The complete guide to Gap Analysis

First thing first, let’s take a quick look at the formal definition of Gap Analysis “Gap Analysis refers to the process of comparing the present state of any product, process, application, business or organization to the future desired state and identifying what all needs to be done to bridge that gap between the present and future states”.

In this article, we are going to understand the basics of Gap analysis (along with some examples) followed by learning how to conduct a thorough gap analysis. We shall also take a look at the situations where gap analysis can be best applied, evaluate gap analysis tools and the learn the best practices for conducting a gap analysis.

 

A. Basics of Gap Analysis

With the advent of newer technologies and constantly changing business priorities, there is a constant need for change and modification to Organization’s current processes and systems.

Gap analysis is performed to conduct a structured analysis aimed at determining the current or actual state/performance/capability (also called as-is state) of an enterprise and carefully documenting the improvements (characteristics, features, performance, etc..) that are needed to achieve the desired state (also called to-be state).

It should be noted that Gap analysis focusses on ‘what needs to be changed’ rather than ‘how’ and results in giving quantifiable data against it.

A thorough gap analysis of any process gives quantifiable data and a realistic overview of what all is actually needed to achieve the envisaged state. Based on this data, the management of a company can:

  • convince all the relevant stakeholders about the scope of work
  • prioritize the features they actually wish to get implemented
  • take informed decisions about the cost, effort and resources required to achieve the future state
  • ensure that the future state meets the strategic objectives/vision of the company

Gap analysis is also called as ‘needs analysis’ and ‘as-is and to-be analysis’.

 

B. Situations where gap analysis can be used

Gap analysis can be performed either at the macro level or at the micro level as well, for instance:

  • An organization trying to ascertain what the changes are that needs to be done to make them a leader in their line of business
  • A company looking to enter in a new field of specialization
  • A department wishing to improve its monthly productivity
  • A team trying to achieve a work-life balance for its members
  • An individual who wants to upgrade her current technical skill-set

 

C. Domains in which Gap Analysis can be used

Gap Analysis, as an analysis technique, is very versatile and can be implemented in quite a wide range of domains and categories. Let’s take a look:

  • People related
    • Knowledge gap of an individual or a team
    • Unclear roles
  • Processes/products/applications
  • Quality improvement
  • Productivity improvement
  • Policy and procedures restructuring
  • Skill augmentation
  • Feature improvement
  • Technical
    • Incorporate new technologies
    • Improve efficiency
    • Increase usability
    • Reduce response time

The above list is just indicative and the diversity of usage of gap analysis is only limited by a person’s imagination.

 

D. How to conduct Gap Analysis

Gap analysis is a multi-stepped process and we shall now take a look at each of the fundamental steps.

 

Step 1: Define the Future State

 

Disciple: Which road should I take?

Master: Where do you wish to go?

Disciple: I don’t know.

Master: Then take any road. It doesn’t matter!

So you see, it’s important to know what you wish to attain.

 

For successful gap analysis, the first step is about specifically defining what goal is to be attained, what should be its features, its characteristics and what tangible benefit will be obtained by the attainment of the desired future state. The goals should be SMART i.e. Specific, Measurable, Attainable, Relevant and Time-bounded.

One can start by drawing a table or a matrix with three columns and the desired future state can be written in the second column. For e.g. the monthly productivity of the team should increase by 20% so that they can develop more functionalities.

 

Step 2: Identify the Current state

 

The second step is to identify the current state of affairs around the outlined goals. To gather details around the current state of an organization or project you can use the historical data, existing documentation, current metrics, reviews and appraisal details, feedback. Also, you can speak to the individuals who are working within the area that is going to undergo a change and get first-hand information.

The current state should be documented in the first column of the table.

Example: As per the current performance metrics, the team can develop 35 story points in a month.

 

Step 3: Describe the Gap

 

In this last step, the gap between the current state and the future state should be defined and all the factors that contribute to the gap should also be listed. All these elements should be described in the third column of the table.

Example: The team should be able to finish 7 more story points per month. Factors that limit team’s productivity – mediocre level of technical expertise, no incentives for top performers, lack of team dynamics.

 

Additional Step: Bridging the gap

 

This additional step contains all the solutions that are suggested to fill the gap between the current and the future states and can be listed in an additional column on the extreme right of the table.

Example of proposals to bridge the gap:

  • The team should undergo technical training to augment their current skillset
  • A rewards and recognition program should be introduced to the team
  • Team bonding activities like team lunch and monthly team outing should be planned

Note – The above gap analysis steps are the primary ones and secondary or intermediate steps may be added as per the process/product/system being analyzed.

 

E. Gap Analysis Tools

Following are some of the most frequently used tools that assist to conduct a thorough gap analysis.

 

Gap Analysis Tool 1: SWOT Analysis

 

SWOT is about meticulously listing down the Strengths (qualities), Weaknesses (negatives), Opportunities (elements in your favor) and Threats (risks) around your project/goal/situation and then analyzing each of these factors to see their impact on your project.

SWOT is by far the most widely used gap analysis tool. Let’s look how to do gap analysis using SWOT

  1. Reflect and state ‘why’ SWOT is being performed and ‘what’ outcome is expected from this activity
  2. List down all the relevant stakeholders that can contribute to the discussion around above statement and then invite them
  3. Draw a 2 x 2 matrix on a whiteboard and label each of the section as ‘Strengths’, ‘Weaknesses’, ‘Opportunities’ and ‘Threats’
  4. Conduct a brainstorming session with the members asking them following questions about their objective (desired state)
    1. List strong and positive internal characteristics that shall help in attaining the objective [Strengths]
    2. List the areas/resources/processes that diminish the chances of success in the attainment of the objective [Weaknesses]
    3. List the external conditions or situations that make achieving the objective easier [Opportunities]
    4. List factors that could pose a risk to the success of the objective [Threats]
  5. Analyze the above factors and see how you can use the strengths to exploit opportunities while avoiding Threats.

