply chain.

The U.S. Department of Energy (DOE) today released a report that makes actionable recommendations to address five gaps in the domestic hydropower supply chain. Hydropower makes up about 27% of renewable electricity generation in the United States and is an important component of the nation’s goal of achieving a 100% clean electricity sector by 2035. A robust domestic supply chain is critical to support new construction and upgrades, refurbishments, and relicensing activities at existing hydropower facilities. The new in-depth report, titled  Hydropower Supply Chain Gap Analysis , considers various sectors of the hydropower supply chain, from mining and extraction to installation and construction.

“As more variable renewable energy sources like solar and wind are incorporated into the U.S electricity grid, hydropower will play a key role in keeping it reliable and stable,” said Jeff Marootian, Principal Deputy Assistant Secretary for Energy Efficiency and Renewable Energy. “These new recommendations will strengthen the domestic supply chain needed to enhance our nation’s hydropower capabilities.”

Drawing on  feedback from hydropower industry stakeholders  gathered by DOE’s Water Power Technologies Office (WPTO), researchers identified five major gaps:

• Unpredictable and variable demand signals for materials and components.  In general, hydropower systems have exceptionally long lives (e.g., 30–50 years), so replacements and refurbishment schedules have cycles that are years or decades.
• Severely limited or nonexistent domestic suppliers for materials and components.  Only one or two—or in some cases, no—domestic suppliers exist for materials and components.
• Federal contracting procedures and domestic content laws.  There are several procurement regulations and/or general practices that inhibit the development of the domestic hydropower supply chain.
• Foreign competition, foreign subsidies, and ineffective trade policies.  Discussions with companies in the hydropower industry highlighted inequitable competition from foreign companies and ineffective trade policies as issues in the hydropower supply chain.
• Shortage of skilled workers.  Hydropower manufacturing and upstream support industries suffer from a significant lack of expertise in the workforce. As these industries have been offshored over the last 40 years, skilled workers have retired or moved to other industries.  

To address the gaps in the domestic hydropower supply chain, the report recommends to:

• Lead with the federal fleet to prime the development of an aggregated, consistent demand signal.  Nearly 50% of the domestic hydropower fleet is federally owned. The potential demand signal from new federal facilities and refurbishments can be significant. Federal procurement processes should be evaluated to ensure that they are effective in developing the domestic supply chain while obtaining the hydropower and pumped storage hydropower equipment and services the federal fleet needs.
• Increase awareness of the domestic supply chain through the development of databases of domestic manufacturing and installations.  Developing tools to predict demand is another way that WPTO can help both the federal and private fleets. Tools currently in development or undergoing enhancements include a database of domestic suppliers along the hydropower supply chain and a tool that allows users to see data (e.g., size, turbine type) on individual hydropower generation units.
• Work with other low-carbon technologies industries to create a significant, steady, and predictable demand signal for common materials.  While the demand from the hydropower industry is in the billions of dollars annually, it is not sufficient to build out a domestic industry, especially in the material and component sectors.   However, many of the components and materials used for hydropower systems (e.g., transformers and electrical steel) are also used in other clean energy technologies, such as wind energy, and for upgrading the electric grid. Industries such as ship manufacturing and defense supply chains also have commonalities with hydropower. These industries can be leveraged so that the aggregate demand can address gaps in their respective supply chains.
• Continue workforce development efforts.  There are few low-carbon energy technologies that have as  significant of a gap  in educational programs as hydropower. In addition to expanding academic programs, there are also a vast array of experiential-type programs that can help  raise the awareness of hydropower and its opportunities , including internships/fellowships/apprenticeships, experiential placements, job fairs, primary and secondary school competitions,  collegiate competitions , programs that place veterans and other unique workforce segments, and more.

These recommendations incorporate feedback from industry stakeholders and will guide DOE’s strategies to strengthen the domestic hydropower supply chain. With a more robust understanding of existing and required domestic hydropower manufacturing capabilities, DOE can better define the market for planned rehabilitations and new construction. These recommendations can inform policies, incentives, loan programs, and technology investments to encourage domestic content. Further, the identified gaps and recommendations can help focus DOE’s workforce development efforts in areas that will also support the domestic hydropower supply chain.

