Gap Analysis is a strategic tool that helps businesses identify the differences or “gaps” between their current performance and desired goals. This approach involves assessing existing capabilities, defining specific objectives, and creating an action plan to bridge any gaps. By pinpointing areas for improvement—whether in performance, skills, or resources—organizations across industries can prioritize actions and allocate efforts more effectively. 

Another day, another meeting riddled with corporate anxieties. After getting comfortable in your seat, your company executives share that there has been an uptick in poor customer reviews this past quarter. Before panicking, you realize that the identified gap is actually quite constructive—in fact, you can already think of some concrete strategies to bring your customer experience to where it needs to be. This process of addressing the mismatch between performance expectations and reality is called a gap analysis. 

A gap analysis, also known as a needs analysis or pre-audit, is a comparative tool for an individual, team, or organization to look at whether current performance measures up relative to what is expected or desired.¹ When conducting a gap analysis, your company will look into how several different resources are applied—such as the amount of time, money, and labor—and then determine what the desired goal is compared to the current state. Management will then analyze any identified gaps, leading to an action plan to close them as your company moves closer to achieving its targets. 

The action plan to “close the gap” is known as a strategic gap analysis. This approach outlines specific steps to achieve ideal business outcomes based on the deficiencies identified before. In other words, while a gap analysis focuses on uncovering gaps, the strategic gap analysis is about taking targeted action to bridge them.

Steps to Complete a Gap Analysis 

A gap analysis has six broad steps that can be further broken down into more elaborate components. These six steps can be summed up by the following questions:¹

1. What is the current performance state? A gap analysis begins with investigating how your company is currently doing. Your team may do some digging into what products are sold, which demographics you’re serving or selling to, what locations are being reached, and even what employee benefits are present. 
   This first step might include quantitative information like financial records of sales or customer feedback surveys. Note that a gap analysis may occur because a specific issue has already been brought to the table—perhaps customer feedback hasn’t been great, with low product ratings or negative responses from those surveys.
2. What is your desired future performance state? This step gets to the core of what a gap analysis is by posing the question: what does your company want to be?  When considering future performance, careful deliberation here is especially key, as this step will pan out the ensuing strategies to reach future targets. 
   For a gap analysis to be a success, a company needs to have specific and measurable goals rather than those that are vague. For instance, simply saying “let’s sell more” is worlds apart from “our goal is to achieve a 50% sales increase over the next 6 months.” For this second step, competition and other markets may also be a means to ascertain future performance. 
3. What are the gaps? After identifying the current and future states, your company may compare the two to spot any differences or “gaps” that exist—and, more importantly, why. For instance, issues like disappointing sales numbers and poor product reviews may actually be a result of employees not being fairly compensated, leading to underperformance and less motivation. 
   It is important to note that gaps nowadays may be more complex than ever before in a globalized, high-tech world where markets often coincide, crossing both physical and digital borders. The complexity and nuance of gaps should be something to have in mind before taking action too quickly!
4. What solutions should your company consider? After identifying all the gaps, the final step is to create an action plan to reach the desired future state. Depending on the nature of the challenge, one or several simultaneous approaches may be implemented. Remember, just as with goals, solutions need to be measurable in ways that easily correspond to gaps. For example, the gap of poor customer service reviews can be compared with the solution of a customer satisfaction percentage. 
5. How will solutions be implemented for change? While step four is all about coming up with the solution, step five is when your company goes forward in implementing the strategy to close the identified gap. Ideally, at this point, a company will start to reach its targets—and if not, might consider going back to the drawing board.
6. How will changes be monitored? Gaps are not simply closed, never to be seen again. Your company must watch closely after the solution is implemented to measure success. While in some cases, the right steps may have already been taken, other times, a company may realize the gap was bigger than originally anticipated. A gap analysis is not necessarily linear as a process—it is circular in the sense that a company will revisit its means to close a gap several times after its initial attempt to do so.
   

