Gap Analysis (Part 2)

Synopsis

Your current business performance may be solid, but there's still a gap between where you are and where you strive to be. Use this Gap Analysis (Part 2) deck to find what's missing from your current state and improve accordingly. Evaluate, understand the cause, and plan meaningful actions for better results.

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Slide highlights

Follow the Gap Analysis Procedure to identify what stands between your current and desired states. Investigate the causes, implement corrective actions, then standardize and improve. (Slide 3)

A Fit Gap Analysis chart analyzes how you measure up across areas like analytical problem solving, strategic vision, and commercial awareness. (Slide 17)

Additional tools like the Fishbone Diagram can root out systemic issues that contribute to the gaps and hold your organization back. (Slide 21)

Outcome

To stay afloat in a rapidly transforming market, many businesses have been forced into dramatic changes between where they were and where they need to go.

For instance, maybe you need to assess your company's needs around remote work. Or determine the cost to upskill employees around machine learning. Or you might need to create an action plan to implement new digital channels into sales and marketing. Gap analysis is the best tool to bridge the divide and achieve your goals.

Questions and answers

Can you compare Gap Analysis with other business analysis frameworks?

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Gap Analysis is a business analysis framework that focuses on identifying the differences between the current state and the desired future state of a business. It's a tool to understand what steps need to be taken to bridge the gap between the present and the future. Other business analysis frameworks, such as SWOT Analysis, PESTEL Analysis, and Porter's Five Forces, have different focuses. SWOT Analysis evaluates strengths, weaknesses, opportunities, and threats. PESTEL Analysis looks at political, economic, social, technological, environmental, and legal factors affecting a business. Porter's Five Forces analyzes the competitive environment of a business. Each framework has its own strengths and is used for different purposes.

What are common challenges in applying Gap Analysis and how can they be overcome?

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Common challenges in applying Gap Analysis include lack of clear objectives, insufficient data, and resistance to change. Overcoming these challenges involves setting clear, measurable goals, collecting and analyzing relevant data, and fostering a culture of change and continuous improvement.

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Application

Introduction

We begin with an overview of gap analysis basics. The "gap" is the distance between the current state and the desired state. For instance, maybe your current state is a SaaS business that offers decent features that your current customer base appreciates. But your desired state is to be recognized across the industry for being the most innovative SaaS platform out there. (Slide 2)

Questions and answers

What are the practical applications of gap analysis in the SaaS industry?

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Gap analysis in the SaaS industry can be used in several practical ways. It can help identify areas where a company's product or service is falling short of customer expectations or industry standards. This could be in terms of features, user experience, pricing, or customer support. Once these gaps are identified, strategies can be developed to bridge them. This could involve improving existing features, developing new ones, adjusting pricing models, or enhancing customer support. Gap analysis can also be used to identify opportunities for innovation and growth. By comparing the current state of the business with the desired state, companies can identify areas for improvement and set clear, actionable goals.

How does gap analysis align with digital transformation initiatives?

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Gap analysis is a critical tool in digital transformation initiatives. It helps identify the current state of the organization's digital capabilities and the desired state. The 'gap' is the difference between these two states. By identifying this gap, organizations can develop strategies and initiatives to bridge it, thereby driving their digital transformation. This could involve implementing new technologies, improving processes, or enhancing skills within the team.

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Procedure

To get there, follow the gap analysis procedure across six steps. First, formalize a plan. Identify the gap, investigate the causes for that gap, and select actions to fix it. In our example scenario, you are missing innovative product features that make your brand stick out. Your previous offering provided a useful service but it's not attractive enough to dominate today's market. So, you need to hire new talent to revamp your product design and development strategies. Then, implement the selected actions, study the results, then standardize the system to continuously improve. (Slide 3)

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Questions to ask

Here are some key questions to ask yourself to help identify the gap. Survey your entire team to get a wide sample of answers. In addition to asking what the gap is and who is responsible, ask for potential solutions and costs to eliminate the gap. Once all the possible reasons have been collected and studied, a root cause should present itself. In the case of a Saas business that is no longer seen as innovative, the root cause could be the development team is too swamped with incremental improvements for the existing core product. As a result, they don't have the bandwidth to work on anything new. (Slide 6)

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Milestone and timeline

Draft key milestones for each time period on an editable timeline. Each milestone should correlate with an incremental step towards your larger goal. In the case of the creation of a more innovative SaaS business, by Q1 you should have hired new talents, and by Q2 you should have made progress on one or more "innovative" new products in development. By Q3 and Q4, you could expect to release said products for testing and gather data to measure the initial market response. (Slide 5)

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Current situation

In order to determine which resources and activities should be implemented to reach your desired state, you need to have a strong awareness of your current state. To do this, evaluate where your organization stands now. For instance, your current mission could be all about equitable access to revolutionary products at the lowest price point. While your SaaS business is very affordable, it's no longer providing the revolutionary products that are core to your central mission. (Slide 8)

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Additionally, your current market share could reveal you might be a leader in brand image and legacy, but you have fallen behind in new product development and customer acquisition. (Slide 10)

And your current revenues could point to a gap between your actual revenue and target revenue that could be aided by the development of new products. In this table, you also have the option to compare revenue performance between different product lines. The product that generates the least revenue could be reexamined for its ROI. (Slide 12)