The  Hydropower Supply Chain Gap Analysis  builds on the  Hydropower Supply Chain Deep Dive Assessment , part of a series of reports produced in response to Executive Order 14017 “America’s Supply Chains.” This executive order directed the Secretary of Energy to submit a report on supply chains for the energy sector industrial base. It also aimed to help build more secure and diverse U.S. supply chains, including energy supply chains.

On Thursday,  Sept. 5, 2024, at 10:30 a.m. ET , U.S. Secretary of Energy Jennifer M. Granholm will join experts from WPTO, other government agencies, and the hydropower industry during a webinar about the  Hydropower Supply Chain Gap Analysis . Speakers will explore the gaps facing the U.S. hydropower supply chain along with the potential remedies.  Register now .

Courtesy of Department of Energy

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Money blog: Is this the end of the British pub?

Welcome to the Money blog, your place for personal finance and consumer news and tips. Read our deep dive into the demise of the British pub below - and we'll be back with live updates on Monday. As always, you can comment on anything we're covering in Money below.

Saturday 10 August 2024 09:21, UK

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By Brad Young , Money reporter

Mourning his mother's death and celebrating her life at the Old Neighbourhood Inn was the obvious choice for Martin Leach, 72, from Chalford Hill, near Stroud. 

The wood-beamed pub opposite his home had been woven into the fabric of the village for 150 years, so it made sense for 90 friends and family members to gather there in 2015 to say their final goodbyes to Nellie "Lilian" Leach. 

But seven years later, the village would say goodbye to the Old Neighbourhood too; its only pub shuttering its doors in a scene playing out hundreds of times over across the UK – and at an accelerating pace. 

"Entirely pissed off," said Mr Leach, when asked how he felt about the closure of the pub, which had once played host to local bands, mobile bakeries, artisan vendors and an affectionate black Labrador. 

"The pub was all that was left to represent that [village] community, and that's gone. And I think it's important to have that sense of community otherwise we just turn into a bunch of hamsters in cages."

Some 239 pubs closed in England and Wales during the first three months of the year, according to government figures – 56% more than in the same period in 2023. 

"There's a sense of death by a thousand cuts or 'what fresh hell is this?'" said Dr Thomas Thurnell-Read, a sociology expert at Loughborough University who has extensively researched pub closures. 

"Everything cumulatively is building up and that's why, sadly, there isn't a magic bullet for the problems in the sector."

Gen Z's changing habits 

Young people are more health and fitness conscious and more time-poor than their parents were, said Dr Thurnell-Read. 

The financial burden of university is rising, meaning students are taking part-time jobs and reducing the social time when drinking habits could form, he said. 

Freshers' week, once a party-filled gateway to three years of drinking, has become a box to tick and leave behind. 

"A generation of young people are finding other ways to socialise without automatically reaching for alcohol."

COVID played some part in this trend, said Dr Thurnell-Read. His students who started their degrees during social restrictions don't routinely go for big nights out or spontaneous, post-lecture pints. 

Between 2011 and 2022, the proportion of non-drinkers increased from 16% to 19%, according to Drinkaware's analysis of NHS data.

It's a trend driven by 16-24-year-olds (26%) and resisted by adults aged between 55 and 64 (14%).

Less cash, more alternatives 

"The younger generation don't drink as much. That's definitely a noticeable thing, but I don't think anyone really does any more. I don't really see the culture of when people used to go out and drink – like properly drink," said Simon Goodman, 44, owner of the Duke of Cumberland Arms, Henley.

The publican, who has been in the industry for 18 years, said that trade between the start of the year and the start of summer was "the quietest I have ever seen it". 

"People just weren't around. It's very bizarre after being in the business like this for so long."

The public have little money left over after paying their bills and more places to spend it, said Tom Stainer, chief executive of the Campaign for Real Ale (CAMRA). 

This was a trend that began in 2003, when the Licensing Act gave new types of venues the right to sell alcohol, not just pubs and clubs. 

