четверг, 23 ноября 2023 г.

Gap Analysis

 


Tom Wright
 
How To Perform A Gap Analysis: 5-Step Process

Most of us have at least a rough vision of where we'd like to take our organization. But sometimes, knowing where and how to begin can be challenging. This is where the process of gap analysis comes into play.

Gap analysis is a great strategic analysis tool that gives us a broad framework for defining not just where we are today, but more importantly where we want to be and how we're going to get there.

What Is A Gap Analysis?

A gap analysis is a process of comparing your current state to your desired future state. This process includes assessing the actual performance of your organization to determine whether business goals or objectives are being met and, if not, creating an action plan that will bridge the identified gap.

It's a great tool to use as part of the internal analysis of your company. Almost all major businesses usually assign the completion of a gap analysis template to project managers or business analysts.

Conducting a gap analysis is actually quite simple, but it can also have its challenges. That’s why it’s useful to follow a step-by-step approach to ensure your strategic planning is well-structured and meaningful in assessing your business goals.

What Are The Benefits Of A Gap Analysis?

Gap analysis forces you to think about your current situation, your desired future state, the root causes of the gaps between the two, and the action plan to bridge that gap in a very structured and clear manner.

Think about it as the bridge that will get you from point A (your current state) to point B (your desired state).

Gap Analysis Diagram

But apart from that, it presents a framework for collaborating on creating a strategic plan and a common execution roadmap that is visible and aligned with all stakeholders. When multiple people are involved in strategic planning and execution, their different approaches can sometimes conflict with each other.

A gap analysis can also be used as a way to analyze historical performance. The first time you run a gap analysis process, you will explicitly capture the current performance of your business (in both qualitative and quantitative forms). So the next time you do one, you will have a benchmark against which you can compare your most recent performance to efficiently set goals.

To streamline your gap analysis process, we've developed a free gap analysis template. This handy tool poses thought-provoking questions that guide you in developing a robust strategic plan, integrating all the pieces seamlessly.

Gap Analysis Use Cases & Examples

So, everything sounds great. But, when is the best time to go through the gap analysis process?

Gap analysis is most useful when you need to:

  • Create a new strategy for your team and want to understand where you currently sit
  • Figure out the right areas of focus to achieve your business goals
  • Develop a new product understanding the gap between your current offer and what customers want
  • Find out why you aren't meeting important KPIs and strategic objectives
  • Develop a change management strategy, but you need first to identify the gap between the current and desired state.
  • Identify opportunities to improve current processes or workflows
  • Prepare for an audit and showcase how you are proactively addressing any gaps
  • Prepare a strategic plan and prioritize resource allocation

These are, of course, just some use cases... Gap analysis is a versatile tool that can be applied to multiple different scenarios. The best part is that it’s suitable for companies and teams of all sizes and industries.

Let’s check out some “real-life” scenarios where a gap analysis would be a great option:

Example 1: Technology Company New Product Launch

A technology company plans to launch a new mobile app to expand its product offerings and reach a wider audience. To ensure the app's success, they conduct a gap analysis to evaluate their current app development processes, features, and user interface compared to competitors in the app market.

By identifying gaps and areas for improvement, they refine the app's functionalities, enhance user experience, and align it better with customer needs, positioning it as a standout solution in the competitive app market.

Example 2: Human Resources Strategic Plan

The Human Resources (HR) team at a medium-sized organization faces challenges with employee retention and satisfaction. To improve the HR department's performance, they conduct a gap analysis to assess their current practices, employee feedback mechanisms, and talent management strategies.

By pinpointing gaps between existing practices and desired outcomes, they develop a strategic action plan. This plan includes implementing effective employee engagement programs, talent development initiatives, and performance management systems, leading to improved retention rates and increased employee satisfaction.

Example 3: Digital Transformation In Manufacturing

A manufacturing company aims to undergo a digital transformation to enhance operational efficiency and adapt to evolving industry demands. They perform a gap analysis to evaluate their current technology infrastructure, data management processes, and workforce skills in relation to the digital transformation objectives.

