Gap Analysis: Definition, Examples, and How-Tos

Business success usually comes from being willing to change instead of remaining stationary. A gap analysis can help an organization determine what needs changing or improving. You can identify opportunities and shortcomings by looking at what’s going on compared to what you hope to accomplish. 

For example, a sales manager for a technology company expected their new product to produce $2 million in revenue during the first three months. Still, the actual sales number is closer to $1 million during that time frame. The manager performs a gap analysis in which she provides an anonymous survey to her sales team and discovers that they don’t fully understand the product, hindering their ability to sell it. Thus, she can identify the problem and implement a solution.

Explore the basics of gap analysis—what it is, how it works, and how to do one yourself.

What is a gap analysis?

Gap analysis provides parameters to help organizations evaluate their current state against a desired objective. Businesses might use gap analysis to evaluate time, money, labor, market share, or other performance areas and gauge whether the company meets expectations.

You might also hear a gap analysis described as a needs analysis. It helps determine what’s needed from point A to point B. Unlike risk analysis, which looks forward to anticipating what could happen, gap analysis examines the now compared to a target goal. You can develop an action plan to reach your full potential by defining and identifying any gaps.

Key components of a gap analysis

At its core, a gap analysis consists of three key components:

• What is: Captures the current state (e.g., what your business has achieved so far, what skills or resources you have to draw upon now) 

• What should be: Captures the desired state (e.g., what you hope to achieve, where you want to reach)

• Necessary actions: Considers how to get from here to there to fill any gaps you identify with the analysis as you get approval from necessary stakeholders to move forward with the plan

Gap analysis diagram

When brainstorming, organizing your ideas and action plans with a gap analysis chart can be helpful. You can customize this to your preferences, but one way you might choose to fill out a gap analysis chart is the following. 

Who uses gap analysis?

Gap analysis can prove useful in many contexts. While you might be familiar with a gap analysis in business contexts, you can use gap analyses in several other areas, such as the following.  

• The US Geological Survey uses gap analysis to map land conservation goals.

• Health care organizations might use gap analysis to measure their progress in reducing falls.

• Retailers might use gap analysis to identify their strengths for attracting customers in a local market.

• Marketers use gap analysis to assess the difference between expected market share and their achievements. 

• Individuals may even use gap analysis when looking for a job to determine whether they meet career qualifications or evaluate areas for improvement.

Pros and cons of gap analysis 

When deciding whether to use gap analysis, consider its advantages and limitations and decide which qualities are most important to you.  Knowing the pros and cons can help you decide whether it is the right approach for your needs.

Pros

• Invites participation from stakeholders

• Encourages collaboration within your workforce

• Develops a shared goal

• Helps align individuals

• Provides energy, motivation

Cons

• Needs persistence to complete

• Expert knowledge required to expose needs

• May not go deep enough to identify key problem

• May not be suited for long-term goals

• Can take a long time to implement the gap analysis process

• Results may be inaccurate

How to perform a gap analysis

You’ll encounter different approaches to gap analysis, but when beginning, you might consider following a straightforward, four-step process, which can help you build an efficient and effective analysis plan.

Step-by-step guide

Try these four steps to conduct a gap analysis:

1. Review the current state: Begin by researching where you stand right now. This could require surveying employees, asking customers for feedback, gathering quantitative data, reviewing financial filings, interviewing stakeholders, and more.

2. Identify the desired state: Think of your business's ideal state. What would it accomplish, or what is the goal? For example, you might envision selling 70 percent of current inventory in six months. 

3. Discover the difference: Compare the information gathered in steps one and two and collaborate with others to determine what’s missing, what barriers impact progress to the desired state, and where improvements are needed.

4. Make an action plan: Consider the gaps you discovered in the previous steps and then develop your plan for improvements based on those issues, ensuring your plan is detailed with clear objectives. Doing so will help you gain the support of everyone involved. Now, you attempt to close the gap between your current and desired state. Your company follows the steps in the plan to achieve the objectives and remove the gap.

Analysis frameworks to explore 

When you perform a gap analysis within your organization, you can choose from several models. These might include the following:

• SWOT analysis: This technique focuses on an organization’s strengths and weaknesses, business opportunities, and threats.

• McKinsey 7S framework: This approach works through seven key organizational aspects: strategy, structure, systems, shared values, skills, style, and staff.

• Nadler-Tushman congruence framework: This framework allows you to examine strengths and weaknesses in four main areas: work, people, structure, and culture.

• PEST framework: An acronym for political, economic, social, and technological, this approach helps you identify threats and opportunities by considering external factors. You might also add legal and environmental factors for PESTLE analysis.

Getting started in business strategy Coursera

Gap analysis is an important part of business strategy. Discover more about gap analysis and other business strategies on Coursera through the University of Virginia’s Foundations of Business Strategy course, which provides a great starting point and introduction to business analysis. You can further uncover methods for thinking strategically while exploring how to use different types of analyses in the University of Virginia Darden School Foundation’s The Strategist’s Challenge course available on Coursera. You might also take a look at the skills necessary to manage the change involved with reaching the future state of your gap analysis with Dartmouth’s Strategic Leadership: Impact, Change, and Decision-Making Specialization.