Now the cost of living crisis looms large. One in five people who would usually go weekly to pubs and restaurants said they were doing so less often in a survey by consultancy firm CGA in April.

At the same time, skyrocketing rents and mortgages have led to a squeeze on leisure time, with people spending longer commuting in order to afford homes in cheaper locations, added Dr Thurnell-Read. 

"The big shift I think has been home entertainment. One of the other effects of COVID was it showed everyone how easy it was to get just about everything delivered to your front door," Mr Stainer said. 

This is a setback profoundly familiar to the manager of the Queen Inn, Great Corby, in Carlisle, which closed on 30 June.

Punters thinned out because they had a "vast amount of options at their fingertips" at home and supermarket alcohol was significantly cheaper, said Katie Wilkinson.

"It's a big shame," Ms Wilkinson said: "It means the village won't have a pub anymore and a lot of people rely on coming in each night for that social aspect."

She said this was particularly important for older people: "They see each other every night and now they won't.

"I think as we move forward more and more smaller village pubs will be closing."

The real estate incentive

As pubs become less profitable, companies that own the land are knocking them down to cash in on the real estate value "time and time again", said Dr Thurnell-Read.

"Pubs are being closed against the will of the people who run them and often against the will of the community who need them."

One of those community members is Tricia Watson, who moved to Chalford Hill, Stroud, as a new mum and used the Old Neighbourhood as a hub to connect with other parents. 

Now a Stroud district councillor representing the area, she has joined a campaign group fighting to stop the landlord's plans to convert it into a residential property. 

The Old Neighbourhood has been deemed an asset of community value under the 2011 Localism Act, meaning local groups like the Chalford Hill Community Benefit Society must be given time to make a bid to buy it for the community. But, ultimately, the owner can reject it. 

"The asset of community value regulations are absolutely toothless. So any community that wants to keep their pub going is at the mercy of the markets," she said, adding the site is worth £300,000 more as housing than as a pub. 

Without outside support, community efforts to purchase closing pubs have a success rate of less than 10%, according to the Plunkett Foundation, a charity promoting community-owned businesses. 

"Sadly that picture is very recognisable," said CAMRA's Mr Stainer. "It was recognisable pre-COVID and COVID has accelerated the process."

He added: "I think a lot of property owners are being tempted to take the fast buck."

Pub companies often finance buying pubs in such a way that they need to make big returns to service the debts, which can either be done by raising rents or selling off parcels of land, he said. 

"It is the tenants and the pubs that suffer because they are the ones that get chucked out of their business and often their homes."

'Daily struggle' of doing business 

The last four years have been "incredibly intense" for the industry, said Emma McClarkin, chief executive of the British Beer and Pub Association (BBPA). 

She lists off some of the "thousand cuts" Dr Thurnell-Read was referring to: the pandemic, war in Ukraine, pressures on supply chains, the energy crisis, cost inflation and customers who are far worse off than they were 2019.

Mr Goodman, of the Duke of Cumberland Arms in Henley, lists the impacts of these wounds: "The price of food, alcohol, wages, electric, gas - it's never ending." 

He said: "It is definitely the trickiest the industry has ever been I think. It is a daily struggle."

Food costs in particular have been "insane since the beginning of the year", rising by at least 15%, and in some cases doubling since 2019.

And they are completely unpredictable: "The prices can just change overnight, quite drastically as well."

It's not just food. Despite wholesale energy costs easing, Ofgem research published in March found 88% of hotel and catering businesses were still concerned about the impact of energy prices on their business. 

Fixed energy contracts have come to an end at five Cornish pubs run by Chris Black and his husband Jason, who face new tariffs costing 25% to 50% more.

"Pubs are not particularly energy efficient. I think that can be a massive factor in where money is basically being wasted quite easily," said Mr Black, 39.

He went on to echo an argument being made across the industry: while world events may not be in the government's gift, taxation is, and pubs are being "overly taxed". 

"I don't think there has been enough done to support pubs and that's evident in the number of pubs that are closing," he said. 

Alcohol duty, a tax levied on booze, is worth approximately 54.2p in a pint of 5% ABV draught beer (38p in a 3.5% pint, 75.9p for 7%).