Types of Gap Analysis 

After learning more about how to conduct a gap analysis, you might be thinking: this still sounds too general to sufficiently address my company’s corporate worries. Luckily, there are specific types of gap analysis depending on what you’re looking for—and the industry you’re a part of, too.¹

Gap Analysis Tools

Aside from our various gap analysis types, there are also a plethora of gap analysis tools a company may apply as a framework to conduct a given gap analysis. Much like the types of gap analysis to choose from, a company may pick the tool that is best fitted for their needs, gaps, and industry.¹

Strategic Gap Analysis: Also known as a performance gap analysis, this type of analysis is often a formal internal procedure that outlines company performance.¹ A strategic gap analysis allows a company to see how it's doing when compared to its competition.

Market Gap Analysis: Also known as a product gap analysis, this kind of analysis looks into how market and customer needs are not being met.¹ For example, a market gap analysis may investigate the mismatch between product supply and consumer demand by closing the gap, where businesses can identify unmet needs, optimize their offerings, and gain a competitive advantage.

Financial/Profit Gap Analysis: With a focus on finances and their shortcomings, this analysis puts emphasis on various financial measures.¹ Some examples are fixed vs. variable costs, overheads, or margins. The aim of a profit gap analysis is to be effective with spending and saving compared to other competition. 

Skill Gap Analysis: A type of gap analysis that highlights employees over and above finances by spending time on personnel improvement or changes instead.¹ This may be found where there are gaps in knowledge or skills of current workers at a company. By outlining the goals of a company, organizations can assess whether current workers are good fits. This might lead to suggestions for training or outside hires. 

Compliance Gap Analysis: A means to assess how external regulations come into play when doing a given task, frequently in relation to internal audits.¹ A common example is for a company to look at its own accounting before hiring an external auditor to provide advice on financial outcomes. This type of analysis is not strategic overall; rather, it is a cautionary measure to avoid fees and to meet regulations, reporting standards, or deadlines.

Product Development Gap Analysis: When new products are made, this analysis investigates what markets are demanding and if a product will fit into such demands.¹ Here, companies often implement product development to introduce new technology or software. This is a dynamic type of analysis that allows for ongoing evaluations and changes of products internally. 

SWOT Analysis: An analysis tool spelling out the acronym Strengths, Weaknesses, Opportunities, and Threats. When it comes to a gap analysis, conducting a SWOT can help a company consider both internal and external factors relative to gaps found in its business. 

Fishbone Diagram: Also known as a cause-and-effect diagram or an Ishikawa diagram, this gap analysis tool helps to find what may be causing problems at a company in a creative way.¹ A company may conduct a fishbone diagram by starting at the center of a topic, where bigger categories are branched out from the primary issue. Further branches help to show why problems in each category exist. Overall, this diagram can visualize a highly complex problem into smaller bite-sized components.

McKinsey 7S: A gap analysis tool that considers seven elements beginning with the letter S in terms of a company’s performance and operation.¹ The framework outlines the three ‘hard factors,’ including Strategy, Structure, and Systems, in contrast to the four ‘soft factors,’ including Shared values, Skills, Style, and Staff. The McKinsey 7S can show us how each of the factors may relate to gaps found in an analysis, especially with long-term goals in mind.

PEST Analysis: With a focus on external factors and how they impact profits, the PEST model stands for Political, Economic, Social, and Technological. Additionally, sometimes PEST may extend to PESTLE, where Legal and Environmental factors are included, too.1 In terms of a gap analysis, a PEST may look into how external considerations lead to gaps, increase current gaps, or even solve current gaps. 

Technology gap analysis: A strategic tool used to assess the difference between an organization’s current technological capabilities and the technologies required to meet its goals effectively.³ For example, a company might use it to identify the need for automation tools to streamline workflows and improve productivity, bridging the gap between existing manual processes and desired efficiency.

