Gap analysis is a useful way to determine the untapped potential of a business’s performance. Gap analysis focuses on what the current performance of a business is as opposed to what the market wants from the business. Some limitations of this type of analysis are the lack of actionable steps it provides, the competitor’s gap, the technology needed, governmental influence and seasonal fluctuations.
The gap analysis helps define potential for business growth but does not provide actionable steps for how to grow. In this way the gap analysis is merely the first step in defining a business problem. Further investigation is then necessary to define how the business can reach the new market. What kind of financial investment will it take to reach the growth potential? Will a new research and development department need to be set up? How can we continue to evaluate our products to stay at the top of this continually growing market? A product manager should ask these types of questions when deciding on actionable steps.
Every business should work to carve out a niche market for its products. Businesses are independent and require business-specific gap analysis. Still, competitors will always loom on the horizon and may have already tapped some new growth potential. Gap analysis does not always account for the actions of competitors. Managers should continually analyze what markets competitors are moving into as well as perform gap analyses on their own company’s performance.
Technological advances may be known within an organization already and performing a gap analysis may serve to only highlight obvious needs. The gap analysis merely points out what technological advances might be desired by customers but it does not define how these advances may take place. A hotel chain may realize there is potential for space tourism and lodging, but the technology to take civilians into space as tourists is not yet developed. Some company growth relies on the technological advances of external organizations.
Government entities often control what businesses can and cannot explore. Laws that prevent stem cell research, for example, can prevent “closing the gap” of cancer research according to some schools of thought. Gap analysis may serve to point out the desire for market expansion, but without legal rights to expand the market, a business’s hands are tied. Gap analysis does not provide methods for working around this.
Using specific numbers, or benchmarking, performance of products using quantifiable data is an excellent way to perform a gap analysis, but numbers can sometimes be deceiving. Businesses often go through cyclical changes due to external factors like the time of year, disposable income of consumers around the holidays, or ever changing fashion trends. It is important to use a series of numbers or average numbers when performing a gap analysis. The gap may be unusually large if the growth potential of a business is judged against a predictable slow season.
Jaell Ledford's articles for SuperForest.org cover topics ranging from science and technology to art and personal achievement. She received her Bachelor's Degree of Science in business from the University of Minnesota's Carlson School of Management. Her professional experience is in small business management and hospitality, but she explores her myriad of other interests through writing.