Food and drink served in pubs is also subject to 20% VAT (though this was reduced to 5% and 12.5% at different stages of the pandemic). 

Pubs contribute 2.5% of all business rates collected by the government, but generate 0.5% of total business turnover, which CAMRA and the BBPA argue equates to a £500m overpayment. 

Taken together, Ms McClarkin estimates £1 in every £3 goes "straight to the tax man". 

COVID loans hangover and WFH 

During his research, Dr Thurnell-Read was told by many publicans they could have survived COVID or the cost of living crisis – but not both. 

The term perfect storm is overused, but for CAMRA's Mr Stainer, it's the only appropriate description. 

The pandemic burned through pubs' savings and forced them to take on more debt, just before the cost of energy and ingredients rose dramatically and the amount of money customers had to spend plummeted. 

Now, loans taken out and rents deferred during COVID are being called in, said Mr Stainer. 

"Many pubs have survived COVID but maybe are in danger of not surviving the long-term effects of the lockdown."

Introduced in March 2020, the Coronavirus Business Interruption Loan was a scheme whereby the government would encourage banks to loan up to £5m to businesses by guaranteeing 80% of the money and paying any interest or fees for the first year. 

"It is definitely a contributing factor to these failures, the inability to be able to pay back these loans," said Ms McClarkin, of the BBPA.

She said some smaller brewers had gone into administration because they "simply cannot pay them back". 

Loans aren't the only COVID hangovers facing pubs, according to Ms McClarkin: "Working from home culture has definitely damaged the pub sector, to the point where some pubs simply don't open Monday, Tuesday."

The pub lunch has dwindled in cities and big towns, and some establishments are choosing to close early on weekdays and open earlier on weekends, she said, as customers switch to less frequent outings. 

Fewer, more costly staff

Staffing has been a problem since Brexit, says Jane Pendlebury, chief executive of the Hospitality Professionals Association (HOSPA). 

She explained the end of freedom of movement has made it more difficult to find staff - and choose the right ones. 

"The friendliness, the smiles, charm, the willingness to pour a drink or deliver some food with a smile on your face will take them [pubs] a long way, but... if you can't get the right staff then you're not going to be delivering that." 

Minimum wage increases, while great for workers, have added to the outgoings for struggling pubs, she said. 

April's increase (£1.02-£1.26 more per hour for each employee) will see the sector's salary bills rise by £3.2bn, according to trade body UKHospitality. 

"People's wages have gone up, and that's absolutely acceptable and they should go up, but when it all adds up in this industry, when do you start going out and you're paying over £50 on a steak?" said Mr Goodman, of the Duke of Cumberland Arms. 

Cornish publican Mr Black said: "We've run a lot tighter on labour to try and keep the cost down because labour costs can be real money down the drain if you've got too many staff on at the wrong times."

Exhaustion 

For HOSPA's Ms Pendlebury, it's important to remember pubs are run by people – and they have a limit. 

"People that run pubs, own pubs, are just exhausted. 

"They were enormously under pressure [during COVID] and then as the guests came back, they were more difficult to deal with because their expectations were so high.

"So I think they are at their wits' end."

It's the smaller, more independent pubs that are closing, she said.

The scale of pub companies means more favourable borrowing rates, supply-chain priority and better value for money when bulk buying stock like menus, cutlery and loo roll, she said. 

They may have their own property managers – rather than more costly local tradespeople - and staff to manage their online reputation. 

"If it's all chains then we would, probably, ultimately lose some of our character as a country," said Ms Pendlebury.

It's not all bad

Walk across the River Ver, St Albans, north of London, almost 1,000 years ago and you would have seen the same building where Ronan Gaffney serves pints today. 

Pop into Ye Olde Fighting Cocks for an ale 400 years ago and you might even have bumped into Oliver Cromwell, who was said to have spent a night at the inn during the mid-1600s.

But centuries of history could not save the pub in February 2022, when the Fighting Cocks, the only inn to be officially recognised as the oldest in Britain, closed (though this was a title so disputed in the industry that Guinness dropped the category entirely in 2000).

