What is gap analysis?

Gap analysis is used to assess a company’s current performance against what it wants to achieve. 

The analysis shows whether an organisation is living up to its business requirements and objectives. Gap analysis can be used to overcome any shortcomings by deploying the company’s resources more effectively.

According to the gap analysis definition, the ‘gap’ represents shortcomings that keep companies from attaining their most productive state.

Types of gap analysis

To further understand what gap analysis means, we need to consider the following steps of gap analysis.

What is the current state of the business? What does the business want to achieve? How can the business close the gap to achieve that desired state?

In looking at how to conduct gap analysis, work can be split into two categories: strategic and operational. 

• Strategic gap analysis

Strategic gap analysis takes a look at the company’s business planning and the faults or ‘gaps’ associated with it. It lays out possible areas of improvement to business operations, identifying key resources necessary for the firm to attain its desired state.

By way of a strategic gap analysis example, we could evaluate what changes a restaurant based in a small Italian town needs to make in order to attract tourists, not just its regular share of local clients. 

• Operational gap analysis

Operational gap analysis takes into account more details, such as a particular process that is being carried out by a business. 

An example of operational gap analysis would be if a company has a high rate of employee turnover. The firm would look for ‘gaps’ in its recruitment process and figure out how to reduce the high turnover rate. 

• Other categories and tools

These two broad categories of gap analysis can be further divided into several other types, such as product or market gap analysis, financial gap analysis, and performance gap analysis. 

There is no certain process to carry out a gap analysis. Companies may use one or several gap analysis tools. 

There are several types of gap analysis tools: SWOT (strengths, weaknesses, opportunities and threats) analysis; Program Evaluation and Review Technique (PERT); the Nadler-Tushman congruence model; the Fishbone diagram; the McKinsey 7-S model; the Burke-Litwin Change model; and more.