A gap analysis is a process of assessing the differences in performance between a business’ information systems or software applications to decide whether business requirements are being met and, if not, what steps should be taken to make sure they are met successfully.
Gap Analysis can be understood as a planned tool used for analyzing the gap between the target and expected results, by assessing the extent of the task and the ways, in which gap might be bridged. It engages makes a comparison of the present performance level of the entity or business unit with that of the standard established previously.
Gap Analysis is a process of identifying the gap between optimized distribution and integration of resources and the current level of allocation. In this, the concern’s strengths, weakness, opportunities, and threats are analyzed, and possible moves are examined. Different strategies are selected on the basis of:
- Width of the gap
- Chances of reduction
If the gap is thin, stability strategy is the best alternative. However, when the gap is large, and the reason is environment opportunities, expansion strategy is appropriate, and if it is due to the past and proposed a bad performance, retrenchment strategies are the perfect option.
Types of Gaps
The term ‘strategy gap’ entails the variance between actual performance and the desired one, as mentioned in the organization’s mission, objectives, and strategy for reaching them. It is a threat to the concern’s future performance, growth, and survival, which is likely to influence the efficiency and effectiveness of the company. There are four types of Gap:
The difference between anticipated performance and the actual performance.
The gap between budgeted sales and real sales is termed as product/market gap.
The variance between a targeted and real profit of the company.
When there is a lag between the essential number and quality of workforce and actual strength in the organization, it is known as manpower gap.
For various types of gaps, various types of strategies are opted by the firm to get over it.
Alternative Courses of Action
In case, gaps are discovered the organization’s management has three alternatives:
Redefine the objectives
If there is any various between objectives and forecast, first and foremost the organization’s top executives need to check whether the objectives are realistic and achievable or not. If the objectives are deliberately set at a high level, the company should redefine them.
This is the smallest amount employed action, but it can be considered.
Change the Strategy
Finally, to bridge the gap between the organization’s objectives and forecast, the entity can go for changing strategy, if the other two alternatives are considered and rejected.
Before making any modification in the strategy, one must consider that the gap exists between the current and proposed state of affairs. It is too large to be noticed, and the organization is encouraged to reduce it. The organization’s management is of the opinion that something can be done to reduce it.
Stages in Gap Analysis
On what guesses the existing strategy is based?
Predict the future environment
Is there any inconsistency in the assumption?
Determine the importance of gap between the current and future environment
Are changes in objectives or strategy required?
Whether it is estimated sales, profit, capacity or overall performance, they are always based on the past, and present figures and some amount of assumption are also involved in it. So, the incident of the gap is quite natural, but if the gap is large, then it is a point to ponder because it might have an adverse effect on the company’s future.
There are a number of reasons a Gap analysis plays an important part of the organization’s adoption. Gap analysis assists you to get closer to your customers, study their behavior and expectations, and thereby analyze whether the present operations are capable of achieving customer expectations. If not, you will need to strategies on the actions that are required so that the products or services delivered are as per market demands.