If only we knew why the profit margin on our high-volume product was so low. If only we knew why customer satisfaction was so poor on our delivery service. Wait a minute, this looks like the perfect opportunity to get into gap analysis, so let’s go find and bridge the gap.
Overview: What is gap analysis?
Gap analysis is a well-established business improvement methodology that is designed to guide you through the steps and actions required to improve your business processes, business efficiency, product quality and many more situations where there are opportunities for improvement.
The methodology is typically based around five key process steps and has a number of parallels to a classic Six Sigma DMAIC approach:
- Defining the scope of the analysis; e.g., the daily downtime of an automotive assembly line
- Defining the current state or performance; e.g., 20 minutes of downtime per day
- Defining the required future state or potential; e.g., less than 10 minutes of downtime per day
- Analyzing the gap between current and future state
- Implementing and controlling actions that bridge the gap
In some organizations, an additional step is introduced to prioritize the actions that bridge the gap.
There is a wide range of tools and techniques that can be used when conducting a gap analysis. Let’s take a closer look at some of these and typically where they are used.
- Current State: Here we can start by identifying and exploring existing business metrics, processes and quality data. We can use process maps to ensure we understand our gap analysis scope, identify our suppliers and customers and our Key Process Input Variables (KPIVs).
- Future State: Here we define the outcome we want to achieve. To help us define this, we can use Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis and also conduct benchmarking studies to ensure our future state is achievable.
- Bridge the Gap: Here we explore all of the routes and methods available to us to move from our current state to the future state. This may include analysis tools such as cause and effect diagrams as well as revisiting Failure Mode & Effects Analysis (FMEA) documents to ensure the future state is sustainable.
2 benefits and 1 drawback of gap analysis
As with most business improvement methodologies, there are benefits and drawbacks to be aware of when conducting a gap analysis. Let’s explore some of these further.
It’s a well-structured and recognized improvement methodology
Irrespective of your business sector or industry, gap analysis follows a well-structured approach to define the desired future state, analyze and implement the actions required to bridge the gaps and enable business transformation to take place.
It helps set Key Performance Indicators (KPI) and future business strategy
Gap analysis identifies areas of a business that need to be improved to achieve the desired future state. Typically, these gaps can be controlled and closed by careful use of metrics such as KPIs, which are critical to defining future business strategy.
It can be resource- and time-consuming
Don’t underestimate the commitment required to perform a high-quality gap analysis. Ensure you have the right people available and sufficient time allocated to see the analysis through to its conclusion.
Why is gap analysis important to understand?
By using gap analysis, we have a structured approach that helps us achieve improved performance, quality and business growth.
It locks in continuous improvement to your organization
Organizations that perform gap analysis can improve their efficiency and better understand how to continually improve their processes and products to achieve their desired future state. Gap analysis helps to optimize how time, money, and human resources are both spent and crucially prioritized.
It keeps you one step ahead of your competition
Typically, gap analysis will include some level of external competition assessment that can be facilitated by a SWOT analysis. Understanding your competitive position, capitalizing on areas of strength and addressing any gaps or weaknesses will future-proof your business growth.
It’s great for employee and customer satisfaction
Having a clearly defined and communicated future state and a realistic plan to bridge the gaps and achieve your business goals is a great motivator for staff. It’s great for customers, too, as they benefit from improved product or service delivery and efficiency.
An industry example of gap analysis
A government agency was required to develop policy and procedures supporting the safe development and testing of autonomous vehicles on public roads. The agency recognized that their skills, knowledge and competencies were lacking in the field of autonomous vehicles and set up a dedicated team to investigate how to address this problem.
One of the team members, a Six Sigma Back Belt, had successfully used gap analysis in previous projects, and the team agreed to utilize this methodology. The analysis started with creating a clear and well-defined scope statement for the gap analysis, focusing on skills, knowledge and competencies. The next step was exploring and defining the current state which involved using interviews, evaluation questionnaires to understand current strengths and weaknesses, and defining suppliers and customers. The future state was then defined using the principles of SMART, conducting benchmarking and a SWOT analysis to ensure the future state was both achievable and competitive.
Finally, the gaps between the current and future state were evaluated and methods and routes to bridge the gaps were generated and prioritized. The high-priority actions were resourced, and a training delivery program was created and delivered across the agency. KPIs were linked to the training delivery program, and these were integrated into the business strategy, ensuring successful delivery.
3 best practices when thinking about gap analysis
As with many process-driven activities, there are a number of key things to consider when conducting a gap analysis. Let’s take a look at three of these.
1. Manage the scope of the analysis carefully
Spending time to clearly define the scope of the analysis and getting the team to understand where the scope boundaries are is critical to successful gap analysis. Be as specific as you can, and use the principles of SMART to help and guide you toward defining the scope.
2. Train the team, and use facilitators to guide the process
Not all of the team members may have taken part in gap analysis previously, so it’s useful to assess skills and provide training where necessary. The use of facilitators to help guide the process of gap analysis and keep the team on track and to scope is invaluable in more complex analyses.
3. Make it part of your business strategy
You can extract the maximum benefit from gap analysis by embedding it into your business strategy. Don’t complete an analysis and file it in the metaphorical drawer; use the outputs to shape your KPIs and drive your business growth.
Frequently Asked Questions (FAQ) about gap analysis
Are there different types of gap analysis?
Yes, there are many different types of gap analysis; examples include performance, product, profitability and resource. However, whilst they may have a different approach, they all have a common aim – to assess and close the gap between the current and future state.
Is a SWOT analysis a type of gap analysis?
Yes, SWOT analysis is a tool that is often used when conducting a gap analysis to give insights into the current state and where there are opportunities to improve and achieve your future desired state.
How do I create a gap analysis template?
There are many templates freely available, and creating your own is straightforward, too. A large whiteboard or piece of paper split into five areas identifying the topic that is your focus, the current state, the future state, the gap, and actions to close the gap is a great starting point.
It’s a wrap on gap analysis
We’ve taken a whistle-stop tour of gap analysis and how it can be used to drive continuous improvement into your organization. Be ambitious but realistic with your future state, carefully map your current state, and then get to work bridging those gaps.