By identifying gaps in technology and skills, they develop a comprehensive digital transformation strategy. This includes upgrading technological capabilities, implementing data analytics systems, and providing relevant training to employees, facilitating a successful transition to an advanced and digitally enabled manufacturing environment.

In each of these scenarios, gap analysis plays a crucial role in identifying areas for improvement and guiding strategic decisions. By bridging the identified gaps, these organizations can effectively meet their goals, improve their overall performance, and stay competitive in their respective industries.
Types Of Gap Analysis
As you can probably imagine from the previous examples, gap analysis comes in different forms, and each serves a unique purpose to tackle specific challenges and opportunities within an organization.

Here are some types of gap analysis you might find helpful:

  • Performance Gap Analysis: Evaluates the difference between an organization's current performance and its desired future state to identify areas for improvement and enhance overall efficiency and effectiveness.
  • Market Gap Analysis: Focuses on analyzing the gap between customer expectations and the products or services offered by a company, helping to identify opportunities to meet market demands and gain a competitive edge.
  • Product Gap Analysis: Assesses the features, pricing, and qualities of a product or service against customer needs and expectations to identify gaps and prioritize improvements or innovations.
  • Skills Gap Analysis: Analyzes the existing skill sets of employees in an organization and compares them with the skills required to meet organizational goals, leading to targeted training and development initiatives.
  • Compliance Gap Analysis: Evaluates an organization's adherence to relevant laws, regulations, and industry standards, identifying areas of non-compliance and guiding efforts to meet legal requirements.
  • Financial Gap Analysis: Compares an organization's current financial performance with its financial objectives, uncovering discrepancies and guiding financial planning and decision-making.
  • Technology Gap Analysis: Assesses an organization's technology infrastructure, systems, and capabilities, comparing them with the technology required to support its strategic goals and digital transformation initiatives.
  • Environmental and Social Gap Analysis: Focuses on an organization's environmental and social impact, identifying gaps in sustainability practices and providing insights for implementing responsible and eco-friendly strategies.

How To Do A Gap Analysis: The 5-Step Process

Before we dive in, grab our free Gap Analysis Template to have a better idea of what the final outcome should look like. Follow the step-by-step guide below and fill the template with your own data or use it as a reference to build your own template.


Step 1: Define your focus areas

The first step in creating a gap analysis is to set some boundaries. You can also think of this as defining the scope of your analysis.

It would be easy to talk about your desired future state in general grandiose terms:

“My desired future state is to be the biggest and best company in Asia!!!”

There's little value in these kinds of exercises. Instead, you should have a rough idea of which areas you want to improve.

While we've written extensively about how to create strategic focus areas, here are some typical areas that people often settle on:

  • Financial growth
  • Customer excellence
  • Innovation
  • Employee happiness
  • Scientific achievement
  • Community impact

In short, focus areas should quickly describe what you are trying to improve with your gap analysis.

Step 2: Identify your desired future state

Whoa...hang on a second - shouldn't we be starting with the current state rather than the future state? You'd think so, wouldn't you - and indeed, most of the other gap analysis guides tell you to do that. But there's a problem...

Your organization doesn't have one single current state - it has thousands depending on which team, which measure, or even which person you're talking about.

So despite what you might read in other gap analysis guides, defining your current state without any idea of your future state is, at best, a useless process (and, at worst, an impossible one).

So instead, we start our own gap analysis process with the definition of our future state.

This is where having strategic focus areas really comes in handy. Let's assume that you selected 'Innovation' as one of your focus areas.

You'll want to start by framing your desired future state for 'Innovation' in fairly broad terms (we'll be getting more specific later on).

Broadly speaking, my desired future state for 'Innovation' is:

“To be recognized as one of the most innovative SaaS platforms in the industry.”

Remember, we're keeping things fairly high-level at this stage - so try to avoid adding any specific KPIs or measures to this part of your gap analysis.

Here are a few more examples of desired future states for a range of focus areas:

My desired future state for 'Customer Excellence' is:

“To achieve market-leading customer retention and referrals.”

