Fit Gap Analysis

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Analysis plays an important role in business. Through analysis, a business owner can determine where to cut costs, when to make adjustments to marketing plans and whether a business decision will help the company grow. One important type of analysis is fit-gap analysis, which can reveal strengths and weaknesses within a business model. By learning how to perform a fit-gap analysis, you can better identify problems within your business and take the steps necessary to rectify them.

What Is a Gap Analysis?

A fit-gap analysis is just one of several different types of gap analysis. In general, a gap analysis is a look at some aspect of a business to compare its current state against an ideal or preferred state. There are a number of ways that businesses use gap analyses, including evaluating the software that the company uses, the skills that employees possess, the efficiency of a manufacturing process and even how good of a fit a potential employee is for the role they're being considered for. Because it has so many potential uses, there are specialized versions of the gap analysis which are used to measure different metrics. Some of these include:

  • Skills gap analysis, used to identify training shortfalls
  • Vendor gap analysis, used to evaluate how well a specific vendor meets the company's needs
  • Security gap analysis, used to identify weak points in security procedures
  • Market gap analysis, used to identify new opportunities within a market

While most of these make a lot of sense based on what the analysis focuses on, some business owners are a bit more confused about what a fit-gap analysis is supposed to do.

What's Special About the Fit Gap?

A fit-gap analysis is a bit more general purpose than the other specialized gap analysis types because it is designed to measure the "fit" of a wide range of systems and processes within a business. It is used as a troubleshooting method, helping business owners identify a problem when they aren't getting the results they want from some component of the business but aren't immediately able to determine why. An example of this might be a new promotion that the company rolls out to help sell a new product that it has introduced. The product launch might go smoothly, the promotion might roll out without any hiccups, but sales simply aren't what the business owner was expecting. A fit-gap analysis can then help the owner to figure out exactly what is causing sales to perform under expectations.

Performing a Fit-Gap Analysis

One of the benefits of gap analysis and of fit-gap in particular is that the analysis is fairly easy to implement. To perform a fit-gap analysis, begin by listing your expected results; in the product rollout example, you can create sales estimates based on previous product launches to give you a general idea of how much revenue you could reasonably expect the new product launch to generate. The amount doesn't have to be exact, it's simply acting as guidance for your analysis.

Once you have your expected result written down, write down the current actual results. For the product launch, this is the actual sales figures you've recorded since the new product was released. This figure should be fairly exact, since you can get actual data from your business and use it as the "current" value for whatever it is that you're analyzing.

From this point, create a list of all possible reasons for the discrepancy between your current state and your expected state. Following our example, this could include things like your promotional materials targeting the wrong demographic, not advertising in the right places to reach your target audience, economic downturns, increased competition stealing away potential customers and maybe even the price of the new product seeming high compared to similar items. Even if you're pretty sure that something isn't the reason for the discrepancy, you should still list it if it is at least a possibility.

Interpreting Analysis Results

After you have created a list of possible reasons for the problem your business is experiencing, you can complete the analysis by examining each item on your list and comparing it to any relevant data that you have. With the product launch example, this means going through each item you listed and examining it using relevant marketing, market analysis and economic data. If there are concerns about the way your product launch promotion was marketed, consult the data and see whether the marketing was actually mishandled.

Look at the market analysis that was done before launching the product and identify competitors so you can check how they seem to be selling. Compare prices. Consult economic indexes and see whether spending is reduced in your sector. Continue working through your list until you either find a solution or have to do additional brainstorming for other potential causes. This thorough item-by-item analysis will eventually reveal the problem you're facing and you can take steps to fix it.

References

About the Author

Jack Gerard is a freelance writer and editor with over 15 years of experience writing about topics related to business and finance. His body of work includes copy for small businesses, how-to guides for entrepreneurs and even editing and copy work for international corporations.

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  • business meeting2 image by Andrey Kiselev from Fotolia.com