Gap analysis: the starting point for suc­cess­ful strategic planning

Upon being presented with their company’s ob­jec­tives, many an employee has wondered, while shaking their heads, what the man­age­ment team is thinking when the gap between the strategic planning and feasible execution of an objective is so obvious. When a company clings to its ob­jec­tives without at­tempt­ing to adapt to the internal situation, this is a sign of poor, or at the very least, in­ad­e­quate business planning. Using gap analysis, you can determine the gap between the actual per­for­mance and the desired per­for­mance early on in the planning phase of a project. However, this is only useful if the company sub­se­quent­ly takes actions for im­prove­ment or strategic redi­rec­tion.

You can guess what this analysis focuses on from its name. The word “gap” describes it all. Gap analysis is a tra­di­tion­al tool for strategic marketing, which is used to determine the gap between the potential business planning ob­jec­tives and the actual possible results from a company’s regular ac­tiv­i­ties. This allows you to identify the weak points in your strategic planning early on. The company can then attempt to prevent these potential setbacks by redi­rect­ing their strategy or by modifying their business processes.

Gap analysis is therefore only effective if the company takes the time to assess and implement ad­di­tion­al measures. All this analysis does is describe the current situation and show whether the targeted business ob­jec­tives are realistic. The only way to bring about any positive change is through the use of ad­di­tion­al strategic marketing tools based on thought­ful analysis.

First, the values for the strategic objective are plotted on the graph. These naturally form the top and most steeply rising curve, since a company with a new market model will always want to maximize their profits.

Then, the values related to future per­for­mance are predicted using the actual values from the current business processes. This curve shows how the business will develop under unchanged con­di­tions. Usually, this is the flattest curve.

Lastly, the values which would be obtained under optimal con­di­tions are cal­cu­lat­ed. The resulting curve is usually located between the curve for the objective and the curve for the current situation.

The most important part of gap analysis, however, is not the curves but rather the gaps between them. They clearly indicate how much the strategic objective, optimal con­di­tions and current con­di­tions differ from one another. The gap between the objective and the optimal con­di­tions is referred to as the strategic gap, while the gap between the optimal con­di­tions and current con­di­tions is referred to as the op­er­a­tional gap.

A large strategic gap indicates that the objective is highly un­re­al­is­tic and that the available (or lack of) resources in the company were not given proper con­sid­er­a­tion during planning. This may result in needing to revise the strategy or improve the company’s potential per­for­mance, such as by in­creas­ing the number of employees or procuring more efficient machines.

A large op­er­a­tional gap indicates that something is pre­vent­ing business processes from running optimally. There is a long list of possible causes for this, ranging from technical mal­func­tions in business equipment to a lack of mo­ti­va­tion among employees. Therefore, further research is required to find out how the current situation can be improved.

Gap analysis is a useful tool for con­duct­ing an initial general as­sess­ment of the current situation. It can be used to identify weak points early on and implement the necessary cor­rec­tive actions.

However, the range of possible factors as­so­ci­at­ed with this analysis is so great that further research is necessary in order to apply these findings to the strategic direction of the company. Yet another problem is that factors external to the company are not con­sid­ered. Therefore, any pro­jec­tions for the future using current data are highly spec­u­la­tive.

As long as these lim­i­ta­tions are kept in mind when con­duct­ing gap analysis, it can be a helpful starting point for the strategic planning of a company.

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