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Conduct analysis

There are a few different ways you can present a gap analysis across your organization. For instance, you can use a gap analysis template to fill in your current business requirements, existing situation, and identified gap. For our example, you would start with your requirement to build an innovative new product, then add a desire to double your profit margin, dominate your industry's market share, and create a revenue-generating business partnership. With each gap identified, you can then determine the capabilities needed to reduce the gap, and the issues and risks the gap presents. For your company's main goal, the capabilities you'll need are new C-level hires on the technology team and the risks you'll have to overcome is a lack of promised upward mobility and low morale. (Slide 15)

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Market gap

Another tool to hone in on a specific type of gap is a market gap analysis. A market gap analysis helps you self-evaluate where your organization stands in relation to the rest of the market. Consider multiple areas of concerns, such as excess production capacity, costs of supplies, new technologies, or excess demand. (Slide 16)

Questions and answers

What are some common challenges in applying Gap Analysis and how can they be overcome?

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Common challenges in applying Gap Analysis include: lack of clear objectives, resistance to change, and insufficient data. Overcoming these challenges involves setting clear, measurable goals, fostering a culture of change, and ensuring adequate data collection and analysis.

Can you provide a case study demonstrating the effectiveness of Gap Analysis?

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While a specific case study isn't provided in the content, I can share a general example of how Gap Analysis can be effective. Let's say a software development company wants to improve its product quality. They conduct a Gap Analysis and find that their current state is a high number of product bugs, while their desired state is to reduce this by 50% in the next year. They identify gaps in their testing processes and lack of skilled testers as the main issues. They then develop an action plan to hire more skilled testers and improve their testing processes. After a year, they reassess and find that they have achieved their goal, demonstrating the effectiveness of the Gap Analysis.

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Fit gap

You can also conduct a fit gap analysis to deduce how well your current team fits your processes and goals using a score from poor to excellent. For example, a team with a "good" technological orientation could still have a gap that would benefit from experience working alongside strong engineering talent. (Slide 17)

Questions and answers

How does the Gap Analysis align with digital transformation initiatives?

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Gap Analysis aligns with digital transformation initiatives by identifying the current state of an organization's digital capabilities and the desired future state. It helps in understanding the 'gaps' that need to be filled to achieve the digital transformation goals. This could include gaps in technology, skills, processes, or culture. Once these gaps are identified, strategies can be developed to bridge them, which could involve adopting new technologies, upskilling staff, changing business processes, or shifting organizational culture.

What are some practical applications of the Gap Analysis presentation in business strategy?

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Gap Analysis is a strategic planning tool used in business to identify where a company is currently and where it wants to be in the future. Some practical applications include:

1. Identifying performance gaps: It can help in understanding the areas where the company is underperforming and needs improvement.

2. Strategic planning: It aids in setting goals and planning strategies to achieve them. For instance, using the Ansoff Matrix, a company can decide whether to expand into a new market, increase market share, develop a new product, or diversify.

3. Resource allocation: It can guide the company in allocating resources effectively to bridge the identified gaps.

4. Risk management: By identifying gaps, a company can foresee potential risks and take preventive measures.

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Ansoff matrix

You can enlist additional frameworks to conduct a gap analysis. For instance, the Ansoff Matrix hones in on the strategies you need to employ across four sets of circumstances. Use market development strategies to expand into a new market with an existing product, Use a market penetration strategy to increase market share with an existing product in an existing market. To develop a new product into a new market, utilize diversification strategies. When you want to develop a new product in an existing market, use product development strategies. (Slide 19)

Questions and answers

What are the common challenges in applying the McKinsey 7-S framework and how can they be overcome?

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Common challenges in applying the McKinsey 7-S framework include resistance to change, lack of understanding of the framework, and difficulty in balancing all seven elements simultaneously. Overcoming these challenges requires effective communication, training, and leadership. It's also important to ensure that all seven elements are aligned with each other and with the overall organizational strategy.

Can you compare the McKinsey 7-S framework with other business analysis frameworks?

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The McKinsey 7-S framework is a management model that includes seven factors: strategy, structure, systems, shared values, skills, style, and staff. It's a holistic tool to evaluate and control an organization. Other business analysis frameworks like SWOT (Strengths, Weaknesses, Opportunities, Threats) focus on both internal and external factors but in a less comprehensive way. PESTEL (Political, Economic, Social, Technological, Environmental, Legal) is another framework that focuses on macro-environmental factors affecting an organization. Unlike the 7-S model, these frameworks do not consider all internal aspects of an organization. Therefore, the choice of framework depends on the specific needs and context of the organization.

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Mckinsey 7-S

The McKinsey 7-S framework enables deeper analyses across key organizational areas including staff, skills, systems, strategy, structure, style, and shared values. Include the barriers to change that prevent you from reaching your future state. Perhaps the current state of your skills is proficient, but to develop the products you want to make, you need to reach a future state of stronger technological prowess. The key barrier to change could be an issue of time management as your current team is overworked without the time to improve.

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You can then identify change activities to overcome said barriers and close the gap. In our example, that would be hiring new employees and empowering your current team to upskill through new educational opportunities and working with more experienced partners. (Slide 22)

For additional Gap Analysis tools, check out our previous Gap Analysis deck.