Types of gap analysis: What’s your type?

There are so many aspects to running a business. There are also endless challenges, obstacles, and things that can go wrong. Often, these prevent the business from reaching its goals.

Luckily, there’s a business management tool that’s flexible enough to tackle just about every type of problem — gap analysis.

A gap analysis asks three questions:

1. What is the current state of the company?
2. What is the desired goal?
3. What is missing that can help us reach that goal?

There are several gap analysis methodologies designed to answer these questions in one way or another. But the great thing about gap analysis is that you can adapt it and use it for just about every aspect of business management. It’s simply a matter of choosing the right type.

Strategic or operational?

Gap analysis broadly falls into two categories: strategic and operational.

Strategic gap analysis looks at the gaps in business planning. For example, the finance manager runs a gap analysis of Q2 sales targets:

• What’s the closing rate today, and is it enough to reach the goal by the end of the quarter?
• What tactics could the organization use to achieve the target?

The focus here is clearly on strategies to meet the sales target, rather than the processes you might use to actually get there.

Operational gap analysis examines a specific project or process in execution. Imagine that a company has a poor employee retention rate after training new recruits. What’s going wrong in the onboarding process to turn staff away? This is an operational matter, and the gap analysis helps pinpoint what’s missing from the processes already in place.

Types of gap analysis: Made to measure

Now let’s drill down further and consider the specific types of gap analysis and how you can apply them in a business setting.

Product or market gap analysis

It’s a sad fact that 95 percent of products fail once they hit the market.

A product might not take off for a whole host of reasons, and a gap analysis is a good way to spot issues before investing time and money in a doomed product launch.

A product gap analysis, also known as a market gap analysis, assesses the state of the market, the readiness of the target market, any competing products, and the activities of competing companies. It helps identify gaps in the product’s features, branding, launch plan, and promotional activities, so the company can leverage real opportunities in the market to the max.

HR/recruitment/skills gap analysis

Human resources is a company’s most valuable asset. HR activities, such as recruitment, health and safety, employee training, wellness, and social programs, can make a huge difference not just to staff morale but to the business’s bottom line.

Gap analysis is a popular tool among HR managers to refine and improve their departmental processes. One example is a skills analysis.

Before starting a new project, management can use a skills analysis to help pinpoint what capabilities are lacking among the current pool of staff and what skills are necessary to reach the project goals. Once you identify these, you can make appropriate and cost-effective decisions as to how to fill the skills gap — whether that’s to hire a new employee or outsource to a supplier.

Needs gap analysis

A needs gap analysis is similar to a skills gap analysis — but it takes a wider look at everything a company needs to reach a goal, not just staff skills. What resources do you need? Equipment, knowledge, budget, regulatory compliance?

There are no rules; you can and should take into account any resource necessary to fill the gap between the current state and the future goal with a needs analysis. It could be as big as a new regional office or as small as extra coffee supplies for overtime shifts.

Performance gap analysis

There are so many ways that business performance can fall short, including sales, new customer acquisition, customer retention, and project performance. A performance gap analysis examines today’s performance and compares it to the projected results if current performance continues.

You can then develop an action plan to shift performance to the necessary trajectory. For example, if your company sets a goal to acquire 100 new customers over the next two months, a gap analysis at the one-month mark can help you adjust the strategies to boost performance in the second month and reach the final goal.

Healthcare gap analysis

The modern healthcare industry is a maze of complex relationships and data, including HMOs, insurance companies, hospitals, clinics, doctors, and patients. What’s more, competition is stiff. In order to stay in the game, healthcare providers have to work hard to meet regulatory standards like HIPAA while delivering excellent patient care.

A wide range of health organizations — global health bodies like the WHO, state hospitals, and private health companies — use gap analysis to make sure they are constantly working toward their goals. For example, gap analysis can help healthcare companies identify which third-party suppliers have access to patients’ protected health information (PHI) and must therefore sign a business associate agreement (BAA) according to HIPAA rules.

IT gap analysis

IT is a huge expense for companies, and achieving the best possible return on investment (ROI) is crucial. Identifying software that your team barely uses, reducing staff costs with software automation, and improving IT troubleshooting request processes are all examples of the way you can deploy IT gap analysis to reach your efficiency goals.

Financial gap analysis

Gap analysis of financials is an excellent way to assess where the company currently stands and where it wants to be — and you don’t need a tool more complex than a spreadsheet to do it. Financial gap analysis can look at any financial goal, such as sales targets, resource ROI, budget reduction, and much more.

Retail gap analysis

The retail industry can easily adapt gap analysis methodologies to help retailers understand market gaps and create an action plan to fill them. For example, a clothing retailer can use gap analysis to assess a new regional market before launching there.

The retailer can also examine the sales performance of different products and pinpoint why a product line may not be selling as forecast. Bottom line: a gap analysis is an excellent template to assess the fundamental question in retail — supply versus demand.

Stop the gaps

These are the types of gap analysis at your fingertips. Choosing the right one will depend on which goal your business is aiming for and what gaps might be getting in the way. Once you’ve decided on the type of gap analysis that’s best for you, you can select the right gap analysis tool. Then, the work of closing the gaps and reaching your business goals can begin.