Gap analysis manual: Process and tools explained

Gap analysis process: Step by step guide

Define the current state of the business

Before identifying gaps, you must first build a clear, detailed picture of where the business stands at the moment. This step forms the foundation of the entire gap analysis process.

Start by conducting a comprehensive analysis of your business as it stands today. This goes beyond surface-level metrics—delve deep into your product performance, business operations, customer satisfaction, employee engagement, and compliance. Evaluate internal systems like SQDCP (Safety, Quality, Delivery, Cost, People) and FCIL perspectives (Financial, customer, internal process and learning -growth) to uncover inefficiencies and recurring issues.

This holistic approach ensures your baseline assessment is accurate and well-rounded, forming the foundation of a meaningful gap analysis.

Key areas to cover:

• Product and service analysis- evaluate the quality, consistency, and market relevance of your current offerings.
• Business performance metrics- gather existing KPIs, financial data, and productivity reports. Use tools like SQDCP boards and FCIL frameworks to assess operational health.
• Customer insights- analyse customer trust, satisfaction scores, and complaints. Map out customer journeys and identify friction points through stakeholder interviews and feedback.
• Geographic and resource factors- consider the impact of regional markets, infrastructure, supply chain limitations, and local regulations.
• Internal capability review- examine team structure, skills, technology stack, and workflow efficiency. Highlight both strengths and areas of concern.
• External influences and trends- include competitive benchmarking, industry trends, legal changes, and environmental risks.
• Benefit analysis-identify how current operations are serving (or failing to serve) both the organisation and its customers.
• Key issues and challenges- surface systemic bottlenecks, recurring issues, or missed inefficiencies that affect business performance.

Define the goals and strategic objectives of business

Start by clarifying your organisation’s long-term business goals—what is the ideal future state you want to achieve? This could involve market expansion, operational excellence, or becoming an industry leader. Clearly define parameters and scope of your gap analysis by identifying the specific process, department, or strategy to improve. Align this with your business vision and set measurable objectives.

Also, research industry benchmarks and competitor strategies to understand where your business stands. This helps set realistic targets and adds depth to the analysis. Set SMART goals and align them with business strategy, customer expectations, and industry standards.

Key areas to cover:

• Define the long-term objectives of the organisation (not just operational KPIs)
• Set a clear future state that aligns with business vision
• Narrow down the focus area or department/process under evaluation
• Identify measurable success indicators tied to strategic goals
• Evaluate industry benchmarks and competitor strategies for context

Identify the gaps

Once you've established your current and desired states, the next step is to identify the gaps—the differences between where your business is and where it needs to be. This may include performance shortfalls, resource constraints, skill deficiencies, or process inefficiencies.

Key areas to cover:

• Use the 5 whys technique- apply this method to dig deep into the root cause of the performance or process gap. Template example-

▸ Why did this problem occur?

▸ Why did the cause identified in why 1 happen?

▸ Why did the cause identified in why 2 happen?

▸ Why did the cause identified in why 3 happen?

▸ Why did the cause identified in why 4 happen?

• Conduct root cause analysis-go beyond symptoms and identify the actual causes using tools like 5 whys, fishbone diagram, or pareto analysis.
• Analyse different types of gap analysis- consider approaches like performance gap analysis, skills gap analysis, strategic gap analysis, and market gap analysis for a comprehensive view.
• Benchmark current vs. Desired performance-compare actual performance with industry standards, best practices, or SMART goals to expose inefficiencies and underperformance.
• Prepare a gap analysis report- document your findings, including the gap overview, root causes, risks, and actionable recommendations for closing the gaps.

Develop a targeted action plan

Once the gaps and their root causes are clear, the next step is to design a strategic action plan tailored to close those gaps efficiently. Start by defining clear, measurable objectives that align with your long-term business goals.

Choose the right improvement framework, set specific objectives, and break them into manageable tasks.

Incorporate customer feedback, market trends, and brand challenges to keep the plan relevant. Define KPIs, assign responsibilities, and set milestones. Build in review points to track progress and adapt as needed.

Develop a resource plan that outlines required tools, budget, manpower, and support systems.

Key areas to cover:

• Choose a planning framework like SQDCP, SMART goals, PDCA, Hoshin Kanri X Matrix, strategy map, etc. aligned with business needs
• Break down goals into specific, actionable tasks
• Assign roles, responsibilities, and accountability
• Allocate resources effectively (budget, time, tools, teams)

Implement action and bridge the gap

Once you've developed a detailed action plan, the next step is gap analysis implementation. Put your plan into motion by executing the required changes. Ideas are nothing without execution.

Assign clear roles, set deadlines, and track deliverables using gap analysis dashboards or project tracking tools. Monitor Key Performance Indicators (KPIs) to ensure you're making measurable progress toward closing the gaps and adjust based on real-time performance and stakeholder input.

Key areas to cover:

• Assign ownership for each action item
• Allocate budget, time, tools, and talent
• Use dashboards and KPIs to track success
• Stay flexible—adjust based on ongoing insights

Monitor progress, collect feedback, and repeat

Monitoring progress is vital for sustaining improvements. After implementation, review performance regularly and evaluate whether your organisation is moving closer to its strategic goals and if any new gaps have emerged.

