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What is a Gap Analysis?

In management literature, gap analysis involves the comparison of actual performance with potential or desired performance. If an organization does not make the best use of current resources, or forgoes investment in capital or technology, it may produce or perform below an idealized potential.

Why Do Businesses Perform a Gap Analysis?

Some reasons that a company might kick off a gap analysis include the following:

• Benchmarking: Comparing results against external criteria.
• Portfolio Analysis: Examining their product portfolio to look for new sales opportunities, a company can use a gap analysis to identify new products to sell. In the opposite direction, they can also look for existing products that are not selling well, use a gap analysis to find out why, then promote them, change them to better meet customer needs, or remove them from their portfolio.
• Profits: If a forecast profit percentage isn’t reached, a company can use a gap analysis to determine what went wrong, and whether it was in planning or execution.
• Processes: A gap analysis can help reveal the shortcomings of processes, so that the real outcomes match the expected outcomes.
• Performance Indicators: A gap analysis can also be applied to key performance indicators like new customer acquisition, average order amount, or return on investment (ROI).
• Usage Gaps: A usage gap is the difference between current market size for a product or service, and the potential market size. A gap analysis in this area can help an organization see why they are not reaching the full potential.

Sources: https://www.investopedia.com/terms/m/mortgage_forbearance_agreement.asphttps://en.wikipedia.org/wiki/Gap_analysis, https://www.smartsheet.com/gap-analysis-method-examples