Gap analysis: Guide with templates and examples

For a business to succeed, it must be as good as or better than the competition. But it’s not just about outperforming competitors. It’s also about improving the organization’s internal processes. When a company constantly challenges itself to be all it can be, it unlocks the secret to growth and profitability.

Imagine that a fashion brand is releasing a new collection. The marketing team has put together a promotional campaign. Meanwhile, the sales team is working on distribution partnerships with several retailers to help boost market share in a new region. Both of these activities are aimed at the same thing: meeting the sales revenue goal.

Now imagine that the team’s efforts were so successful, they generated 10 percent more sales than the original target. This is the kind of result business managers crave, and a gap analysis is one of the tools that can be used to achieve such success.

Gap analysis methodology: What is it?

Over the years, the field of business management has become more complex. There are so many theories and methodologies that come with the territory. But at the end of the day, you don’t need an MBA to do a gap analysis.

Nevertheless, having a basic familiarity with the methodology of gap analysis is helpful, as it frames the landscape of what you’re setting out to do and why.

What gap analysis methodology involves is asking a common-sense question — what do we need today to meet tomorrow’s goals? — and answering it with an actionable plan.

As mentioned earlier, there are two broad categories in gap analysis methodology: strategic gap analysis and operational gap analysis. One focuses on the planning and performance side of the business; the other focuses on analyzing how the company is executing those plans and strategies.

Gap analyses can look inward at the company’s internal processes or outward to the market or competitive landscape.

Internally focused gap analyses can focus on business performance, IT or resources, staffing, or financials. An outward-focused gap analysis might look at the market, such as competing brands or products. A gap analysis can also include both internal and external factors. One example is a financial gap analysis that assesses internal financial processes as well as issues related to wider economic trends.

How to conduct a gap analysis

Conducting a gap analysis may seem complicated, but the methodology is based on fairly simple principles. A gap analysis can get tricky when you’re assessing complex projects or activities with processes, goals, and purposes that are multifaceted or somewhat unclear.

That’s why the first thing to do if you think you need a gap analysis is to pinpoint the framework you want to assess. What aspect of the business seems to be underperforming? Are you receiving too many complaints from customers? Is there an overflow of customers returning a specific product? Is your sales team underperforming and you can’t quite figure out why?

These are all examples of frameworks that suggest a need for a gap analysis. Without this, the gap analysis won’t be focused and is destined to fail.

Once you’ve determined the apparent gap between what you’re doing now and the company’s future goals, you can get started on the work of the gap analysis.

What are the key gap analysis steps?

Overall, the gap analysis steps cover point A (today’s performance), point B (the business goal), and what’s missing in the journey between those two points.

Here’s what a gap analysis looks like in practice:

1. Assess the current situation

This is the time to take a cold, hard look at the current situation. Much of this work involves gathering quantitative information, such as business intelligence (BI) data, financial figures, reports, resources lists, and more.

This step also includes gathering qualitative information to provide a deeper understanding of the current data. This may mean having one-on-one conversations with employees or team meetings to get the staff’s perspective. Customer feedback or focus groups can also be helpful here, depending on the focus of the analysis.

If you’re assessing external circumstances, you’ll need to research the market and competitors. Depending on the scope of the gap analysis, this research can be handled in house or by a third-party research services provider.

2. Map the future goal

Once you’ve fully outlined the current state of the business, you can figure out the desired future state. Start by outlining the overarching goal, for example, “to become the local leader in the same-day supply of packaged lunches to schools in our district.”

This goal seems fairly specific and clear; however, there’s a lot to consider if you want to make it a reality.

There are local market forces at play, like competitors and market size potential. There’s the issue of human resources — how many additional employees would the company need to meet the goal? What would the supply chain need to look like to support this kind of growth? There’s also a legal perspective to take into account. How could you achieve this growth while meeting food safety regulations?

Mapping the future goal will demand input from many teams and departments to cover all the activities that determine business performance.

3. Measure and analyze the gaps

Now that you have the current situation and future goal defined in detail, it’s time to measure the gaps between them.

The ideal way to do this is with key performance indicators (KPIs) that are quantifiable and measurable. For example, the KPI (future goal) is to reduce the wait time on customer support calls by 40 percent. According to current performance, the wait time is down 10 percent. That leaves a 30 percent gap. This is valuable information. It lets you know exactly how far you are from achieving the goal and forms the basis to calculate what you need to fill the rest of the gap.

