The Hewlett-Packard Return Map

 

The Return Map is intended to be used by all of the functional managers on the new product introduction business team. It is basically a two dimensional graph displaying time and money on the x and y axes respectively.

 

Time is drawn as a linear scale while money is more effectively drawn on a logarithmic scale, because for successful products the difference between sales and investment costs will be greater than 100:1.

 

It is important to remember that money amount are shown rising cumulatively.

The time axis is divided into three parts:

• Investigation,
• Development, and
• Manufacturing and Sales.

Investigation

The purpose of Investigation is to determine the desired product features, the product's cost and price, the feasibility of the proposed technologies, and the plan for product development and introduction. At this point all numbers are estimates. Investigation is usually the responsibility of a small team and requires a relatively modest investment. At the end of Investigation, the company commits to develop a product with specific features using agreed-upon technologies.

 

Development

The development phase is usually the primary domain of R&D; in consultation with manufacturing; its purpose is to determine how to produce the product at the desired price.

 

Manufacturing Release

The formal end of the development phase is Manufacturing Release (MR) - that is, when the company commits to manufacture and sell the product. When the product is ready to be manufactured and shipped to customers, sales become a reality and manufacturing, marketing, sales costs and profits are finally more than estimates.

 

New Metrics

The map tracks - in money and months - R&D; and manufacturing investment, sales, and profit. At the same time, it provides the context for new metrics:

• Break-Even-Time,
• Time-to-Market,
• Break-Even-After-Release, and
• the Return Factor.

References

• House. C. H. and Price.R. L., "The Return Map: Tracking Product Teams, Harvard Business Review , January-February 1991, pp 92-101.

The Return Map: Tracking Product Teams

by 

• Charles H. House
 and 
• Raymond L. Price
• 
  

• Once time was money. Now it is more valuable than money. A McKinsey study reports that, on average, companies lose 33% of after-tax profit when they ship products six months late, as compared with losses of 3.5% when they overspend 50% on product development. More and more, advanced manufacturers are learning that the time required to develop a new product has more influence on its success than its costs.

  Little wonder, then, that senior managers are working hard to reduce their new product development cycles. At Hewlett-Packard, well over 50% of sales come from products introduced during the past three years, and more than 500 product development projects are going on at any given time. Even enterprises that develop just a few new products over several years, like Boeing Commercial Airplane Group, are focusing on reducing the time required to develop them.

  It is a common belief in management practice today that one of the most effective ways to shorten development cycles is through the collaborative work of cross-functional development teams. But if anything is easier said than done, it is that marketing people, development engineers, and manufacturing engineers should collaborate rather than “throw product specifications over the wall” to one another.

  Collaboration among people from different functions is difficult, uncertain, and suffers from too little mutual understanding. New product development teams are typically composed of people who do not have the experience or qualifications to criticize each other’s judgments or performance—certainly not while the project is evolving. They do not, and cannot, know all that their colleagues from other functions know. And uncertainty comes in many forms. What features do customers want? How do features translate into sales? Is the technology available to develop the features? Will the product be manufacturable at the desired price? Much of the challenge of new product development is centered on people from different functions finding answers to, and getting agreement on, just such questions.

  Obviously, the more team members understand the work of other functions and the interrelationships among all functions, the more likely they are to make intelligent decisions that will enhance the success of the product. But what constitutes understanding? Bill Hewlett, a founder of Hewlett-Packard, used to say, “You cannot manage what you cannot measure,” and his corollary was “What gets measured gets done.” By inference, the real challenge for teams is to develop measures that will help individuals assess how well they are doing what they agree must be done. Advanced manufacturers must create new products that will make the most profit in the least time, but what metric can managers of interfunctional teams use to direct their employees’ efforts toward this outcome?

  Ideally, such a metric would encourage the ongoing monitoring of a new product development project. It would allow people from different disciplines to assess the impact of their decisions and their colleagues’ decisions on the entire project. The metric would encourage collaboration among different functions: engender challenge and criticism without encouraging presumptuousness. It would serve as a prompt for learning and improvement. It would be easy to read and interpret, something to sketch on the back of an envelope while in a coffeepot discussion. And it would provide a way of visualizing progress holistically.