Mr Gaffney, 27, and his colleagues lost their jobs in the pub where he – and generations before him - bought his first pint. 

But this isn't the story of another lost community asset: the pub reopened two months later, and Mr Gaffney was there to welcome the community back – with a promotion. 

The establishment's manager and head chef had banded together to take over the lease with a third business partner.

"It was super rewarding being able to reopen the doors and have been back in," said Mr Gaffney, now general manager.

"It was lovely to see the local community come in and say they're glad we're open again. A lot of people do have a lot of memories in this pub."

The pub is now in a much for comfortable position, though they must remain "very cautious on a daily basis", he said. 

He put its success down to attention to detail, big events, pricing and luck.

Bars can't get by on day trade anymore: birthdays, weddings and other large bookings are essential, he said.

"That is definitely one thing that our pub is not only very good at, but we're also almost reliant on it for a certain amount of our turnover."

Unless your pub is next to a train station, food is a must: "Being a simple boozer any more doesn't really seem to exist." 

He said he pays close attention to how staff are trained, products are bought and prices are set.

A lot of alcohol and food will return very slim – if any – margins, so you've got to make up for it on soft drinks, crisps and nuts, he said.

The same applies to the low and no alcohol products that have become so popular among younger people as they steer away from heavy drinking.

"It was quite strange," said Mr Gaffney. 

"It's not too rare for a pub to close or reopen these days, but it was quite rare to be able to be on both sides of that."

By Daniel Binns, business reporter

On Monday, stock markets around the world plummeted amid fears the US might slump into recession.

The UK's FTSE 100 closed down more than 2%, its worst day since July 2023. In the US, the S&P 500 index slid 3%, while Japan's Nikkei 225 plunged more than 12% - its biggest fall since "Black Monday" in October 1987.

It followed US jobs data, which came in much lower than expected for July, sparking fears of a recession in the world's largest economy.

If a recession was to play out (and that's a big if) there would be consequences around the globe, many negative but not all...

Concern over the strength of China's economy and several weak earnings reports from major tech firms added to the jitters, but from Tuesday onwards  stock markets started to slowly recover , making some gains as investors' worries calmed.

This was given further momentum on Thursday with the release of more jobs data - this time US figures showing a bigger-than-expected drop in jobless claims, alleviating - though not ending - fears of recession. 

More official US data on areas such as jobs and inflation in the coming months will help us get a better idea about the state of the country's economy and whether the recession worries this week were an over-reaction – or bang on the money.

The recovery in the stock market came as the pound's value also began to slowly climb back over the week.

It had dipped after an interest rate cut from the Bank of England last Thursday.

Generally, higher interest rates tend to attract foreign investors looking for more return on their money - lower rates are unappealing and can decrease a currency's value.

On Monday,  £1 could buy you $1.2811 or €1.1677 before its value against both fell.

But by Friday afternoon, Sterling had managed to climb back up to $1.2755 – not quite a full recovery but much better than its lows earlier in the week. 

It means those heading to the US will now get less buck for their bang, compared with if they had exchanged their cash last week.

However, the pound's strength against the Euro on Friday was almost back to where it was at the start of the week, valued at €1.677 by the markets. So those who exchanged money during the week may have got worse exchange rates, compared with those who waited until this weekend.

Several readers got in touch to ask how a US recession might impact exchange rates and holiday money - we took a look here...

The picture could be changed again next week when a few significant economic moments will play out in the UK.

Jobs data on Tuesday and inflation figures for July on Wednesday will provide an updated sense of where we've got to in the cost of living crisis - and likely impact expectations for the direction of interest rates.

We'll also hear how the broader UK economy is doing with quarterly GDP figures on Thursday.

As always, we'll have everything you need to know here in the Money blog.

Each week we feature comments on the stories you're talking about.

Our Bring it Back feature this week looked at Cadbury's Spira, which back in the late Eighties featured six hollow tubes allowing discerning chocolate fans to use them as a drinking straw for hot drinks.

While many mourn its disappearance, one reader pointed out there are alternative chocolate bars for dipping...

