For product managers, continuous improvement is the name of the game. The ability to examine processes, identify inefficiencies, and devise strategies to bridge gaps is what sets you apart. One powerful tool that assists in this quest for excellence is the gap analysis.
A gap analysis allows you to take a step back, understand your current situation, envision where you want to be, and strategize on the best path to get there. In this guide, we’ll demonstrate how to conduct a gap analysis step by step and provide a tailor-made template to help you get started.
Table of contents
- What is a gap analysis?
- Different types of gap analysis
- How to conduct a gap analysis (5 steps)
- Gap analysis template (Excel and Google Sheets)
What is a gap analysis?
A gap analysis is a strategic planning tool that helps organizations identify discrepancies between their current performance and their desired or potential performance. This comprehensive assessment allows companies to understand their current situation, define their future goals, and understand what actions need to be taken to reach those goals.
A gap analysis is commonly used across various domains including project management, product development, process improvement, human resource management, and strategic planning.
In its simplest form, a gap analysis assesses:
- Where you are (current state)
- Where you want to be (desired state)
- The gap between these two states
You can then use this analysis to prioritize where you want to focus next, identify potential actions, and plan specific next steps.
Types of gap analysis
A gap analysis can be a versatile tool with applicability in a variety of domains within an organization. Depending on the context, it can be customized to evaluate different aspects of performance, processes, or strategy. This ability to be tailored to various needs and situations is one of the reasons why gap analysis is such a crucial component in the toolkit of managers, strategists, and executives.
The following are some common types of gap analysis that offer a snapshot into the breadth and depth of this tool:
- Process gap analysis — The most common type of gap analysis. The goal is to map how various processes should and currently look like and what the gap between these two is. Then it’s used as a continuous improvement tool to optimize the delivery process
- Skills gap analysis — Gap analysis is an excellent tool for employee development planning. Team leaders can map the skills desired for promotion, compare them with employees’ current skills, and plan a career path to close gaps between them
- Product gap analysis — Although it’s a rare use case, a gap analysis can also be used to plan product development. You can use it as a tracker comparing the current state of the product with a product vision or as a tool to compare the product with competitive alternatives
- Financial gap analysis — A gap analysis can also be used to show a clearer picture of your financial performance, showcasing precisely in which areas you are underperforming
How to conduct a gap analysis (5 steps)
The process to conduct a gap analysis exercise consists of identifying five core elements:
- Identify key areas
- Define your desired state
- Determine your current state
- Identify gaps
- Plan actions to close gaps
1. Identify key areas
Start with identifying key areas you want to investigate and improve on.
If you are doing the gap analysis for the first time, I recommend identifying roughly five to ten potential areas. Fewer than five leads to tunnel vision and makes it easy to miss the biggest opportunities, while more than ten might be overwhelming at first.
2. Define your desired state
There are two approaches to identifying an ideal state. You can either:
- Be realistic and imagine how you’d like to see the area in the next year or two
- Identify a perfect, ideal state, ignoring all possible constraints. For example, if you investigate team performance, you can imagine how the best team in the world would perform
Choose the approach that motivates you the most.
3. Determine your current state
Next, assess how the area looks like at the current moment. Be brutally honest with yourself.
For example, say you are assessing team documentation. If it’s virtually nonexistent, then write it down as nonexistent.
Don’t go into too much detail. Start small, and expand over time if you need to.
4. Identify gaps
Now, identify the difference between the ideal and current state. If you can measure your ideal and current state quantitatively, then the gap is simply the difference between both values.
More often than not, it’s hard to quantitatively measure the gap. In these cases, it’s OK to just add a qualitative description. Just don’t go overboard; focus on the two or three most significant differences between the states.
5. Plan improvements to close the gaps
The last step is to ideate potential improvements you can implement to close the gap, or at least make the gap smaller.
Invite people that might benefit from closing these gaps and ideate potential solutions. Then, prioritize the one to three most promising improvements.
Next comes the hard part: actually implementing these improvements and reassessing the gaps over time.
Gap analysis template (Google Sheets)
Note: Be sure to create a copy by selecting File > Make a copy from the menu above the spreadsheet.
The gap analysis template consists of eight elements:
- Area — The high-level theme you want to focus on. Depending on your needs, you can go as broad (e.g., happiness, team, product) or as specific (e.g., ticket descriptions, planning effectiveness) as you wish. As a rule of thumb start broad and narrow down over time as needed
- KPI — What’s the best way to measure the health of the area? If there is more than one key performance indicator, feel free to add more, but I’d stick to a max of three per area. If there’s no meaningful way to quantitatively measure it, skip this step
- Desired state — If you’ve identified an area’s KPI, add your desired KPI number. Otherwise, describe it qualitatively
- Current state — Similarly to the desired state, either add a current KPI score or a qualitative description.
- Gap — For areas with KPIs, simply subtract the current state from the desired state. Otherwise, qualitatively describe the one to three biggest differences between the current and desired state
- Priority — After identifying the gaps, you should be able to intuitively pinpoint which areas need the most improvement and which are good enough. Prioritizing them will help you focus on what truly matters
- Key actions — Identify key actions to close the gap. Treat it similar to the product backlog in that a) areas with high priority should be well-described and very specific and b) areas with low priority might have vague key actions or even no actions at all.
- Owners — Specific actions, specific KPIs, or even areas should have an accountable owner for improving them. This is especially critical if you try to close multiple gaps at once; if it’s everyone’s, it’s no one’s
Gap analysis can help you improve by identifying the differences between the ideal and actual state of various areas. You can then plan specific actions to close the gaps over time.
This exercise can be used as a:
- A long-term process improvement
- A single retrospective exercise
- A strategic product document
As a product manager, I sometimes use gap analysis for:
- Working with team members on their growth plans
- Cmparing key competitors
- Improving team dynamics and our delivery
If you are doing a gap analysis for the first time, the key is to start broad and get more specific over time.
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