  In fact, Hewlett-Packard has been using just such a metric since 1987—we named it the “Return Map”—and it is so simple and elegant that it has become a staple of the company’s product development cycle. The Return Map graphically represents the contributions of all team members to product success in terms of time and money. First and foremost, it includes the critical elements of product development—the investment in product development and the return or profits from that investment. But the Return Map also shows the elapsed time to develop the product, introduce it, and achieve the returns.

  Not surprisingly, the Return Map’s crucial coordinate is the point at which product sales generate sufficient profit to pay back the initial development investment, that is, when the project breaks even. But the map’s greatest virtue is not in what it says so much as in what it does. It provides a superordinate goal and measure for all the functions and thus shifts the team’s focus from “who is responsible” to “what needs to get done.” Even more important, the map forces members of the team to estimate and reestimate the time and money it will take to complete their tasks and the impact of their actions on overall project success. In giving a comprehensive picture of the common task, it helps to create the only discipline that works, namely, self-discipline.

  The Basic Elements

  The Return Map is intended to be used by all of the functional managers on the business team. Basically, it is a two dimensional graph displaying time and money on the x and y axes respectively. The x axis is usually drawn on a linear scale, while the y axis is drawn most effectively on a logarithmic scale because for successful products the difference between sales and investment costs will be greater than 100:1. It is important to remember when looking at the exhibit curves that the dollar amounts are rising cumulatively. The x axis is divided into three segments, showing partitioned tasks and responsibilities—Investigation, Development, and Manufacturing and Sales (see Exhibit 1).

The Return Map Captures Both Money and Time 1

The purpose of Investigation is to determine the desired product features, the product’s cost and price, the feasibility of the proposed technologies, and the plan for product development and introduction. At this point, all numbers are estimates. Investigation is usually the responsibility of a small team and requires a relatively modest investment. Obviously, Marketing and R&D should collaborate to determine what features customers want and how they could be provided. At the end of Investigation, the company commits to develop a product with specific features using agreed-upon technologies.

The Development phase is usually the primary domain of R&D in consultation with manufacturing; its purpose is to determine how to produce the product at the desired price. Challenges during this phase include changing product features, concurrent design of the product and the manufacturing processes, and, often, the problems associated with doing something that has not been done before.

The formal end of the Development phase is Manufacturing Release (MR)—that is, when the company commits to manufacture and sell the product. When the product is ready to be manufactured and shipped to customers, sales become a reality and manufacturing, marketing, sales costs, and profits are finally more than estimates. The transitions between these phases or the project checkpoints are key times for the Return Map.

Perhaps the best way to grasp how the Return Map evolves from these early stages is to examine a map for a completed project, where all the variables are known—in this case, the map for a recent Hewlett-Packard pocket calculator (see Exhibit 2).

First, the Team Plots Estimates 2

Investigation took 4 months and cost about $400,000; Development required 12 months and $4.5 million, with many new manufacturing process designs for higher quality and higher production volumes. Hence, the total product development effort from beginning to manufacturing and sales release took 16 months and cost $4.9 million (see the investment line on Exhibit 2). Once the product was released, sales increased consistently for 5 months and then increased at a slightly faster pace during the next 9 months. Sales volume for the first year was $56 million and for the second year was $145 million (see the sales line on Exhibit 2—and remember, the differences are greater than they appear owing to the log scale). Cumulative sales volume gives a sense of how quickly and effectively the product was introduced and sold.

In the first year, net profits of $2.2 million were less than expected due to the sales volume lag and the resulting increase in cost per unit. But profits (see the profit line in Exhibit 2) increased significantly in the second year and passed through the investment line about 16 months after Manufacturing Release. For the second year, net profits reached $13 million. Profits are the best indicator of the contribution the product made to the customers since they reflect both the total volume of sales and the price the product can command in the marketplace.

So the critical lines that are systematically plotted on the Return Map include new product investment dollars, sales dollars, and profit dollars. Each of these is plotted as both time and money, with money in total cumulative dollars. Now that we have the basic elements of the map, we can focus on some novel metrics.

New Metrics

The map tracks—in dollars and months—R&D and manufacturing investment, sales, and profit. At the same time, it provides the context for new metrics: Break-Even-Time, Time-to-Market, Break-Even-After-Release, and the Return Factor. These four metrics (see Exhibit 3, plotted for the pocket calculator) become the focus of management reviews, functional performance discussions, learning, and most important, they are the basis for judging overall product success.