Remember though, a gap analysis can be far broader than just one KPI. There are often several goals and KPIs, and therefore several gaps that need to be identified and filled.

4. Create an action plan to bridge the gaps

When you’ve analyzed and quantified the gaps, you have the information you need to develop an action plan. This plan includes tactics and projects that will help to reduce the gaps moving forward.

Let’s go back to the customer service calls example. If wait times still need to be reduced by 30 percent to meet the target, you could hire additional call center staff or maybe redevelop the customer service scripts to make them more efficient. Both of these are examples of action items that may be included in the plan.

The action plan should be as detailed as necessary to properly demonstrate the gaps and how to bridge them. However, if there are many ideas or options for how to close the gap, you can outline them more broadly. There’s no need to invest time in developing full plans for every idea. Rather, once the most relevant action items have been chosen, you can fully flesh these out in a comprehensive project plan or document.

One of the most famous gaps talked about today is the gender pay gap. It occupies the time and resources of the world’s major international bodies, governments, and academia.

The gender pay gap is a perfect example of a current situation that isn’t meeting the desired goal or expectation. The purpose of the massive global conversation and numerous studies around the gender pay gap is to identify the difference in income between the genders and figure out how to rectify it.

Business owners are likely focusing on lots of different gaps, most of which aren’t as all-encompassing as the gender pay gap. However, the purpose of a gap analysis is always the same: reorganization of processes and systems to reach a future target.

What are the benefits of a gap analysis?

A gap analysis can have far-reaching effects in an organization, well beyond the specific process being assessed. The culture created by performing gap analyses can do wonders for the company as a whole. Here are some of the benefits you can expect:

Boost productivity and profits

A gap analysis has a direct impact on a company’s efficiency, which in turn affects the bottom line. By filling the gaps in work processes and staff performance, the overall productivity of the company will rise, and that translates to increased profits.

Help the company reach its true potential

Every company — even successful ones — can find ways to improve. By looking at what’s going on in the business right now, and analyzing how it’s falling short of its aspirations, the gap analysis can help a company fulfill its true potential and achieve unprecedented results.

Keep the company fresh and lean

Businesses must stay nimble if they want to seriously compete. The only way to do that is by constantly checking in on staff, processes, and activities. A gap analysis is an objective and focused examination of a company’s “hits and misses.” Its strengths, inefficiencies, wasteful practices, and smart use of resources are all put in the spotlight.

Annual performance reviews are necessary, but beyond that, how can a company identify its most pressing needs in real time? By conducting a gap analysis.

How businesses can use gap analyses

The benefits of gap analysis make it a popular and commonly-used tool in business management. Here are a few examples of the versatility of gap analyses and how businesses use them:

• Increasing sales. A gap analysis thoroughly assesses and properly adjusts the various factors and processes surrounding sales performance. This can be based on aspects like the competitor landscape, product pricing issues, sales team performance, sales training processes, and much more.
• Improving employee retention. If a company has high staff turnover, a gap analysis can help identify what’s causing dissatisfaction among staff and the methods required to change direction and achieve the desired retention rate.
• Investing in a little research and development (R&D). When a company is developing a new product, a gap analysis can be vital in identifying where to focus R&D investment to meet timelines and goals. It can show where the R&D budget is lacking and how funds can be reallocated to better serve R&D performance.
• IT security. A gap analysis can be extremely helpful in identifying security issues within a company and what needs to be done to meet stricter guidelines. The assessment covers not just the IT situation and needs, but also the resources and budgetary issues that arise.

A gap analysis is an effective tool for just about any business process or performance issue. It can work in a range of situations, as long as you stick to the basic methodology of gap analysis: where you are, where you want to be, and what you need to get there.

In rather shocking news, between 24 and 150 biological species are lost every day to extinction.

What’s one of the tools that can help slow down extinction rates and reduce the gap? Gap analysis — conservation gap analysis, to be precise.

Scientists and environmental specialists use conservation gap analysis to make recommendations about how best to protect threatened species in nature reserves and protected areas.

There are lots of different types of gap analysis, and each has its place and purpose, sometimes even beyond the boardroom or office.