My desired future state for 'Community Impact' is:

“To make lasting & meaningful changes to the lives of people in the community.”

Once you have identified a high-level desired future state for each of your focus areas, it's time to move on to the next stage of our analysis process.

Step 3: Assess your current state

The next part of performing a gap analysis involves getting a better understanding of where you are today - your current state.

Once again, we'll be using the focus areas that we defined in Step 1 to scope our gap analysis. We'll be starting off high level and then getting more specific in Step 4.

For each of your focus areas, write a sentence that gives a realistic summary of your current state. Try to use similar language and structure to the one you used when defining your desired future state above.

For example, for our 'Innovation' focus area, we might summarize our current state as:

“We are not currently known for innovation; however, our software does contain a couple of unique features.”

For our 'Customer Excellence' focus area we might say:

“We have high customer satisfaction and retention in our Enterprise segment, but our smaller customers are significantly less satisfied with their experience.”

Or finally, for our 'Community Impact' focus area we might say:

“Most members of the local community are not currently aware of our presence.”

Remember that for this part of your gap analysis, it's more important than ever to be 100% honest and realistic about your strengths and weaknesses.

You might already be aware of your current state because you’re experiencing a particular problem you’re trying to solve (a specific gap you’re trying to close). But it’s not always the case.

Step 4: Apply metrics / KPIs to your gap analysis

It's time to get specific about what we want to achieve and how we're going to do it by adding some specific metrics or KPIs (Key Performance Indicators) for each one of our focus areas.

Here are a few tips on how to select the right KPIs for your gap analysis:

  • Select KPIs you can actually measure, and decide on your measurement approach
  • Choose KPIs you already have a baseline for, so that the gap can be easily measured
  • Apply both leading and lagging KPIs to achieve a complete set of measures for each focus area

Let's dive into some specific KPI examples that you can use as part of your gap analysis. We'll start by defining the targets for our desired future state, and underneath write down how this looks for our current state.

Focus area 1: 'Innovation'

1. Leading KPI: Dedicate at least 50% of our developer resources to creating new features.

(current state: <10% of developer resources are on creating new features)

2. Lagging KPI: Achieve an 'Innovation' score of over 80% on at least one customer review website.

(current state: Our 'Innovation' score on g2crowd.com is less than 60%)

Focus area 2: 'Customer Excellence'

1. Leading KPI: Achieve an average customer NPS score of at least +7.

(current state: Our NPS score is less than 3 on average)

2. Lagging KPI: Decrease our overall gross % customer churn to less than 10% per annum.

(current state: Our gross % customer churn is greater than 20% per annum)

Focus area 3: 'Community Impact'

1. Leading KPI: Raise our community awareness to 70%.

(current state: Our community awareness is less than 20%)

2. Lagging KPI: Get directly involved in at least 3 major political initiatives.

(current state: We’re not participating in any political initiatives currently)

The 'gap' component of your gap analysis is the variance between the KPIs of your current state and your desired future state.

For example, you could say that we have a gap of 50% between our current level of community awareness (20%) and our desired future state of community awareness (70%).

Step 5: Create an execution-ready action plan and roadmap

Creating a gap analysis leads to the crucial step of formulating an action plan and roadmap to address the identified gaps. This process involves defining specific projects for each focus area, aiming to close the gaps identified in Step 4.

Think of your gap analysis action plan as a series of projects that directly contribute to achieving the Key Performance Indicators (KPIs) set in the previous step for each focus area.

Let's brainstorm some specific examples of projects you could add to yout action plans for each focus area:


Focus area 1: 'Innovation'

  • Project 1: Hire four additional developers dedicated to new feature development.
  • Project 2: Implement an 'Innovation Check' for all new features to ensure they meet the definition of “innovation”.

Focus area 2: 'Customer Excellence'

  • Project 1: Launch an automated survey to gather reasons for customer cancellations.
  • Project 2: Establish a dedicated retention team in customer service to handle cancellation requests.