Although a gap analysis feels rather business-oriented at first glance, its origin story may surprise you as one of wildlife conservation. In the mid-1970s, scientist J. Michael Scott (not to be confused with another Michael Scott we may know of) was deployed as a research biologist in Hawaii.⁴ Mike Scott, with a PhD in Zoology and a passion for thriving ecosystems, took note of a serious gap: biodiversity protection had limited information to support plants and animals. This was true at the time for localized geographies, individual species, and how these elements combine for survival.

In the early 1980s, Scott developed a prototype of gap analysis while at the University of Idaho, using data from his Hawaiian forest bird survey to map species richness across the island. His analysis addressed wildlife conservation by documenting the distribution of endangered birds and their ecosystems, filling a gap in itself—no system existed yet to organize species, their conservation, and geography. Scott sought to manage biodiversity concerns through this new system, inspired in part by the recent passing of the Endangered Species Act.⁴

The byproduct of this inaugural gap analysis was the development of the Hakaiau Forest National Wildlife Refuge, an ecosystem with a rich biodiversity. Into the late 1980s, Scott took his idea a step further with his research colleagues seen in the Idaho Gap Analysis Project,⁵ which soon became an important aspect of the U.S. Geological Survey in 1989.⁵, We may appreciate Scott’s original intentions to save wildlife gaining mass popularity in the early 2000s, where every country that signed the Biodiversity Treaty used gap analysis to protect our critters.⁴

As a landmark concept for biology, Scott and his fellow researchers used gap analysis to actively evaluate the protection status of bird species, particularly in relation to biodiversity. His cohort took a jump into different policies, land management, recovery planning, and other strategies with the hopes of protecting Hawaiian birds. Scott’s analysis found areas of endangered birds with habitats that were worthwhile and priorities for protection, soon to be applied to other issues in other industries. 

Since Mike Scott’s conservation efforts, gap analysis has flown far beyond just birds, reaching fields such as wood processing, the food industry, marketing, and business performance management—only to name a handful of uses in the 2010s.⁶ This versatile tool is used to identify discrepancies between current conditions and desired outcomes, making it applicable across a wide array of industries and disciplines. Its adaptability allows organizations to tailor the method to address diverse challenges, from optimizing production processes to enhancing customer satisfaction and strategic planning.

In modern workplaces, gap analysis has proven valuable in the digital realm, leading to the development of technology gap analysis: a tool for identifying gaps between current technological capabilities and future goals.⁷ Where gap analyses will continue to find their use with machine learning and artificial intelligence remains an exciting open question. 

J. Michael Scott

An American scientist and author who coined the method of gap analysis while studying endangered bird species in Hawaii in the late 1970s.⁴ Mike Scott was integral to the development of the Gap Analysis Project in the late 1980s, which continues to be a requirement for wildlife conservation projects today. Scott earned his PhD in zoology from the University of Oregon prior to his work with the University of Idaho, where he ran his exploration of bird species in Hawaii, which led him to invent the gap analysis.

Gap analysis isn’t only for birds, despite its original applications in Hawaii.⁴ There are many benefits from gap analysis across industries—such as how organizations can better manage resources, expand to new markets, and improve both customer and employee experiences. 

Better Resource Usage

An outcome of a robust gap analysis may be discovering areas where a current company’s resources are not meeting needs, and, in turn, how future resource allocation can achieve the opposite. Like other gaps found, finding resource gaps helps a company put a name to how resources such as employee skill sets, company budgets, time spent, or technology used can be changed to be more effective. For instance, gap analysis in healthcare can pinpoint discrepancies in staffing or equipment, helping to allocate resources efficiently and improve patient care.⁸ By addressing gaps, providers can reduce wait times and prevent resource shortages.

No company wants to have to use more resources than necessary, yet at the same time, a savvy business is able to optimize what resources they have without neglecting them. Some concrete impacts of a gap analysis for better resource usage include where resources need to be allocated more, reducing costs where resources are overused, and more effective project planning to catch resource usage before being wasted. 

