Gap analysis is an excellent strategic tool used by management to identify where the company is going and what is the expectation or the potential of the company. In essence, Gap analysis compares the actual achievement with the potential achievement to find the gap in the existing strategy. This gap then needs to be filled such that the company meets its own potential.
There can be many reasons that gaps exist within a companies strategy. Most of these reasons are because of a changing business environment. In the last decade itself, we have many changes in the business environment. Retail market has come in leaps and bounds, internet is taking over retail and now mobiles and smart phones are utilizing internet to get the customers what they need at their doorstep. That is a lot of changes in a decade.
Imagine that you are a very old newspaper company and you only want to continue with traditional paper distribution. You neither want to have a website, not do you want a mobile app. Slowly but surely, your newspaper will lose popularity. This is because you are letting go of a majority of potential readers – The online readers as well as the mobile readers. Thus, at the end if the newspaper company looks at its downfall, it will realize that there was a gap in the technology present in the market and the technology that the company used. Due to the absence of technology usage, the company has failed in attracting new readers.
Thus, gap analysis analyses where the company stands currently, what is the current business environment? And where the company needs to go and subsequently what the company needs to do to reach its potential. Gap analysis can also suggest strategies which optimizes the utilization of resources to give the best results possible.
Another aspect of gap analysis is expectations. These expectations may be from vendors, employees or customers. If the expectations are not met, there is a gap between the expectations and the actuals. For example – vendors expect timely payment, but the payments are always delayed. Thus, due to this gap in communication, the company might be losing vendors. Meeting expectations is another objective of Gap analysis.