Focus area 3: 'Community Impact'

  • Project 1: Launch a local TV advertising campaign.
  • Project 2: Increase our spend on online advertising by $5,000 per month.
It's up to you how many projects you want to create, but typically, you'll have at least two for every gap. You'll also have to use your own best judgment about whether these projects are likely to close the gap!‍

Now, let's talk about the roadmap.

As you create the action plan, it's essential to establish a clear time frame for each project and determine realistic deadlines and milestones to track progress effectively. This roadmap will guide your organization on the sequence of actions to take, the allocation of resources, and the expected time frames for achieving those significant milestones. Having a well-defined roadmap will help your team stay focused, organized, and motivated throughout the implementation process.

🎁Bonus step: Execute, monitor and adapt your plan

Congrats! You’ve developed your action plan and set targets and KPIs to measure success.

What’s next?

Well, now it's all about the execution – the heartbeat of your plan.

Make sure everyone in your organization is on board and has clear visibility over the plan. But it's not just about sharing the big picture; you’ll have to provide clarity on the specific actions needed to close the gaps you identified during your analysis. Encourage a collaborative spirit where different teams are accountable for the KPIs that drive progress.

Now, here's the secret sauce: continuous monitoring of your progress and being open to adapt when needed. Keep a close watch on how things are unfolding, and if they don't go as planned, don't panic! Be ready to tweak your plan swiftly to get back on track.

You can monitor and track your results with spreadsheets, but in an era when change is the new normal, simply relying on them may not be enough. It will be hard to keep everyone on the same page and adapt quickly.

https://www.cascade.app/

Conducting A Gap Analysis: A Four-Step Template

Sean Callison


It’s an age-old business dilemma: You want to grow your business -- you want to implement your strategy -- but aren’t sure where or how to allocate resources to make it happen. Sound familiar? If so, you may need to conduct a gap analysis.

What is a gap analysis?

A gap analysis is an examination and assessment of your current performance for the purpose of identifying the differences between your current state of business and where you’d like to be. It can be boiled down into a few questions:

  1. Where are we now?
  2. Where do we wish we were?
  3. How are we going to close the gap?‍

Conducting a gap analysis can help you improve your business efficiency, your product, and your profitability by allowing you to pinpoint “gaps” present in your company. Once it’s complete, you’ll be able to better focus your resources and energy on those identified areas in order to improve them.

What is a gap analysis template?

A gap analysis template visualizes the difference between reality and target for your organization, making it easy to show employees where there is still room to grow. It is a great way to visual your data and show where your organization is struggling and thriving.

In our discussion around the gap analysis template below, we’ll talk specifically about how a gap analysis can be used within a department; it can also be used for your entire business or for a single process. The four steps outlined in the template below will help ensure you know precisely what issues you’re facing and how to go about fixing them.

How To Conduct A Gap Analysis: 4 Steps to Completion



Step #1: Identify the current state of your department.

This may sound overwhelming, but bear with me. Do you have a strategic plan or a Balanced Scorecard? First, identify the priority of that plan or scorecard. For example, let’s say your banking organization wants to increase growth by 30% a year and has been growing at 8% per year. That puts your “current state” at 8% growth. Or, perhaps you work for a manufacturing organization that is producing revenue of $180,000 per employee, and your goal is to grow that to $250,000 per employee. That would put your current state at $180,000 per employee.

Keep in mind, your current state doesn’t have to be financial. If your nonprofit currently serves 10,000 meals a week to the homeless, that is your current state. Or, if you work for a municipal government, you might have 200 public safety incidents per 100,000 citizens per year—another example of current state.

You are likely now thinking, “We have a lot of current states!” And you’re probably right! You can actually run a gap analysis on each one. For the purposes of this article, try to stick with the current state that best represents your entire department.

Step #2: Identify where you want to be with your department.

This future goal is sometimes called a desired state, future target, or stretch goal. In order to accomplish this, you’ll want to think about how you are doing today in your current state (from step one) and where you really want to be within a reasonable timeframe. If you are doing a gap analysis within the context of your strategic plan, take a look at the targets on your plan. These targets may be three to five years out, which is ideal. Where are you with them? To answer that, go back to your current state areas of focus.

