Gap analysis

Gap analysis compares a clearly defined current state with a desired future state, then converts the difference into a prioritised plan. The “gap” may concern performance, products, customer segments, geography, capability, technology, resources or information.

When to use it

• To identify and improve an important area of underperformance.
• To evaluate the business opportunities and operational situations described here.

Origins

The logic of comparing actual performance with a target is much older than the label and has no single inventor. Planning, quality management, needs assessment and strategy all use versions of it. A distinct biodiversity Gap Analysis Program was established in 1989 to identify species and habitats insufficiently represented in conservation areas; it illustrates the same current-versus-required logic but is not the sole origin of business gap analysis. In commercial research, importance–satisfaction analysis applied the method by comparing how much customers value an attribute with how well an offer delivers it.

What it is

Common business applications include:

Performance gaps:

differences in satisfaction, loyalty, delivery, quality, share of wallet or another outcome.

Product gaps:

needs not covered by the current portfolio.

Segment gaps:

relevant customer groups that are not effectively served.

Geographical gaps:

viable regions or territories that the business does not reach.

Capability gaps:

shortages in people, technology, process, resources or market intelligence that prevent the desired result.

A useful gap is measurable, decision-relevant and linked to an owner. A numerical difference without a plausible action is only an observation.

Performance gaps

A performance gap exists when an offer or process delivers less than customers or the strategy require. The most important gap is not always the largest operational difference; it is the difference attached to an attribute that matters to the stakeholder.

Importance–satisfaction research asks customers how important each attribute is and how satisfied they are with current delivery. High importance combined with low satisfaction marks a candidate priority. Validate that result with behaviour, complaints and operational evidence before treating stated ratings as cause.

Product gaps

A product gap appears when the portfolio does not meet a worthwhile need. A toothpaste manufacturer, for example, may serve customers seeking taste or whitening but lack an offer for sensitive gums.

Before adding a product, estimate the unmet need, willingness to switch or pay, competitive response, cannibalisation, capability and economics. “Missing from the range” does not automatically mean “attractive to launch.”

Segment gaps

A segment gap can sometimes be filled with an existing product. Disposable razors historically marketed to men also served women, and breakfast cereal can be positioned for another consumption occasion such as an evening snack.

Good segmentation changes more than colour or advertising when needs differ. Test product fit, access, representation and value rather than relying on stereotypes.

Territorial gaps

A territorial comparison may reveal headroom, but geography is not destiny. In the example, annual Coca-Cola consumption was about 400 containers per person in the United States and 40 in China, producing an arithmetic difference of 360. China’s population was stated as 1 billion versus 320 million in the United States.

That difference is not a forecast. Preferences, income, channel reach, regulation, alternatives, pack size and data comparability can explain it. The analysis must determine which portion is realistically addressable and at what cost.

At its simplest, the model asks:

Where are we now?

Establish the baseline with valid quantitative and qualitative evidence.

Where do we want to be?

Define a future state tied to customer, strategic and operational value.

How will we get there?

Specify interventions, resources, sequence, ownership and learning.

SWOT, the Boston matrix and the directional policy matrix can help identify opportunity areas. Importance–satisfaction analysis can prioritise customer-facing gaps by plotting importance against performance.

• Step 1: define the problem, boundary and stakeholder whose gap matters.
• Step 2: establish current performance with a reconciled baseline.
• Step 3: set a justified, specific and achievable target, including the deadline and evidence that reaching it creates value.
• Step 4: design the action plan, owners, resources, dependencies, milestones and review rules.

The letters in the importance–satisfaction figure represent the following customer attributes:

In related importance–performance views, labels such as Why bother? and Monitor identify different priority zones. Performance reference points may be shown at 20%, 45% and 70%.

Developments of the model

Gap-analysis templates commonly use a spreadsheet or action register with the issue, baseline, target, metric, intervention and owner. The format can add assumptions, benefits, dependencies, risk, cost, due date and status according to the decision.

The model has also developed into capability assessments, skills matrices, service-quality studies, maturity models and strategic road maps. Whatever the format, preserve a traceable connection from evidence of the current state to the target and action.