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How Do I Perform a Gap Analysis?

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  • Written By: Terry Masters
  • Edited By: Allegra J. Lingo
  • Last Modified Date: 28 August 2016
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You can perform a gap analysis by determining a current status based on a success measure, deciding on a future level of success, and figuring out the steps it would take to get there. The analysis is often used in a business context as part of the strategic planning process. In any context, gap analysis is ultimately a way to measure actual performance against potential performance. Once the gap in performance is defined, the functional analysis switches to the various approaches to close the gap.

Gap analysis can be applied to a company as a whole, a particular department, a product, or a process. It can can be used in any ordinary business context or in any context where room for improvement is a standard measure. For example, a company can analyze the current market penetration of a product as compared to a desired level of future penetration. A school, in comparison, can analyze the success of current operations against benchmarks the school needs to meet to attain certain standards.

In any instance, the first step in performing a gap analysis is to set the performance measure. A business can use any measurable statistic, such as profitability, market share, or sales levels. Schools can use academic measure, such as standardized test scores, graduation rates, or proficiency levels in math and reading. The performance measure is used to determine the present or actual state of affairs.

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The next step in a gap analysis is to establish a time period over which change will be measured. For example, a company can use gross profit margin as its performance measure. It then decides how many years in the future it wants to project potential performance. This timespan will be particular to every situation. For a business, it might depend on the company's inventory turnover, while a school might use an academic year or a timespan set by a governing body.

Third, determine what level of performance you expect to reach by the end of the of the timespan. What makes this different from merely setting goals and objectives in the vacuum of wishful thinking is a strategic analysis of competitive probability. Gap analysis is only relevant if you first determine that a particular future state is reasonably attainable based on market conditions, or should be attainable based upon established standards. It works from the premise that there are operational deficiencies that need to be corrected or business opportunities that are yet to be explored.

Last, identify steps needed to close the gap. These steps generally fall into either the strategic or tactical category. For example, a strategic plan to close a gap in product market share will concentrate on theories of market development, penetration, and diversification. A tactical plan will focus on specific activities, such as changing the price point, running a promotion, or placing the product in new outlets.

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