Key Metrics Complete the Picture 3

Break-Even-Time, or BET, is the key metric. It is defined as the time from the start of investigation until product profits equal the investment in development. In its simplest form, BET is a measure of the total time until the break-even point on the original investment; for the pocket calculator, BET is 32 months. BET is the one best measure for the success of the whole product development effort because it conveys a sense of urgency about time; it shows the race to generate sufficient profit to justify the product in the first place.

Time-to-Market, or TM, is the total development time from the start of the Development phase to Manufacturing Release. For the calculator project, TM was 12 months. This time and its associated costs are determined primarily by R&D efficiency and productivity. TM makes visible the major check-points of Investigation and Development. It is obviously the most important R&D measure.

Break-Even-After-Release, or BEAR, is the time from Manufacturing Release until the project investment costs are recovered in product profit. BEAR for the calculator was 16 months. This measure focuses on how efficiently the product was transferred to marketing and manufacturing and how effectively it was introduced to the marketplace. Just as TM is considered the most important R&D metric, BEAR is the most important measure for marketing and manufacturing.

Finally, the Return Factor, or RF, is a calculation of profit dollars divided by investment dollars at a specific point in time after a product has moved into manufacturing and sales. In the case of the pocket calculator, RF after one year was .45 (that is, cumulative profit of $2.2 million divided by total investment of $4.9 million) and was 3.1 (a profit of $15.2 million divided by $4.9 million) after two years. The RF gives an indication of the total return on the investment without taking into account how long it took to achieve that return.

The effectiveness of the Return Map hinges on the involvement of all three major functional areas in the development and introduction of new products. The map captures the link between the development team and the rest of the company and the customer. If the product does not sell and make money, for whatever reasons, the product development efforts were wasted. The team is accountable for designing and building products that the customers want, doing it in a timely manner, and effectively transferring the products to the rest of the company.

Making the Most of the Return Map

We have argued that an interfunctional team uses the Return Map most appropriately during the Investigation phase by generating estimates for a final map, including investment, sales, and profit. These initial estimates or forecasts are a “stake in the ground” for the team and will be used for comparison and learning throughout the project. By focusing on the accuracy of the forecasts, marketing, R&D, and manufacturing are forced to examine problems as a team; all three functions are thus sharing the burden of precision.

Too often, the whole burden during the initial phase of a project is placed on the R&D team—to generate schedules, functionality, and cost goals. But the Return Map requires accurate sales forecasts, which forces market researchers to get better and better at competitive analysis, customer understanding, and market development. Similarly, manufacturing involvement is essential for forecasting cost and schedule goals; manufacturing engineers should never be left to develop the manufacturing process after the design is set.

We cannot emphasize enough that missed forecasts generated for the Return Map in the Investigation phase should be viewed as valuable information, comparable with defect rates in manufacturing—deviations from increasingly knowable standards, proof that either the process is out of whack or the means for setting the standard are. The Return Map can be used to provide a visual perspective on sales forecasts and expected profits given any number of hypothetical scenarios. What if the forecasts varied by 20%, over or under? What are the implications of reaching mature sales six months earlier than expected? The Return Map allows for a kind of graphic sensitivity analysis of product development and introduction decisions; it sets the stage for further, indeed, continual investigation.

By no means should the Return Map be used by management to punish people whose forecasts prove inaccurate. Estimates are a team responsibility or at least a functional one—no individual should be held responsible for generating the information on which they are based. Moreover, if functions are penalized for being late, they will simply learn to estimate conservatively, building slack into a discipline whose very purpose is the elimination of slack.

Consider the estimated Return Map for a proposed ultrasound machine (Exhibit 4). The Investigation phase is planned to last 5 months and cost $500,000, TM is estimated to be 9 months and cost $2.3 million, while anticipated BET is 18 months. Mature sales volume is expected to be 300 units a month, or $16 million, and mature profits are expected to be $2 million per month. These estimates were made by a project team that had developed two other ultra-sound products and were quite knowledgeable about the medical instrument business. They wanted to take more time in the Investigation phase to completely understand the desired product features in order to move more quickly during the Development phase.

During Investigation, the Ultrasound Team Makes Early Estimates 4

During the Development phase, that is, once product features and the customer requirements are understood, TM becomes vital and other concerns fade. The Return Map implicitly stresses execution now. The faster a product is introduced into a competitive marketplace, the longer potential life it will have—hence the greater its return. TM emphasizes the need to respond to market windows and competitive pressures.