Market Share Growth

Naturally, a gap analysis will help a company grow its market share to gain a bigger presence. This approach can shed light on where a company is not hitting the mark relative to its competition. A few different ways that market share may find benefits include finding untapped opportunities, better product development, and locating competitive advantages. One place in particular where there is high competition and the need to grow market share is at universities, where schools attempt to attract students to educate themselves and have memorable experiences on their campuses. Here, research demonstrates that gap analysis reveals how improving service quality is key to colleges retaining their market share of students.⁹

For those untapped opportunities, a gap analysis allows a company or organization to find the difference between their current versus potential market share—where finding new areas of business, as well as customers, is possible. In addition to new business opportunities and customers, a company’s products may also be improved in their features and functions alike to align with customer needs. With all of this in mind, a gap analysis permits a company to identify the gaps and close them as a means to competitive advantage for a bigger market share.

Customer and Employee Satisfaction

A bad review can kill a company—whether from a customer on your product site or from an employee on a public forum. As opposed to being reactive to both customer and employee needs, a company that conducts a gap analysis can identify issues surrounding dissatisfaction prior to those relationships becoming strenuous. One possible setting could be a tech company, where a gap analysis can reveal mismatches between current employee training programs and the skills needed to meet customer demands. By addressing gaps in customer support response times, the company can implement targeted improvements to enhance user experiences and employee efficiency.

A handful of specific ways to address these concerns on customer and employee satisfaction might be targeting poor reviews and reaching out to unhappy customers, fostering an engaging company culture, clear communication with both customers and employees, and building customer loyalty incentives. These types of solutions may be challenging to locate at first, but with the help of a gap analysis, a systematic way to discover and close these gaps is feasible. 

Like any type of analysis, gap analysis has flaws that need attention, such as issues stemming from bias, a lack of sufficient data to conduct gap analysis, and only being able to capture gaps in real time.

Cognitive Biases from Subjectivity 

Though a gap analysis seems like a straightforward strategy for identifying weaknesses within a business, bias can easily creep in. It can be difficult for a company to distinguish between objective versus subjective findings after a gap analysis, especially if the gaps discovered confirm preconceived expectations. For example, we may initially assume that poor customer reviews result from low customer satisfaction percentages, but it may stem from sour employees tainting the customer experience overall. A heuristic that may be coming into play is the confirmation bias, which may reveal why a gap analysis leads us to focus on outcomes that fit into our expected gaps.

How, then, can we fix this problem of subjectivity? To start, it is essential to be aware that the confirmation bias may be present, especially when it comes to data interpretation and picking which gaps are addressed. Prior to the gap analysis itself, a wise strategy is to determine what gaps are expected versus not expected. This way, a company can better distinguish between facts bringing light to critical issues, and “facts” merely confirming preconceptions that were formed beforehand.

Not Enough Data

Some key limits of the data from a gap analysis may be the volume of data itself, how to interpret the data, and if the data found can actually be leveraged to close the gap. These limitations are significant, as they can skew the nature of the gaps themselves—including how they are closed. However, some research has shown that a gap analysis is capable of running automatic data collection and access for specific medical problems like assessing glucose and clinical outcomes for patients.⁸

To avoid lackluster data, creating clear intentions for the amount of desired data from the get-go is crucial, such as the medical research doing so automatically. If the data doesn’t match the gap, then a company may need to reassess what gap analysis tool was used in the first place or if the gap in question doesn’t actually exist in reality. Without the necessary data, there may be inaccuracies with the found gaps and ensuing decision-making. For these reasons, picking the right tools for a gap analysis that fit the needs of a company’s industry, size, and problems at hand is just as important as the gap analysis itself.

Static Snapshots

While a gap analysis provides a picture of problems at the moment, it may fail to account for the dynamic aspects of ongoing issues that can impact the future. Nowadays, this static issue may be as pressing as ever before, given that market and technology changes are the fastest seen in human history. This overwhelming rate of advancements is often referred to as “accelerating change,” which sheds light on the concept of technology as a driving factor in social change that is increasing at an exponential speed.¹⁰ This may be especially true when considering technology like artificial intelligence and machine learning, which may require some more contemporary form of a gap analysis—perhaps sourced by these technologies themselves to be reliable. 