This step emphasises continuous improvement—use lessons learned to refine processes and restart the gap analysis cycle if necessary. Regular evaluations ensure your business stays aligned with long-term objectives, adapts to change, and maintains operational excellence.

Key areas to cover:

• Incorporate customer feedback and known brand challenges
• Track progress using performance metrics and clear milestones
• Create flexibility to adjust actions based on review findings
• Communicate progress across all levels

Boost continuous improvement with gap analysis template

Gap analysis template is a structured tool that helps to identify the difference between their current performance and desired goals through step-by-step process. By mapping out gaps through different frameworks and metrics, manufacturers can clearly see where improvements are needed.

Using a template ensures:

• Consistency in analysing KPIs across teams.
• Clarity in setting benchmarks and SMART goals.
• Actionability with defined steps to close performance gaps and ensure continuous improvement

9 Essential tools of Gap analysis and key features

SWOT analysis, Fishbone diagram, McKinsey 7S framework, PEST analysis, Nadler Tushman model, Burke-Litwin causal model and others are valuable tools that can be used with a gap analysis to gain deeper insights and facilitate decision-making.

These tools provide different perspectives and approaches to conducting gap analysis, allowing for a comprehensive understanding of the gaps and developing effective strategies to bridge them. It's important to select the most appropriate tools based on the specific context and objectives of the gap analysis.

Let's take a closer look at each tool:

1. SWOT analysis

SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is a widely used strategic planning tool that evaluates a company’s internal capabilities and external environment. Strengths and weaknesses are internal factors—like resources, systems, and culture—while opportunities and threats lie in the external landscape such as market trends, regulations, and competition. By mapping these four areas, leaders can spot critical performance gaps between where they are and where they want to be, aligning resources more effectively with strategic opportunities.

Key features

• Distinguishes between internal and external influences
• Helps align strategy with company strengths and market opportunities
• Encourages proactive problem-solving and decision-making
• Easy to facilitate during workshops or strategic planning sessions

2. Fishbone diagram

The Fishbone Diagram, also known as the Ishikawa Diagram or Cause-and-Effect Diagram, visually organises potential causes of a problem or performance gap into categories. Typically structured around six M (Man, Machine, Method, Material, Measurement, and Mother Nature), this tool encourages teams to brainstorm deeper layers of causes behind a single effect. It’s ideal for manufacturing, quality control, and process optimisation, enabling teams to fix the root of the problem and not just the symptoms.

Key features

• Categorises and visualises root causes of gaps
• Encourages team-based root cause brainstorming
• Useful in quality audits, defect analysis, and downtime reviews
• Often paired with 5 Whys for deeper analysis

3. Customisable digital dashboards

Customisable digital dashboards are modern gap analysis tools designed to provide real-time, visual insights into key performance areas across manufacturing operations. Tools like the SQDCP board (Safety, Quality, Delivery, Cost, and People) and FCIL can be integrated into a single digital software like balanced scorecards that tracks both daily metrics and structured problem-solving progress. These dashboards are highly adaptable and align with lean daily management principles, making them essential for team accountability, decision-making, and continuous improvement.

Key features

• Tracks real-time metrics across critical KPIs
• Enables color-coded visual management (e.g., green/yellow/red indicators)
• Allows role-based access and multi-departmental views
• Facilitates performance tracking, accountability, and communication
• Can be customised for various industries, goals, and workflows
• Promotes faster decision-making through live data visual management

4. McKinsey 7S framework

The McKinsey 7S model is designed in 1970s to analyse the alignment of seven internal ‘S’ elements —

• Hard elements-Strategy, Structure, Systems
• Soft elements- Shared Values, Style, Staff, and Skills.

The framework shows that all these elements must be in sync for an organisation to function effectively. By assessing gaps in alignment across these components, leadership can identify cultural, structural, or skill-related weaknesses that impede performance or change initiatives.

Key features

• Enables a comprehensive internal diagnostic
• Ideal for transformation, reorganisation, and leadership transitions
• Helps align operations, strategy and execution
• Visual representation supports workshops and boardroom discussions

5. Nadler-Tushman Congruence model

The Nadler-Tushman Congruence Model is a diagnostic tool to uncover why an organisation may be underperforming. It focuses on the congruence or balance between four core components: Work, People, Structure, and Culture. Gaps or misalignments between these elements often lead to inefficiencies, low productivity, or strategic failure.

This model evaluates both inputs (such as resources, leadership, and market conditions) and outputs (like employee behavior and business results) to identify problem areas and guide corrective action.

Key features

• Highlights interdependencies within an organisation
• Diagnoses breakdowns in workflow, behavior, or communication
• Supports strategic alignment efforts
• Useful in leadership development and enterprise restructuring

6. PEST / PESTLE analysis

PEST (Political, Economic, Social, Technological) and PESTLE (adds Legal and Environmental) analysis, mainly identifies external macro-environmental factors that affect business performance. By assessing these factors, businesses can forecast threats and opportunities that may create strategic gaps in the future. It is commonly used during market entry, long-term planning, and regulatory reviews.

