Gap Analysis

Reaching Your Ideal Future State

Gap Analysis - Reaching Your Ideal Future State

© GettyImages
portishead1

Bridge the gap to drive your project forward.

You may be familiar with the proverb, "A journey of a thousand miles begins with a single step."

Wise words indeed. But, in a business setting, how can you be sure that the steps you take with a project will lead you to the right place? How do you get from where you are now, to where you want to be in six months or a year?

One answer to this question is Gap Analysis. It's a useful technique that enables you to identify the gap between your current situation and the future state that you want to be in, along with the tasks that you need to complete to close this gap.

Gap Analysis is particularly useful at the beginning of a project, or when you're developing a business case. But it can be used at any stage of a project (to assess your team's progress) or applied to any area of your business (to compare your actual performance with your desired or potential one). You can even use it at an organizational level, to check that you're on course to achieve your strategic goals.

In this article, we'll outline a simple, three-stage Gap Analysis process that you can use to get your project or business to where you want it to be.

Note:

Gap Analysis is not specifically mentioned as a technique in project management methodologies PMBOK or PRINCE2. However, it's a useful tool that you can apply when working with them.

How to Use Gap Analysis

Use the following three-step process to conduct a Gap Analysis.

1. Identify Your Future State

First, identify the objectives that you want to achieve, and the timeframe that you want to achieve them in. This gives you your desired future state – the ideal "place" where you want your business or project to be.

Perhaps you want to increase your company's market share, reduce your overheads, speed up the manufacturing process, or add functionality to your product. Or maybe you're more concerned with customer satisfaction or staff engagement. The Gap Analysis process works the same way in each case.

Be specific with your objectives, and avoid too many changes to the project, known as scope creep: Gap Analysis will only be effective when the areas under scrutiny are consistent.

As a simple example, let's say you're a sales manager in an e-commerce retail business and you've been tasked with increasing the profitability of your online sales to 10 percent within the next six months. You begin your Gap Analysis by defining the desired future state, as shown in the table, below.

Future State Current Situation Next Actions/Proposals
Profit margins for online sales to average 10 percent.    


2. Analyze Your Current Situation

Next, analyze the current situation for each of your objectives.

To do this, you may need to gather data from a range of sources. So, begin by asking yourself questions such as these:

  • Who has the information that you need? Who will you need to speak with to get an accurate picture of your current situation?
  • Is the information in people's heads, or is it documented somewhere, such as in company reports?
  • What's the best way to get this information? Do you hold brainstorming workshops? Do you need to conduct customer surveys, or an ethnographic study of your users? Do you need to interview your team members one-on-one, or observe project activities such as the design and manufacturing processes? Or is there some other way to find out what you need to know?

In our example, your finance department provides figures that show an average profit margin of 8 percent on your current sales. You add this information to your Gap Analysis, as shown below:

Future State Current Situation Next Actions/Proposals
Profit margins for online sales to average 10 percent. Profit margins for online sales average 8 percent.  

Your analysis of the current situation and the desired future state can be quantitative or qualitative, or both.

For quantitative analysis, use data such as sales figures or financial reports for a snapshot of your current state. You can also call on industry-wide trends and statistics to assess your gap relative to your competitors, or to your sector as a whole.

For qualitative analysis, define your objectives by using general statements or attributes that describe your current state and your desired future state.

Here's an example of both assessment types:

Assessment Type Future State Current Situation Next Actions/Proposals
Quantitative Production costs are $80 per unit. Production costs are $100 per unit.  
Qualitative Team morale is high. Team morale is low.  

Free "Build a Positive Team" Toolkit

When you join the Mind Tools Club before midnight PST September 27

Find out more

3. Figure Out How to Bridge the Gap

Once you know your current situation and your desired future state, you can think about what you need to do to bridge the gap and reach your objectives.

The key is not to dwell on how far short of the target you are, but to find out why the gap exists and then address its underlying causes. Read our articles on The 5 Whys, Root Cause Analysis, and Cause and Effect Analysis to learn how to get to the core of a problem quickly. If there's a structural or organizational issue, tools like The Congruence Model and The McKinsey 7-S Framework can help you to identify it.

Develop your analysis into a set of proposals for solving the problem, and then back them up with evidence and detail to make a convincing case for implementing them. It could take time and resources to make these changes, and they may need to be signed off at a senior level.

Let's take a final look at our e-commerce example, below. Using Gap Analysis, you've discovered that your business can achieve its desired future state by making savings on costs and inventory, improving quality control, and adjusting its pricing structure.

Note:

We've used a very simple example in this article, but Gap Analysis can also be extensive and complex – for example, when it is used to identify software modifications needed in IT projects. Take care not to underestimate how much work your Gap Analysis may involve!

Future State Current Situation Next Actions/Proposals
Profit margins for online sales to average 10 percent. Profit margins for online sales average 8 percent.
  1. Reduce shipping costs. Negotiate a better deal or find a less expensive carrier.
  2. Improve quality control to reduce the number of returns.
  3. Increase prices on premium products.
  4. Discontinue less profitable lines to cut warehousing costs.

Tip:

If you're lucky, analysis of your current situation may reveal that your performance has, in fact, exceeded the goal you've set for your future state. If so, you can use Gap Analysis "in reverse" to identify the factors that contributed to your success – and then keep on using them!

Key Points

Gap Analysis compares your current situation with the future state that you want to achieve in your project or business. By conducting a Gap Analysis, you can identify what you need to do to "bridge the gap" and meet your objectives. You can use it at any stage of a project to analyze your progress, or to address any area of your business that needs improvement.

To carry out a Gap Analysis, first identify your project's objectives – this is your "future state." Then analyze your current situation, making sure that you gather information from the right sources.

Finally, identify how you'll bridge the gap between your current situation and the desired future state.

Ratings

Rate this resource