It is difficult to keep project goals focused during development. Creeping features, management redirection, and “new” marketing data all push the project to change things in midstream, much to the detriment of engineering productivity and TM. The Return Map can help put this new information into perspective and help team members analyze the impact of changes on the entire project. For example, how much will new features increase sales and profits? If adding the features delays the introduction of the product, how will that affect sales and profit?

For example, two months into the Development phase of the ultrasound machine, Hewlett-Packard labs had a breakthrough in ultrasound technology that would enable the machine to offer clearer images. Should the project incorporate this new technology or proceed as planned? The project team determined that customers would value the features and they would result in more sales, though the new technology would be more expensive to produce. But would the changes be worth the extra expense?

The original Return Map was updated with a new set of assumptions (see Exhibit 5). Development costs would increase by 40% to $3.2 million, the TM would be extended by at least 4 months, but the sales could increase by 50% and net profits could increase by 30%. The Return Map demonstrated that the BET for the project would extend to 22 months, the BEAR would remain the same, but the RF would be reduced slightly.

During Development, New Technology Calls for Revised Estimates 5

What on the surface seemed like a great idea proved not to increase significantly the economic return. In the end, the team decided to incorporate the new technology anyway, but in order to capture a greater market share, not to make more money. The team went into the changes with its eyes open; it made a strategic decision, not one driven by optimistic numbers.

Once the team gets beyond Investigation, the Development phase, represented by TM, can itself be segmented into subphases and submetrics that provide greater understanding and accuracy and more effective management. Teams that compare projects over time become more and more sophisticated about the development processes underlying TM forecasts. Within Hewlett-Packard, for instance, the time required for printed circuit board turnaround emerged as something of a bottleneck for many projects. So the company developed streamlined processes for printed circuit board development and eventually simulation tools that reduced the need for board prototypes.

Another HP study showed that company managers were much more effective at predicting total engineering months than total calendar months (that is, effort rather than time). The big mistake here seemed to be a tendency on the company’s part to try to do too many projects with the available engineers—resulting in understaffed projects. Once management focused on staffing projects adequately, the company experienced a significant reduction in this kind of forecast error.

Beyond Manufacturing Release

The Manufacturing Release, or MR, meeting is perhaps the single most important built-in checkpoint in the system. It is structured to allow the management team to focus on the original goals of the entire development effort and to compare the goals at the project’s inception with the new estimates based on the realities of the Development phase. The team can now analyze the adjustments required by the marketing and manufacturing estimates, in consequence of any elapsed time, schedule slippages, or the changed competitive and economic scene.

Consider the updated Return Map for the ultra-sound project showing the estimates that were made during the Development phase and the real development cost and TM (see Exhibit 6). The project took two extra months to complete and cost $700,000 more than estimated. At this time, the estimates for sales and profits are lower than Development phase estimates. The important point for team members to understand, obviously, is the effect of a slide in TM on the other measures, and they should take corrective action in the future to avoid delays. A series of MR meetings, supported by documentation, will sharpen any team’s estimating and development skills.

At Manufacturing Release, the Team Sees What Actually Happened 6

During the Manufacturing and Sales phase, the emphasis shifts from estimates to real data for sales and profits. This is the moment of truth for the development team. As sales and profits vary from the forecast, everyone has the right—and responsibility—to ask why. One HP study tracked sales forecasts for 16 products over a two-year period. The targets were set rather broadly—a 20% deviation either way would be acceptable—on the assumption that manufacturing and sales could adjust successfully to either surging or weakening demand within that range. Nevertheless, only 12% of the forecasts fell into the acceptable range.

From our experience, this is the time when the project team gets the most constructive criticism, insight, and enthusiasm to do things right, now and the next time. At the MR stage, analysis, thoughtfulness, and responsiveness are vital. We have seen products falter because of such varied problems as unreliable performance, an unprepared sales force, or an inability to manufacture the product in appropriate volumes—all problems that should be correctable, even at this late date. Problems such as inappropriate features, high costs, and poor designs, however, will have to wait for the next generation.

Incidentally, one important lesson we have learned is the need to keep a nucleus of the project team together for at least six months after introduction. Team members should be available to help smooth the transition to full production and sales, and the company’s next generation of products will benefit greatly from the team’s collective learning.