Analysis of the gender pay gap, for instance, encompasses much more than the problem of salaries. It’s a social justice issue that affects millions of women, children, and communities worldwide.

The power of gap analysis is its adaptability. Whenever a goal isn’t being met — in the forest, in the halls of the United Nations, or in your business — conducting a gap analysis will make all the difference.

What are the types of gap analysis in business?

While gap analysis fits just about anywhere, it’s time to get back to business.

The types of gap analysis most often used in business cover a range of areas. Gap analyses can focus on the performance of people, processes, or strategies. They can also cover gaps in needs, such as resources, budget, and staff. There are specific gap analyses for different industries, including retail and education.

Here’s a brief rundown of some of the types of gap analysis you can expect to see in business management:

• Performance. Gaps in performance cover things like customer acquisition, sales, project execution, productivity, and more.
• Market. Market gap analyses include competitor activities versus your company’s activities, the differences between competing products, and assessing market opportunities.
• Skills. This type of gap analysis focuses on staff capabilities. How are your teams performing? What skills are lacking to achieve the business goal? What education or training could fill the gaps?
• Needs. A needs gap analysis takes a close look at things like resources, knowledge, budget, and equipment. For example, there might be missing data your team needs to reach a goal. It can also focus on a specific process, like how many more service reps you need to reach the target quota of resolved customer complaints.
• Retail. A retail gap analysis assesses the supply and demand situation in specific retail markets and regions. If a retailer aims to open stores in a new region or introduce a new product to existing stores, they’ll want to do a retail gap analysis first.
• IT. This kind of gap analysis involves an in-depth assessment of the efficiency and usability of the company’s IT resources. For instance, is there a particular process that could be automated with software to help reach the company’s goals?

There are lots of ways a gap analysis can improve the processes and performance of companies. Let’s focus on two specific scenarios: recruitment and healthcare.

Gap analysis in the recruitment process

Recruiting employees is expensive. Hiring the right people and keeping them satisfied is important, not just for the business’s bottom line, but for team morale too. Conducting a gap analysis in the recruitment process can help you identify where your process is lacking and what you need to do to make it more efficient and accurate.

Case in point: Finding candidates who match the company culture

In an ideal workplace, employees naturally fit in with the vibe of the company. This is not just a matter of their skills and experience, but also personality and lifestyle, which are much harder to quantify. However, with a thorough recruitment gap analysis, it’s possible to pinpoint even these areas.

First, assess the company culture and produce a detailed report of the key values and expectations. Then take a look at your current recruitment process and how it might not be attracting the best people. For example, the gap analysis may reveal that your HR team is attending the wrong job fairs or that your interview questions aren’t designed to properly weed out unsuitable candidates.

Gap analysis in healthcare

Any business owner in the healthcare industry knows just how complex the relevant laws and regulations have become. Keeping up with issues such as patient privacy is essential. In the United States, HIPAA regulations mean that healthcare companies have no choice but to ensure full compliance to avoid privacy breaches that carry serious penalties.

Case in point: Making sure all patient forms meet privacy regulations

We live in a digital, data-based world, and that makes patient privacy extremely complicated. Healthcare companies and medical clinics hold large amounts of patient data, such as health records, personal details, and payment information. This data is often collected from patients with the help of forms.

A gap analysis in healthcare can identify all the different patient forms that you use, such as appointment scheduling and health declarations, and which ones don’t meet HIPAA standards. If the problem is widespread, you may decide to switch to a HIPAA-friendly form builder tool so that all of your forms are automatically compliant.

Fill all the gaps

Any kind of gap in your business can be identified using a gap analysis. There’s almost no end to the ways that you can apply gap analysis.

Fishbone, SWOT, Nadler-Tushman, McKinsey 7-S. What do these have in common?

They are all gap analysis tools.

The concept of a gap analysis is fairly broad — when you assess the difference between where your company is today and where you want it to be. So it’s no surprise that tons of different methods and tools were developed to fit all kinds of gap analysis situations.

Bottom line? You don’t have to use a special tool for gap analysis. Even a spreadsheet is helpful to identify gaps in financial or other data-based processes.

There are many options out there and several ways to use them. At the end of the day, your gap analysis will be far more efficient and powerful with the help of a suitable gap analysis tool.