  • Future state for your bank: 30%.
  • Future state for your manufacturing organization: $250,000 in revenue per person.
  • Future state for your nonprofit: 20,000 meals per week.
  • Future state for your municipality: 100 safety incidents per 100,000 citizens per year.

You could even chart it out and see a clear representation of the current state and the future state


Step #3: Identify the gaps in your department.

Now that you’ve recognized where your organization is currently and where you want it to be in the future, it’s time to bridge the gap.

Take a look at the chart above; the “gap” is the gray shaded area, which demonstrates the difference between where you are and where you want to be. When identifying gaps in your department, you need to ensure that your goal and your current state exist in the same time period. So if your future goal is three years out, you need to extrapolate your current state out for three years to see the appropriate gap. For example, if you’re growing at 8% and you want to be growing at 30% a year for three years, you’ll want to consider how much revenue you have currently and how much you’ll have in 3 years at your current pace. If you currently have $100 in revenue, you would be at almost $220 with 30% growth in three years, and $126 with 8% growth in the same time period. So your gap is $94.

Some organizations do not project out three years. Instead, they may say they wish their soup kitchen was serving 25,000 meals today instead of 10,000 meals. Therefore, their gap is 15,000 meals.

This is a great time to figure out why there is a gap.

    First, be specific about the gap. For example, if your revenue per employee is $70,000 less than you planned, why is that? Is there some issue with the way you work, with customers, or with your prices?

      Second, dig deeper and determine why this gap has occurred. Do this by asking questions—and questioning the answers to those questions—until the root causes of the gap become clear. You may have heard about asking “five whys”; below is an example:

      Question 1: “Why are customers so difficult to work with?” Because they want something custom.

      Question 2: “Why do they want custom work?” Because they are dealing with a different problem than our company imagined.

      Question 3: “Why didn’t we imagine the problem the customer is facing?” Because we started out in the healthcare industry and now most of our customers are in the banking industry.

      Question 4: “Why haven’t we built a product for the banking industry?” Because our product development team isn’t thinking about new product offerings.

      Question 5: “Why aren’t we thinking about new product offerings?” Because we are too busy building custom products.

      Step #4: Devise improvements to close the gaps in your department.

      Now that you’ve discovered why the gap in your department is taking place, it’s time to figure out the proper course of action to close it. Use the following guidelines to ensure the improvements you come up with are solid:

      • Base all improvements on the information you discovered while identifying the gaps.
        For example, if your team is too busy doing custom work, it will be difficult for them to step back and devise a new product offering. Perhaps if you stop taking on custom work for a few weeks, that will free up your team to create a scalable product for your new target clients.
      • Consider the cost of implementation for each solution.
        Perhaps you don’t have the capability to stop working with your current customers. Can you outsource the development of a new offering? Maybe partner with another organization?

      What happens after the gap analysis?

      Hopefully, you’ve emerged from your gap analysis exercise with some good ideas—ideas around your performance gaps and how you might address them. But as anyone who’s ever read our blog knows, ideas are nothing without execution. Carrying out those ideas is often more challenging than people expect—especially if they don’t have a concrete way to measure and manage progress over time.

      So, don’t stop short after the idea stage. A more complete gap analysis template should include a few additional steps; consider them the “boots on the ground” phase of the analysis exercise—the logistics of getting the job done. Here’s what needs to happen after the gap analysis to put those good ideas into action.

      Step 1: Choose a framework that helps organize your plans.

      If a gap analysis reveals the problem areas, a framework helps you map them. Frameworks summarize the important parts of your plan and help you stay organized. (Many management teams fail simply because of their disorganization!) They also make it easy for everyone to see why you’re doing what you’re doing—the activities that contribute to achieving a specific goal—which is important for getting buy-in.