RE: Using confectionary as a drinking straw. You have clearly never heard of using a Twix. Nibble off a small amount at either end - then dip one end into very hot tea and suck hard. It's like dunking a Twix from the inside out. Highly recommended - and no mess lol.  Paul C

Other readers commented...

Not a question, more a statement, please continue this worthwhile crusade to BRING BACK THE SPIRA. Thanks. Razor

Hi Bring it Back team, can you please ask Heinz to bring back Toast Toppers. Their posts on Facebook are always full of people begging them to bring them back and I think there are three petitions online but as yet no joy. Can you ask them please? Lovetoast

Good news, Lovetoast - we'll be focusing on this next week. 

More comments came in...

The greatest ever chocolate bar was the Cadbury's Fuse. I recall my wife, when we were courting in our youth, telling me in the mid-90s that a Cadbury's representative came into the Spar she was working at and said: "It is more than just a chocolate bar, it's a full meal." Shaun Fielding

Campbell's need to bring back condensed pea soup - think about vegetarians. I used to live on pea soup, then they decided to put ham in it. No other pea soup will do, they just don't taste the same. I have tried ordering it online but it has been discontinued.  Mandy63

Brannigans beef and mustard crisps were and still are the best I have ever had - there is not a crisp out there today that comes close in flavour. Mr S

Mr S, we're looking into this one too.

Burtons fish and chips. A wee packet of savoury biscuits. Currently available in salt and vinegar, but not in the original fish and chip flavour. A favourite of tuck shops and much loved by 1970s school children. Ruth Currie

Bring back the Aztec bar. Best bar ever. Young people have no idea just how short-changed they are with mediocre chocolate bars. Cadbury Marvellous Creations? What a load of rubbish!! RuthiePuthie

They need to bring back white Maltesers! I could never get enough of them, so much so I've not had a Malteser since! CEdwards

Walkers crisps. Bring back the small bags of your discontinued (last year) Worcestershire sauce flavoured potato crisps. It was, and always will be, Walkers' best flavoured crisp. R. Lyon

Please bring back Kellogg's Puffa Puffa Rice, best cereal ever!! I used to eat this cereal morning, noon and night. It tasted delicious! I really wish they would bring it back Doglover

Bring back the Pyramint! Dark chocolate shaped pyramid filled with mint flavoured fondant. Made by Terrys. Yum!!! JessElizabeth

Bring it back: Ketchup Pringles! They are the most delicious Pringles and other countries sell them but can only get them imported here very expensively. They should stop creating all these weird flavours and bring back the best one! Sooty

We need to bring back the Cabana Bar - a mix of coconut, cherries and caramel wrapped in chocolate. A treat that this generation are sadly missing out on - Bring it Back! Please. Gillian Mackay

Bring back Pacers! A bit like the shape and texture of Star Burst (previously Opal Fruits) but minty with white and green stripes! Never could understand why they stopped making them! LorWil

Cadbury should bring back the Secret bar. Very fond memories of being sent to the local shop to get one for my mum and then having the last bite. Francesca D

PLEASE can you harass the hell out of whoever has the power to bring the Secret chocolate bar back? It was so unique! Help a girl out (With many thanks). SecretAgent

I'd love to see the Texan Bar brought back. It was like a big Chomp and I loved it. Also, Cowan's Highland Toffee was another favourite that I don't think you can get anymore. And Riley's Toffee Rolls too, which were a bit like Eclairs but chewier! LupusAquatica

The Money blog is your place for consumer news, economic analysis and everything you need to know about the cost of living - bookmark news.sky.com/money.

It runs with live updates every weekday - while on Saturdays we scale back and offer you a weekend feature, a round up of what readers have been saying this week, and an overview of the biggest news.

Check them out this morning and we'll be back on Monday with rolling news and features.

The Money team is Bhvishya Patel, Jess Sharp, Katie Williams, Brad Young, Ollie Cooper and Mark Wyatt, with sub-editing by Isobel Souster. The blog is edited by Jimmy Rice.

ScotRail and Caledonian Sleeper staff have voted in favour of a walk-out in an ongoing dispute over pay, the RMT union has said.