Gap analysis tools everyone’s talking about

Getting acquainted with the various gap analysis tools is a smart move for any business owner or manager. Here’s a look at the main gap analysis tools at your disposal.

SWOT analysis

No one is quite sure exactly when or where it was invented, but SWOT analysis is one of the most popular tools for understanding a business’s market position. It covers a company’s strengths, weaknesses, opportunities, and threats.

Some regard it as a more general strategic planning tool, rather than a method of gap analysis. However, it’s a versatile and proven way to gain a clear picture of a company’s current and future state. Find out more about gap analysis vs SWOT analysis in this article.

Fishbone diagram

This strange-sounding method gets its name from the way it looks — like a fish skeleton. The fishbone analysis is typically used to figure out problems and gaps in production processes, due to things like materials, man, machines, method, measurement and the environment. Mazda Motors even used the fishbone chart to develop the Miata/MX-5 sports car.

Nadler-Tushman model

This gap analysis tool is also known as the “congruence model,” and it’s designed to look at how people, organizational structure, company culture, and the work they do all come together to affect performance. It was developed by two organizational researchers in the 1980s and is one of the popular ways to assess the gaps between the inputs and outputs of a company, and why they happen.

McKinsey 7-S

Developed in the 1980s by two McKinsey consultants, McKinsey 7-S stands the test of time as a gap analysis tool for organizational effectiveness. Rather than focusing just on the organizational structure, it assesses the way different factors interrelate to produce results. So what are the seven S’s that affect organizational performance? Strategy, structure, systems, shared values, style, staff, and skills.

There are more gap analysis tools out there, and each is best for different uses and purposes. Finding the right one for your business goal is the next step.

No two gap analyses are alike. The gap analysis process has so many variables and can be applied in so many ways, each specific gap analysis will inevitably be unique.

A gap analysis can be intense and complex, from 20 to more than 100 pages, or it can be smaller in scope, focusing on a gap that’s resolved with only a few action items.

Because gap analysis is individual and case-specific, it’s a good idea to look at several real-world examples. Starting from complex gap analyses for government and banking institutions and moving to a more common gap analysis used by small to medium-sized businesses, here’s an overview of three gap analysis examples to inspire you.

Gap analysis example 1: An action plan for digitizing cultural and historic materials

The world is turning digital at an incredible pace, and that leaves governments and institutions with a big challenge: digitizing masses of cultural and historic hard-copy materials to ensure their preservation.

The Federal Agencies Digital Guidelines Initiative is tackling this problem head-on with the help of the Still Image Working Group. The task force is responsible for the digitization protocols and practices for heritage materials among federal agencies. It’s an enormous job that requires advanced technical capabilities, such as scanning, storage, and organization of millions of digital files, not to mention staffing and coordination within federal organizations nationwide and with external tech service providers.

The task force conducted a gap analysis to identify the various digitization needs — both current and future — and to prioritize those that require extra attention. What’s interesting about this gap analysis is that it was explicitly designed as a living document, which can be continuously added to and adjusted as necessary. Since digitization technologies are continually developing, this is a smart approach.

Gap analysis example 2: Helping a bank become more customer-centric

The modern banking industry is incredibly competitive, and that means banks today put customer service excellence at the top of their list. But it’s no longer about being the friendly bank on the corner. Many banks are global organizations trying to sell highly complex financial products in a market rife with competition and bound by stringent regulations. It has never been so difficult for banks to satisfy their customers.

That’s why a leading international retail bank hired Merkle to conduct a gap analysis and develop a road map to boost its direct marketing efforts with a more focused approach to customers’ needs.

The gap analysis followed the classic model. First, the analysis team did a deep dive to understand the bank’s current situation and competencies. That included a SWOT analysis. Then, they created a vision to support the bank’s marketing goals for a new consumer loan program. Next, they compared the current and future states and developed an action plan based on their findings.

And it worked: The budget for marketing the consumer loan program increased by 65 percent, and the program performance doubled!

Gap analysis example 3: Boosting a small business’s SEO strategy

Every day there are an estimated 3.5 billion internet searches. For businesses of every size, ranking high in search results is extremely important. It’s a key way to help customers find you in a virtual haystack and to increase awareness about what you have to offer.

And that coveted no. 1 position on Google search? If you land it, you’ll enjoy a 31.7 percent average click-through rate!