Key features

• Helps anticipate future performance risks
• Complements SWOT and benchmarking
• Excellent for strategic foresight in uncertain environments
• Encourages policy, legal, and sustainability awareness

7. Process flowcharts

Flowcharts provide a visual breakdown of tasks, decisions, and workflows, making inefficiencies easy to identify. This tool is particularly effective in manufacturing and service operations, where standardised procedures are essential. By mapping the current and desired workflows, organisations can spot redundancies, bottlenecks, or missing steps contributing to performance gaps.

Key features

• Clarifies process structure and sequence
• Makes process breakdowns visually apparent
• Supports SOP creation and lean six sigma
• Useful in training and onboarding

8. Benchmarking

Benchmarking is the process of comparing your organisation’s performance with industry leaders or direct competitors. It helps you identify where your business falls short and what best practices can be adopted to close those gaps. Benchmarking can be internal (between departments), competitive, or functional (comparing to best-in-class companies across industries).

Key features

• Highlights quantitative and qualitative performance gaps
• Encourages adoption of proven practices
• Tracks KPIs over time or against external sources
• Drives data-informed strategy improvement

9. Burke-Litwin model

The Burke-Litwin Causal Model is a strategic change management framework that explains how different elements within an organisation influence one another and drive overall performance. It identifies the cause-and-effect relationships between internal and external factors—such as leadership, culture, systems, and structure—helping organisations diagnose performance gaps and assess readiness for change.

Key features

• 12 interrelated organisational variables
• Highlights root causes of performance issues
• Differentiates transformational vs. transactional change
• Aligns strategy with operations and employee behavior
• Supports data-driven gap analysis and change planning

Closing the gaps with Data Point software

Gap analysis is a powerful tool for identifying and addressing performance shortfalls within an organisation. By following a structured process and using tools like SWOT analysis, flowcharts, strategy maps, and models such as Burke-Litwin and Nadler-Tushman, businesses can uncover root causes, align strategies, and drive meaningful change.

Whether you are optimising workflows or planning transformation, combining gap analysis techniques with the Data Point Balanced Scorecard delivers the clarity, focus, and performance tracking essential for continuous improvement and sustainable growth.

Data Point strengthens this process by translating strategic objectives into measurable KPIs across financial, operational, customer, and learning perspectives. It helps organisations bridge the gap between current performance and long-term goals by enabling real-time tracking, team alignment, and data-driven decision-making. With its visual dashboards and integrated reporting tools, Data Point ensures that the insights uncovered during gap analysis are actively monitored, implemented, and improved upon.

FAQs

1. What is mean by gap analysis process?

Gap analysis is the process of comparing the current state of performance with the desired state to identify shortfalls or "gaps." It helps in creating action plans to bridge those gaps for improvement.

2. Is SWOT analysis a gap analysis?

SWOT analysis is not a gap analysis but a tool or technique that can support it. SWOT helps identify strengths, weaknesses, opportunities, and threats, which can inform a gap analysis by highlighting internal and external factors affecting performance.

3. What is a gap tool? Example

A gap tool is any framework, template, or software that helps identify, analyse, and close the difference between current and desired performance. Common tools include SWOT analysis, Fishbone diagram, and strategy maps.

4. What are types of gap analysis? Give example

Gap analysis types are categories based on what area is being assessed.

Common types are-Performance gap analysis, strategic gap analysis, skills gap analysis, market gap analysis, and compliance gap analysis.

• Performance Gap: Difference between actual and expected performance. Example: A factory producing 700 units instead of the target 1,000 units.
• Skills Gap: Mismatch between employee skills and job requirements. Example: Technicians lacking training in new automation tools.
• Strategic Gap: Misalignment between current capabilities and long-term goals. Example: A company aiming for global expansion without adequate infrastructure.
• Market Gap: Missing products or services in a market segment. Example: No local supplier offering eco-friendly packaging in a high-demand area.
• Compliance Gap: Shortfalls in meeting industry or legal standards.

5. What are the 5 basic steps in the gap analysis process?

• Define the current state
• Identify the desired future state
• Spot the gaps
• Analyse the root causes
• Create an action plan to close the gaps

6. What is mean by 5 Whys in gap analysis?

The 5 Whys is a root cause analysis method used within gap analysis. By repeatedly asking “Why?” (typically, five times), it uncovers the underlying cause of a performance gap.

7. What is the basis of gap analysis?

The basis of gap analysis is identifying the difference between where an organisation is and where it wants to be, then using structured tools to close that performance gap effectively.

8. How does gap analysis help in strategic management?

Gap analysis supports strategic management by aligning goals with actual performance, uncovering weaknesses, guiding resource allocation, and helping in setting SMART goals for long-term success.

9. What is meant by a gap analysis report and its use?

A gap analysis report documents the findings of a gap analysis, highlighting current vs. desired performance, root causes, and recommended actions. It is used to guide decision-making and improvement initiatives.

10. What is a gap analysis checklist?

A gap analysis checklist is a structured list of questions or criteria used to evaluate current vs. desired performance. It ensures no critical area is overlooked during the assessment.