In addition to helping manage and analyze individual products, the Return Map can be used for families of products, programs, and major systems. As companies establish a market presence with a product, it must be buttressed with corresponding products based on customer requirements and the next appropriate technologies. A complete program strategy for an important market usually embraces products from three overlapping generations, which we call a “strategic cycle.”

A family of products can lead to overall success, even if some of the products do not reach standard return goals and are not seen as successful. The success of major new programs may not be obvious until the second generation is produced: it may take many years before success or failure is completely determined.

The table illustrates the cumulative data for an entire product family, divided into three generations, with the second generation divided into five major products (A, B, C, D, E).

Three Generations of One Product Family

A quick scan of the second generation of products suggests that productivity could have been improved by doing only those products that end up with a low BET, low BEAR, and a high RF. Unfortunately, this requires more luck than foresight. One product in the series (product D) made much of the economic difference, but it is not possible to establish a full program with only one product. In fact, the success of product D was almost entirely dependent on the investment made in the technology for product C (note the long Time-to-Market) and the market understanding gained from product B.

To have a winning and sustained market presence usually requires at least three generations of products. Frequently, one of those generations will develop a new and significant technology, while the next generation will exploit that technology by means of rapid product development cycles—products tailored to specific markets.

Easier Said Than Done

The Return Map, along with its BET, TM, BEAR, and RF measures, provides a useful indicator of the effectiveness of new product development and introduction. It provides a general management tool to track the development process and to take corrective action in real time. But while the map is simple, the difficulties of using it well are great, time-consuming, and require significant commitment. The first challenge is to get the forecast data out and to track the actual costs, sales, and profits against those forecasts. Unfortunately, most development teams will have to pull this data manually from the period expense reports, since most companies track costs, sales, and profits on a period rather than a project basis. If development teams can prove project data useful, though, accounting departments may start tracking numbers for major projects and not only aggregate numbers month by month. (HP is now overhauling its cost accounting systems to provide project as well as period data.)

Another challenge is to get functional managers to work together toward common goals and to share openly the subset measures that govern their function’s contribution to BET, TM, and BEAR. The map exposes each function’s weaknesses insofar as each function’s performance is clearly measurable against its own predictions—predictions upon which important project decisions were based. Again, if there is going to be open sharing of data, the Return Map should not be used to penalize people for their forecasts. The race to market is a concerted effort that requires enthusiasm, not fear and apprehension. The judgments of the marketplace are generally all the correction a talented team requires.

The Return Map provides a visible superordinate goal for all the functions of the team and, in graphically representing the common task, helps them collaborate. No graph can substitute for judgment and experience—yet there is no substitute either for basing judgment on an accurate picture of experience.

https://hbr.org/1991/01/the-return-map-tracking-product-teams

How do I build a high-performance team for new projects?

 Having a good understanding of what team dynamics are is a good starting point.

What to consider when building a high-performance team

Size – A classic mistake in team formation is to include too many members. Teams with more than eight people often suffer from challenges in coordination, increased tension, and reduced productivity.

Invisible Diversity – Most corporations in recent years have begun paying increasing attention to diversity and inclusion. While visible diversity is key (gender, age, ethnic background, etc.), we risk overlooking the importance of invisible diversity in teams. As team leaders forming a team, do you take into account the members’ life stories and personality differences? They are an intrinsic part of employees’ identity and the most innovative ideas will usually get proposed in teams characterized by “diversity of thought”.

Complementarity – While a candidate’s expertise for a job is highly important, many line managers underestimate the importance of this person’s complementarity with the team of peers. What is their personality? How self-aware are they? How good are they at verbalizing and resolving conflict with others?

Peer recruitment – A key ingredient to forming successful and complementary teams is to involve the candidates’ potential peers at the recruitment stage. First, you are giving your team an opportunity to voice or withdraw support from a candidate, and are increasing the likelihood that they help this person succeed afterward.

A good Team Leader is absolutely critical in creating high-performing teams

• Team Leaders Inspire More Than They Drive
• Team Leaders Resolve Conflicts & Increase Cooperation
• Team Leaders Set Stretch Goals
• Team Leaders Communicate, Communicate, Communicate the Vision & Direction
• Team Leaders Are Trusted

Characteristics of High Performing Teams

• Effective Work Practices
• Mutual Respect Among Leaders & Team Members
• Shared Vision
• Open, Clear Transparent & Totally Honest Communication

Mark Vernall

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).
• Measures—Measures 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/