Capability Gap Analysis – A quick guide to strategic gap analysis

Any organisation should have a strong base to build goals, tactics, objectives and strategies for effective business planning. By performing a capability gap analysis, businesses can develop benchmarks from which to grow, and mearsure their operational performance.

Capability mapping is the model of how the enterprise associates the processes, capabilities and functions essential for the success with its IT resources. It is the process of modelling what the business does to reach the capabilities instead of what it does to achieve the goals.

This approach is aimed at modelling the business on stable elements to ensure longevity. The capabilities of a business are likely to remain more stable as compared to how the business implements the processes.

Capability gap analysis is an assessment of how the enterprise meets the business needs with the use of existing capabilities and people, technology, structure and processes. In this guide, we see how you can get started with capability gap analysis and use this measure for better strategic planning.

Capability Gap Analysis – Getting started

A capability map is derived using the most stable elements of a business. It makes the analysis work for the organisation much more effective. The analysis compares the business fundamentals to the goals where the organisation remains the same, and the execution changes to meet the needs.

Capability gap analysis is the assessment of capability gaps to determine what new capabilities the business needs to fulfil particular needs. This assessment is aimed at identifying the gaps that prevent the business from achieving the desired goals.

Capability gap analysis is performed by documenting the required capabilities, the current state of each of them, the future state and the gaps existing between the current and the future state. A capability gap helps identify the need for additional capabilities, the need to rectify existing ones and to remove the redundant ones for optimum performance in the organisation.

To get started with capability gap analysis, you can focus on the following steps:

• Understand the current situation of the business
• Understand the needs at the end of the goal
• Formulate plans to accomplish the goal
• Deliver based on the plan
• Evaluate the results for gaps to ensure continuous development

This is a general idea to carry out a capability gap analysis in any department of an organisation. It can also be applied to individuals or teams or the organisation as a whole to check the performance.

Performing a Capability Gap Analysis

Business may desire to perform a capability gap analysis for a number of reasons.  Capability gap analysis may be undertaken as part of digital transformation, or simply to grow a business to new performance levels.

A capability gap analysis template helps visualise the gap between the expectation and reality of the organisation to show the people where they can still improve. Let us look at a gap analysis template where we see how it can be used in an enterprise within a single department, for any single process or the whole business.

Here are the four steps to capability gap analysis that helps find what problems you should address and how.

1. Analyse the current state

See if your business has a strategic plan. For example, a banking institution is growing by 5% per year and wants to increase it to 15%.

This means the current state is 5% growth. Remember that the current state need not be about money. A non-profit organisation might be serving 5000 meals to the poor per week. So this is their current state. There can be gap analysis for several current states.

2. Determine where you want to be

Think about how your organisation is doing today and where you want it to be after a reasonable period.

If you are considering your strategic plan for gap analysis, look at your targets which are a few years away. Ask where you are with them and get a clear picture of the current and future situation.

3. Identify the gaps

When you know where your business is and where you want it to be, you can start filling the gap. You should make sure your current state and your goal are within the same time range.

For example, if your current growth rate is 5% and you want to grow at 18% in a year after three years, you should see how much revenue the business generates today and how much it will do in three years at the current rate. This gives you an accurate gap.

Some businesses would not project over a time period. They may, instead, say they want their restaurant to serve 20,000 meals instead of 10,000. So their gap is simply 10,000. Apart from finding the gap, you should see why the gap has occurred. Do that by asking questions and finding answers to them until you find the root cause behind the gap.

4. Devise strategies to close the gaps

Once you know why there are gaps in the department, you can find out an effective course of action to close the gaps. Here are some useful guidelines to ensure effective improvements.

• Consider the findings from your gap analysis to devise improvements
• Take into consideration the cost of implementing different solutions
• Identify the deadline for resolution of the gaps

Strategic & Performance Gap Analysis

A strategic gap analysis is aimed at determining the gap between the desired and the actual outcome. Based on these gaps, plans and strategies are devised to fill the differences. The process involves creating benchmarks for desired outcomes and comparing the real results with it. The aim is to come up with strategies that help achieve the goals.

Consider an example of a business that aims to double its sales and introduces new sales channels, adds new business partners and takes other steps to achieve this goal. Introducing new strategies to achieve the goal is based on strategic gap analysis.

On the other hand, performance gap analysis focuses on identifying the gaps in the performance of a person or a team about the goals and objectives set by the organization. Here is what you can do to carry out a performance gap analysis.

• Create the Performance Map – Mapping the performance of an organization involves measuring the efficiency of the person or team in comparison with the needs that drive the analysis
• Market Criteria – Once the performance is mapped, you can check it against the set benchmarks that you determine by either setting self-formulated goals or checking other businesses
• Fill the Gaps – When the gap between the desired and actual performances is identified, it is possible to devise actions to correct and fill the gaps