Union members at the two publicly owned rail operators were separately balloted for strike action following a pay offer that was described by the union as "derisory".

Bexley has topped the list as London's cheapest area to rent .

The average rent in the southeast London region is £1,297 per month, a study by  BLG Development Finance and Online Marketing Surgery  found.

In second place is east London's Havering, with an average rent of £1,350 a month.

The most expensive average rent is in Kensington and Chelsea, with renters paying around £3,322 a month.

A secret advertising deal was struck between Google and Meta to boost Instagram's users, according to a Financial Times report . 

Google had worked on a marketing project for Meta aimed at targeting 13 to 17-year-old YouTube users with adverts promoting Instagram. 

That's despite Google's rules prohibiting personalising and targeting adverts to under-18s. 

Google has since cancelled the project after being contacted by the FT and investigating its claims.

The chocolate maker is giving customers the chance to star in one of its classic ads from the last 200 years with the use of AI.

As part of the AI-powered tool, users will be able to upload a selfie and select their era from one of seven Cadbury ads. 

Users can also select how they would like to be represented and the AI technology will then recreate their image.

Those who do give it a try will automatically be entered into a prize draw to win £200.

The My Cadbury Era campaign is being launched by the chocolate company's agency VCCP London to mark Cadbury's 200th anniversary this year. 

You can find out more here ...

Free Jude's ice cream is being offered for John Lewis reward members this summer.

Shoppers looking to indulge will be able to get one for free at The Place to Eat if they join the retailer's loyalty scheme .

The offer comes as a short-lived but intense spell of hot weather prepares to hit the UK this weekend, with temperatures expected to reach 33C in parts of the country.

The offer is valid until 27 September.

Eagle-eyed shoppers have noticed Heinz Ploughman's Pickle appears to have disappeared from supermarket shelves. 

The popular condiment might have been a favourite for your cheese sandwich, but there's bad news - Heinz has confirmed the product has, in fact, been discontinued. 

Concerned customer Sarah-Ann asked this on Twitter...

To Sarah-Ann's disappointment, Heinz replied: "Thanks for your message. Sorry to say but this product has now been discontinued."

So, is this one that should be brought back? 

We've been running a weekly series called Bring It Back where we look at the discontinued food items that you want back on our shelves. 

Here are the ones you've been calling for so far... 

Teachers and school support staff can now apply for a Blue Light discount card - but the sudden surge in demand has caused the official website to temporarily crash. 

The Blue Light card is a discount provided to emergency services, NHS workers, social care staff and members of the armed forces, and provides thousands of offers and discounts online and on the high street. It costs £4.99 to register for two-year access to more than 15,000 offers from large national retailers and local businesses. 

But it seems demand was so high, with teachers rushing to grab the card, that it promptly crashed the website.

"Due to the high demand we've seen over the last 24 hours we experienced some issues with our website and app," the organisation wrote on X. 

"Please accept our apologies for this error. We are in the process of refunding any duplicate payments and you should receive an email in the next 24 hours with more information." 

However, the move to accept teachers into the scheme has been met with some criticism. 

One A-level maths teacher wrote: "I'm not sure how I feel about this. Teaching can be hard, but we're not an emergency service, and our work isn't really in the same category as "blue light" jobs. If they're going to widen the eligibility criteria, it needs a name change, at the very least."

Another X user wrote: "This is precisely why fewer and fewer businesses accept the BLC. You really ought to rebrand to something like 'Key Worker Card'. The majority of jobs which meet your eligibility criteria are not 'blue light' roles -- the name 'BLC' is misleading now." 

But Blue Light Card hit back, saying: "Teachers are not just educators; they are mentors, guides and inspirations that are helping shape the future for our children. They are fully deserving members of our blue light community." 

What kind of offers can a Blue Light card get you? 

Among the offers is 12% off at Fenty Beauty and 15% off at Bose. 

Users can also get a £30 gift card if they spend more than £1,000 at British Airways or a £110 voucher if they sell their car via Carwow. 

Or if getting fit is more your thing, you can get 50% off an annual subscription to the Body Coach.  

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