Organisations often know where they want to go but struggle to pinpoint why they’re not there yet. That’s where gap analysis comes in. It’s more than a diagnostic tool—it’s an essential framework for identifying performance shortfalls and untapped opportunities. Here’s seven steps on how business leaders can start implementing gap analysis effectively.
1. Understand What Gap Analysis Is
Gap analysis measures the difference between a company’s current state and its desired future state. It’s a systematic approach to uncover misalignments in strategy, operations, or culture. Harvard Business School Professor Mike Tushman defines it simply: “A gap occurs when there’s a difference between your strategy and your actual results.”
2. Recognise the Two Types of Gaps
Before diving into a gap analysis, identify which type of gap you’re dealing with:
- Performance Gaps: These arise when the company underperforms against its targets. For instance, if sales are declining despite increased marketing efforts, that’s a clear performance gap.
- Opportunity Gaps: These are forward-looking and represent areas of untapped potential. Ignoring them can turn potential gains into future performance issues. As Tushman warns, “If your company fails to embrace a technology your main competitor uses… a proactive opportunity gap could become a more pressing performance gap.”
3. Define Current and Desired States
Start by mapping out where the organisation currently stands versus where it wants to be. Be specific. Use benchmarks—both internal and industry-based—to clearly define your end goal.
Example: Lululemon CEO Christine Day identified that every store had a different aesthetic in 2005. Her goal? Create a cohesive brand image across all locations. She pinpointed the disconnect between decentralised store designs and the brand’s vision by conducting a gap analysis.
4. Pinpoint the Nature of the Gap
Is the gap rooted in inefficiency, underperformance, or strategic misalignment? Tushman suggests evaluating gaps through three critical lenses:
- Purpose: Are teams aligned with the organisation’s core mission?
- Strategy: Is the current strategy effectively executed?
- Objectives: Are specific goals being met?
At Lululemon, the gap was a misalignment in operational autonomy. Store managers had too much creative freedom, leading to brand inconsistency—a performance gap tied to leadership directives.
5. Gather Data Across Multiple Levels
Data collection is essential for accurate diagnosis. This involves gathering insights from every level—executives, middle management, frontline employees, and even customers.
Christine Day’s approach at Lululemon was comprehensive. She consulted leaders, store managers, and frontline staff to uncover specific practices that were undermining brand consistency.
6. Conduct a Root Cause Analysis
Surface-level symptoms often mask deeper systemic issues. To find the root cause, use structured frameworks like the congruence model, which aligns people, work, structure, and culture.
Day traced the inconsistency back to a leadership policy that emphasised autonomy over uniformity in Lululemon’s case. While the intention was to foster creativity, it inadvertently diluted the brand’s identity. Identifying this root cause allowed Day to implement targeted solutions.
7. Develop a Targeted Action Plan
Once the root causes are clear, design specific interventions. Avoid generic fixes; solutions should be directly tied to the identified gaps.
For Lululemon, Day implemented new directives to standardise store designs without stifling creativity. This approach maintained brand cohesion while allowing for localised adaptations—enabling Lululemon to scale effectively.
Conclusion
Gap analysis isn’t just about identifying what’s wrong—it’s about turning blind spots into actionable insights. Gathering comprehensive data, and targeting root causes, leaders can bridge the divide between strategy and execution by systematically defining gaps.