      There are a lot of strategic planning frameworks out there, including the Balanced Scorecard, Objectives and Key Results (OKRs), SWOT analysis, and many others. We've pulled together a list of 20 of the most popular ones and describe the scenario that they are most useful—the point being that any model can be customized to suit the way your business works.

      Step 2: Develop your framework with the goals, measures, and projects identified in the gap analysis.

      Next, you’ll start filling in the blanks of your framework with information, some of which you determined in the gap analysis:

      • Goal(s)—In Step 2 of the gap analysis, you identified where you’d like to be in terms of performance. Those are your goals (also called objectives).
      • MeasuresMeasures are indicators that signal how well you’re accomplishing these goals. You should select one or two measures for each goal.
      • Projects—Sometimes referred to as “initiatives,” projects are the action programs you develop to achieve your goals. Step 4 of the gap analysis template focuses on devising solutions to close the gap; those solutions may become the projects you undertake. Most organizations implement one or two initiatives for every goal.

      Step 3: Put your plan into action and track your progress.

      Now it’s time to launch your plan and periodically evaluate how things are going. Make sure you’ve allocated sufficient resources to carrying out the plan—and communicated it to everyone in your organization.

      As they say, the devil is in the details. Tracking your performance can actually be quite complicated, so you need a way to manage the strategy execution process. Most organizations use some kind of performance management software, like ClearPoint, to monitor their progress toward goals. Performance management tools allow organizations to track a variety of metrics related to strategic projects to sustain their activities over the long term.

      Using ClearPoint for Gap Analysis Tracking

      To help explain how a tool like ClearPoint can track performance and close gaps, let’s look at an example.

      The Gap Analysis Scenario:

      The performance gap: Say you are part of the local government of a small, rural town. A gap your team identified as part of the analysis exercise is a lack of new businesses. Therefore, your goal over the next three years is to increase the number of new businesses by 10%.

      Why the gap might exist: Step 3 of the gap analysis prompted discussion around why the gap might exist. Research has shown that Millennials are the age group most likely to start a new business, and data of the town’s demographics shows a surprisingly low number of Millennial residents. Other possible reasons: Some of the town’s processes around starting new businesses are very complex, and the town has no developed central area that would help businesses to thrive.

      A proposed solution to close the gap: While considering how to close this gap, your team has come up with some possible plans of action, including:

      • Taking steps to attract more Millennials both as residents and investors.
      • Simplifying the rules for starting new businesses.
      • Creating a central, walkable “town center.”

      Execution of the Plan:

      Now that your team has devised some good ideas around closing the identified gap, it’s time to put the plan into action.

      Using the Balanced Scorecard as your framework, you’ll use ClearPoint to build out your strategy for improvement, including:

      • Your goal: Increase the number of new businesses opening by 10% over the next three years.
      • Your measures: The number of new business applicants per year and the number of new business openings per year.
      • Your projects: You decide to tackle two projects related to the goal:

                  • Simplify the rules for starting new businesses.
                  • Launch an initiative to attract more Millennials as residents and entrepreneurs.


      Lastly, you’ll use ClearPoint to track and report on all the information relevant to your gap analysis. You’ll want to:

      Integrate ClearPoint with the appropriate data sources. ClearPoint is capable of automatically pulling in data from disparate systems around your organization, so you can view all your performance-related data in a single place.

      Link proposed improvements to relevant goals and objectives. ClearPoint allows you to link proposed improvements to goals, so you can see the impact of your gap plan. Our customers frequently use summary reports for gap analyses data related to current and desired states.

      Manage your projects. ClearPoint offers a simple way to stay on top of the numerous tasks associated with projects. You can create informative project dashboards and Gantt charts to visualize key data and assign ownership and accountability to specific individuals.

      Track performance to see if you’re meeting targets. You can track both qualitative and quantitative data in ClearPoint, giving you a complete picture of your performance. In addition, our RAG status feature makes it easy to see how you’re doing on your measures (using visual red, amber/yellow, or green indicators), and lets you quickly view trends over time.