Gap Analysis for Public Health:  Mental Health and Addictions Programs in Alberta 

In 2014, experts in mental health and addictions in Alberta ran a project called Gap Analysis of Public Mental Health and Addictions Programs (GAP-MAP) with hopes of producing a comprehensive report of provincially funded mental health and addiction services for vulnerable populations.¹¹ A core gap often identified in this sphere is not enough evidence-informed discussions occurring for the delivery of such services—ranging from prevention, to diagnostics, to aftercare. In hopes of increasing meaningful evidence, the research group did a population survey of over 6,000 random adults, a survey for over 400 distinct programs and services, and reports from over 2000 full-time mental health and addictions managers. 

Given the complexity and scale of this problem in Alberta, where one-fifth of adults in the province experienced mental health or addiction problems in 2012, let’s look at some of the gaps identified:¹¹

1. Current services leave needs unmet. Almost 50% of adults feel services are unusable or provide insufficient support. In Alberta, this equates to over 300,000 people.
2. Services are reaction-focused within clinics. These services see limits in their timing and location, where services often occur during office hours and in the heat of the moment.
3.  Children and youth are left out of the system. Approximately half of Alberta Health Services (AHS) exclude children and youth—with only 10% of AHS services going toward those under 18. 

In the decade since this report, the mental health and addiction crisis of not only Alberta but across Canada continues to evolve in complexity and spread. How a gap analysis may account for these issues in 2025 such as the opioid crisis with more powerful drugs, the negative effects of social media on mental health, and the lingering struggle of youth mental health today, is a significantly important topic to explore. 

Gap Analysis for Agriculture: Improving Central American Bean Gene Pools 

Outside of the business world, where gap analyses are used more for company profits and growth, gap analyses may be applied to other important industries, such as agriculture. In a time where behavioral science may assist the future of crop growth, a gap analysis may be an approach to find out what is missing in how food is grown long before it's on our plates.

Ramírez-Villegas et al. looked into how gap analysis could be applied as a method in collecting crop gene pools for the Phaseolus beans genus, primarily from central Mexico and Guatemala.¹² This genus dates back 7000 years in its cultivation and includes the common bean—one of the key legumes for food protection and security on a global scale, representing up to 50% of grains consumed across the world. To put it another way, these beans are a part of the diet of over 500 million humans. With this significance in mind, Ramírez-Villegas and colleagues used a gap analysis in search of geographic and environmental gaps for sustainable growth. 

The results of the 85 taxa of the gene pool investigated using an eight-step gap analysis displayed that the majority (56.5%) were found to be of high priority for collection as a result of not being properly represented in their gene banks. These findings aligned with expert opinions, importantly helping the authors to understand which beans would be prioritized relative to taxonomic, geographic, and environmental gaps found via the analysis. In particular, the authors realized that certain areas in northern Central America such as Mexico and Guatemala could provide the best sample richness for further research on what maximizes growth and what environmental factors need to be considered for such.

There is a bigger story here than beans: a tool like gap analysis allows experts from across industries to successfully find gaps that truly matter in fulfilling basic human necessities.

A Blueprint for Climate-Smart Farming

With our case studies above, we may want to consider various ways of sustainable agriculture aside from gap analysis. In this case study, TDL outlines how agriculture is evolving in the wake of climate change. Strategies are discussed with respect to behavior change of the work that TDL did with Solidardad—an international civil society organization that focuses on sustainable supply chains. 

What is a Cost-Benefit Analysis?

Still worried about the costs at your company? In this article from our reference guide, TDL columnist Annika Steele breaks down the concept of cost-benefit analysis. Some interesting case studies are discussed to make this idea more tangible such as the U.S. Clean Air Act and the London Congestion Charge. 

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