Getting on the top of Google search rankings isn’t easy, and it requires a top-notch SEO strategy. On the flip side, even small businesses can get great visibility with the help of SEO.

Smart Insights recommends that small businesses conduct an SEO gap analysis to find out where their SEO strategy is lacking and what’s needed to boost search rankings.

You don’t need sophisticated tools to conduct an SEO gap analysis. Just export your Google analytics and Google Search Console data to an Excel file, and you’ll have what you need to do an SEO gap analysis.

Of course, some knowledge of SEO is required. Hiring an SEO specialist is a great way to manage the gap analysis process.

There’s no one-size-fits-all approach in the gap analysis process. Every gap analysis has its own scope and purpose.

A quick look at gap analysis examples shows that there are many ways to personalize your process. However, the way you present your gap analysis will depend in large part on the details.

Does the gap analysis focus on data? Then a numbers-based report is what you need. Are you using surveys in your gap analysis? Perhaps a summary of the results in a Word document will be best.

One of the great things about gap analysis is its diversity. But that comes with a challenge. What’s the best way to structure and present the gap analysis? Here’s where the use of templates comes in.

Free Online Gap Analysis Template

Conduct a gap analysis on your business and work to achieve your goals with a free online Gap Analysis Template!

Go visual with your gap analysis

The basic flow of a gap analysis goes like this: current state versus future state and an action plan of how to get there.

Essentially, it’s the process of moving from one point to another.

That’s why a template can be helpful. A gap analysis template is a visualization of the current and desired situations, laid out in a format that’s easy to grasp. It may involve the use of diagrams, charts, or other design elements to make it visually interesting.

There are a variety of different gap analysis templates available online, covering all the different types of gap analysis. It’s easy enough to use a SWOT analysis template or create a needs analysis with the various online templates. They come in every form, including printable PDFs, Excel sheets, Word tables, and PowerPoint charts.

What appears on a gap analysis template?

In its most basic form, a gap analysis template must include the informational points needed to identify and rectify gaps in business:

• Current assessment
• Future goal
• Gaps between them
• Action items to rectify the gaps

In the example below, there’s an additional column dedicated to the notable issues and risks that can arise. Any gap analysis template should also include the specifications of the project or business area covered, as well as relevant dates.

Of course, gap analysis can go much further in scale and become incredibly complex and detailed. Gap analyses conducted by government bodies or large institutions can take up an entire book — and can take many months or years to complete. Take a look at this 91-page gap analysis report produced by the Arctic Centre at the University of Lapland for the European Union, which assesses the environmental impact on the Arctic region. A gap analysis template wouldn’t have worked here.

However, for most business owners, a gap analysis template provides a helpful structure, or framework, for a process that can easily grow in several directions.

Here’s another standard gap analysis template that uses a different presentation:

In this example, the basic informational elements are covered — current state, future state, gaps, and action items — but in a slightly different visual format. The use of color in gap analysis templates is important. It helps the viewer organize and digest the information quickly and easily.

The templates above are examples of basic, general gap analysis structures that can be adapted for any smaller gap analysis. Creating templates like these is easy. Download a template from your business management software or online template sites, or build your own template in Word or PowerPoint.

For all kinds of gap analysis in business — financial, sales, project performance, employee satisfaction, or customer retention — templates are a practical and cost-effective way of generating a powerful gap analysis that gets results.

Your business is constantly in flux, and there’s no such thing as perfect performance. There’s always room to improve and grow. If you can do that, then just about any goal can become a reality.

At its core, gap analysis is a simple concept. It’s a tool that describes the current situation and helps develop a plan to get your company where you want it to be. Knowing what you need to do to bridge that gap is the way to success.

Conducting an effective gap analysis can sometimes get complicated. As the scale of a business process or project expands, so do all the potential gaps that can arise. The beauty of gap analysis is that it’s based on a structure that expands to accommodate the scope of whatever you want to achieve. With the help of a gap analysis template, it’s even easier to manage a successful gap analysis, no matter how big or small.

There’s one question you must ask before starting a gap analysis: What is the best future for my company? Leave the rest up to the assessment process. Like a made-to-measure suit, gap analysis is a versatile, powerful, and efficient tool that will perfectly fit any company or goal.