      Report on your measures. Give each performance measure a reporting frequency, which determines how often you will gather data and report on its progress. Reporting can be time-consuming without software, but ClearPoint has automated most of the reporting process, saving you a significant amount of time. It sends automated reminders to those responsible for updating data and populates reports automatically with data from various sources. And our simple drag-and-drop interface means you can quickly create a variety of dashboards, reports, and scorecards for different audiences.

      Evaluate results, rinse and repeat. Adaptation of strategy based on results ensures continuous improvement, allowing for quick adjustments to address changing circumstances and capitalize on emerging opportunities. Consider leveraging AI applications (like ClearPoint's AI Assistant) to provide real-time, actionable information and insights.

      See Your Gap Analysis Through to Completion

      A gap analysis is a worthwhile exercise, but it must be accompanied by an actual plan for improvement. Forward progress relies on the incremental work that gets done over time.

      Tracking is part of that incremental work. Not only does tracking show how well you’re doing, but it also reveals if you’re taking the right actions. If your projects are proceeding on pace, that’s great—but if they aren’t positively impacting your measures, then you may need to reassess whether you’re tackling the right projects to begin with. In this case, you may end up attracting more Millennials to your town as a result of your efforts, but will that ultimately result in an influx of new businesses? Only time—and tracking!—will tell.


      https://www.clearpointstrategy.com/

      How to Do a Gap Analysis

      There’s no standard process for doing a Gap analysis since it should usually be tailored to meet your business needs. But here are the steps a typical Gap analysis would follow.


      Step 1: Pick an Area to Focus on

      First of all, you need to know where to focus on during the analysis.

      Whether it’s from finance, product quality, marketing etc., pick that specific problem area you need to drill down on. For example, if it’s marketing, a specific area would be social media marketing.

      Being specific will help you focus better during the Gap analysis.

      Step 2: What are Your Targets/ Goals?

      Now that you know the area you need to improve, it’s time to set goals or targets. Not only these goals should be realistic, which mean that they should be achievable within a certain time limit you set, but they should also align with your business goals.

      These goals you set will help you define the future state in the 4th step.

      Step 3: Determine the Current State of Things

      Before you step forward, you need to know where you are standing. In this step, you’ll figure out the current state of things.

      By looking into reports or process documentation, doing interviews, brainstorming etc. gather as much data as possible to clarify how you are performing at present.

      Step 4: Determine the Future State of Things

      Remember the goals you set in step 2? Achieving these goals will help you get to the future state or the desired situation you want your business to be in.

      Define what the parameters of the ideal state of your business are.

      Step 5: Identify the Gaps between the Two States

      Now you have an understanding of the attributes of your current state and the future state, it is easier to identify what is stopping you from reaching your goals.

      After identifying these gaps, come up with the steps you need to take to close them.

      Gap Analysis Tools

      Once you have identifies what the gaps are, you need to look into why they exist and what you can do about them. There are a few gap analysis models you can use for this task. Following we have listed a few Gap analysis tools that you can use.

      SWOT

      SWOT analysis focuses on Strengths and Weaknesses in the internal environment and Opportunities and Threats in the external environment. It helps you determine where you stand within your industry or market.

      How to do it;

      1. Gather around a team from relevant teams/ departments
      2. Create a SWOT analysis matrix; you can either use the one below or choose from these SWOT analysis examples
      3. List down the internal strengths and weaknesses of your business
      4. Note down the opportunities and threats present in the industry/ market
      5. Rearrange each bullet point in the order of highest priority at the top, and lowest at the bottom
      6. Analyze how you can use your strengths to minimize weaknesses and fight off threats, and how you can use the opportunities to avoid threats and get rid of weaknesses

      Check out this resource to learn how to use SWOT analysis effectively.


      Fishbone

      Fishbone diagram, also known as cause and effect diagram or Ishikawa diagram, helps you identify the root cause of an issue or effect. It lists the 6 Ms (listed in the diagram below) and helps you see how they relate to the central problem.

      How to do it;

      Here’s a quick guide on fishbone diagram to help you understand how to do a cause and effect analysis.


      Get more fishbone diagram examples.