Related Article: SWOT analysis: Examples, Tips and Best Practices

 

Gap Analysis Tool 2: Spreadsheets

 

Spreadsheets are very handy as a tool for conducting gap analysis especially for analysis involving calculations and numbers.

Using spreadsheets you can write your present numbers on the left and desired ones on the right and then find the delta or the gap between the two. Moreover, you can also create quick mathematical models defining what your constants (rent, machinery) are and what your variables (materials, utilities) are and then see the how changing your variables impacts your overall profit margins or percentage.

 

Gap Analysis Tool 3: 5 Hows / Questionnaire

 

Similar to the 5 Whys technique, 5 Hows helps get you get into the specific details of how you will be able to solve a problem by using the deliberate questioning technique.

Here’s the procedure to conduct 5 Hows analysis:

  1. Gather the relevant team members who are working on the process or project that is to be subjected to change or improved
  2. Specifically, define what is the desired state of things (to-be state) and make all the team members understand it
  3. Ask the members ‘How’ will you attain the future envisaged state? Encourage brainstorming and open discussion amongst the team members so that every answer can be cross-checked and validated.
  4. Based on the initial answers, question the team members 4 more times. Each answer should be noted down and should form the basis of the next ‘How’. Asking ‘How’ repeatedly will get you past obvious ways to achieve the desired state and see the activities or tasks that need to be done at the root level. However, even after asking How 5 times if you still perceive you are not near to finding the fundamental tasks, then you should definitely ask more ‘Hows’.

It should be noted that every answer should be backed by knowledge, statistics or details and should not be superficial. That’s why the presence of relevant members is imperative to the success of 5 Hows analysis.

Another alternative to 5 Hows is sharing a ‘Questionnaire’ with the relevant members and asking them to fill their responses within the questionnaire. This is useful when the members are not co-located or cannot get into a meeting/conference.

 

Gap Analysis Tool 4: Fishbone Analysis

 

Fishbone Analysis, commonly known as cause and effect diagram and Ishikawa diagram is another root cause analysis technique which works on the principle of ’cause and effect’ i.e. every action has an effect and we have to perform the right action to have the desired effect.

To use Fishbone for conducting the gap analysis, we can follow the below steps:

  1. Write the desired state or goal at the head of the fish, facing right
  2. On the left, list the major activities that need to be done/features to be developed as a part of attainment of the desired goal. These activities/features are written at the end of every rib of the fishbone diagram
  3. Take one activity/feature (effect) at a time and analyze the sub-activities/tasks (cause) that should be performed under it. These sub-activities/tasks should be written on the branches of the respective rib.

Just like 5 Hows analysis, the results of the fishbone analysis should be discussed in a meeting and cross-validated before they are finalized.

 

Gap Analysis Tool 5: McKinsey 7S

 

McKinsey 7S is a model that states that “for an organization to continue to perform well, there should be harmony and alignment amongst seven elements, namely structure, systems, strategy, staff, skills, style and shared values”.

The seven elements are closely interrelated and changing one element will have a direct or indirect impact on the remaining six elements. McKinsey 7S technique helps gives direction to the gap analysis by depicting what all elements need to be analyzed and aligned while trying to bring a change.

Since the names of all the models start with the letter ‘S’, and it was developed by two consultants working at McKinsey, the name of the tool is McKinsey 7S.

Following steps should be followed while conducting gap analysis using McKinsey 7S tool:

  1. The future state of the system/process that needs to undergo a change should be properly identified
  2. Based on the nature of the suggested change, it should be categorized under one of the seven elements described above.
  3. Now, the remaining elements should be taken one at a time and it should be analyzed what modifications/changes should be made to this element so that it can positively contribute to the attainment of the desired state.

Apart from the generic techniques discussed above, the gap analysis can also be performed using some other specialized tools and technique like Nadler-Tushman’s congruence model and Burke-Litwin Causal Model.

 

F. Gap Analysis Tips and best practices

Before doing a serious gap analysis exercise, it’s worthwhile to consider and implement some of the following tips and best practices:

  1. Gap analysis results in preliminary action items required to bridge the gap between current and desired state and gets the analysis rolling. However, it should never be substituted for more detailed analysis that should be carried out once the respective project (of implementing the change) has started
  2. The gap analysis should preferably be performed at the preliminary stages of any change related project. However, it’s also quite suitable to carry it out during out stages as well.
  3. While trying to obtain information about the elements involved in gap analysis, always make use of more than one tools (discussed above) and then combine the results obtained. This will ensure you are taking a holistic view of the scope of the change.
  4. All the data that is obtained around the change should be quantifiable so that it could be verified if needed. For e.g. effort of 500 man-hours, implementation cost of $65,000 rather than ‘huge effort’ and ‘a lot of money’.
  5. While collecting information, the concentration should be on the processes, workflows, information and interdependencies rather than individuals. For e.g. ‘We need to implement a process that evaluates the product after every stage’ rather than ‘we need to remove inefficient people like Mike’.
  6. Last, but most important, the end goal/future state and the respective scope of the change should be carefully defined as any mistake in doing so might turn the analysis into an altogether different direction.

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