      McKinsey 7S

      McKinsey 7S can help you with any of the following purposes

      • To help understand the gaps that may appear in the business
      • Identify which areas to optimize to boost business performance
      • Align processes and departments during a merger or acquisition
      • Examine the results of future changes within the business

      The 7s refer to key interrelated elements of an organization. They are as follow,


      These elements are divided into two groups; hard elements, which are tangible as they can be controlled, and soft elements which are intangible as they cannot be controlled.

      Hard elements

      • Strategy – the plan of actions that will help your business gain a competitive advantage
      • Structure – the organizational structure
      • Systems – business and technical infrastructure employees use to do their daily tasks

      Soft elements

      • Shared values – a set of beliefs or traits the organization upholds
      • Style – the leadership style of the organization and the culture of interaction
      • Staff – the general staff
      • Skills – key skills of employees

      How to apply it;

      1. Gather around a competent team
      2. Check whether the elements are properly aligned with each other (look for gaps and weaknesses in the relationship between the elements)
      3. Define the state where these elements would be optimally aligned
      4. Come up with an action plan to realign the elements
      5. Implement the changes and continuously review the 7s, moving forward

      Here’s a more detailed look at how to apply the McKinsey 7s model.

      Nadler-Tushman’s Congruence Model

      The Nadler-Tushman’s congruence model is used to identify performance gaps within an organization.

      It is based on the principle that a business’s performance is a result of these 4 elements; work, people, structure and culture. The higher the compatibility among these elements, the greater the performance will be.


      How to apply it;

      1. Gather all data that points at the symptoms of poor performance
      2. Specify and analyze inputs which include the environment, resources and history. And define your organization’s strategy.
      3. Identify which outputs are required at individual, group and organizational levels to meet the strategic objectives
      4. Figure out the gaps between desired and actual output and the problems associated with it (and mark down the costs associated with them as well)
      5. Collect data on and describe the basic nature of the 4 major components of  the organization
      6. Assess the degree of congruence among these components
      7. See how poor congruence and problems related to outputs are correlated. Check if the poor ‘fit’ of the 4 major components are related to  the problems
      8. Come up with action steps to deal with the problem causes

      Check out this resource for more in-depth instructions on how to apply the Congruence model.

      Burke-Litwin Causal Model

      This tool helps you understand the different components of an organization relate to each other when going through a period of change. There are 12 components that are interrelated and they are as follow,


      How to apply it:

      1. Find out where the need for change is coming from; whether from the external environment, transformational factors etc.
      2. Identify which of the elements in each group is responsible for the situation
      3. Examine the key element along with the other 11 elements; pay special attention to those that are closely linked to the identified element
      4. Figure out the changes you need to make to the main element along with the other few elements it is closely linked to

      Learn more about the 12 drivers of change, the Burke-Litwin highlights here.

      https://creately.com/

      McKinsey’s Three Horizons


      Another framework for complementing your gap analysis could be McKinsey's Three Horizons of Growth.

      This framework forces you to think about your business progression over a series of time-based horizons that help you isolate your mandatory business-as-usual activities from your truly innovative drivers of growth.

      The 3 Horizons are:

      1. Horizon 1: Maintain and defend the core business
      2. Horizon 2: Nurture emerging business
      3. Horizon 3: Create genuinely new business

      By using this framework, organizations can identify gaps in their growth plans and ensure a balanced approach to innovation and sustainability.

      👉🏻Check out this article where you can learn more about McKinsey’s Three Horizons.

      Balanced Scorecard


      A balanced scorecard is a useful tool for categorizing your business activities into a series of outcome-focused quadrants (also named "perspectives"):

      1. Financial
      2. Customers
      3. Process
      4. People

      You can then mirror these same quadrants to categorize and prioritize your gaps and their associated action plans.

      By using the balanced scorecard for gap analysis, organizations can identify gaps in each perspective, understand how they relate to the overall strategy, and prioritize actions to address these gaps effectively.

      👉🏻Check out this article where you can learn more about the Balanced Scorecard.

      https://www.cascade.app/


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