Designing The Future – Gap Analysis

Ed Burghard

Secret To Winning? – Extend Your Competitive Advantages And Reduce Your Competitive Disadvantages

I had an interesting conversation the other day. We were talking about how to move the needle on job growth and build a sustainably stronger economy. Of course none of us had an obvious solution to the challenge. But, from a process perspective, the solution can be found through classic gap analysis.

What Is Gap Analysis?

According to BusinessDictionary.com, Gap Analysis is –

A technique for determining the steps to be taken in moving from a current state to a desired future-state. Also called need-gap analysis, needs analysis, and needs assessment.

Gap analysis consists of (1) listing of characteristic factors (such as attributes, competencies, performance levels) of the present situation (“what is”), (2) cross listing factors required to achieve the future objectives (“what should be”), and then (3) highlighting the gaps that exist and need to be filled.

In my experience, Gap Analysis is a great way to identify and prioritize the highest impact business climate improvements that can be made to help ensure the long-term success of companies in your community. But a Gap Analysis must be done correctly or it can be a colossal waste of time.

3 Tips For Conducting a Gap Analysis

  • Accept That You Are Not The Expert. It doesn’t matter how much experience you have from working in or with an industry. As an economic development professional you cannot be certain you know what is needed to accelerate discontinuous business growth. Consultants are not the experts either, although they can be very helpful in facilitating the gap analysis process for you. The experts are executives working in the industry. You should seek input from relevant executives in your community to understand how they see the present situation (“what is”) and their view of how they wish the business climate was (“what should be”). Then ask relevant executives from outside your community for their input.
  • Benchmark Your Community Against Best In Class. There is a lot to be learned by studying the business climate of communities that are doing things right. Identify what is available in their community, but missing in yours. However, don’t fall into the trap of assuming that you can succeed by making a carbon copy of their business climate. How the parts are connected is often just as important as what they are. The interconnectivity is often overlooked, but it is typically the critical grease that makes the entire system effective. In many cases, the interconnectivity is relationship and trust based, two things that are virtually impossible to copy correctly. It is better to design a business climate customized for your community. Benchmarking helps you identify the most productive “rocks” that may be for you to turn over and explore further.
  • Be Practical. You can’t change everything at once. The time horizon of your plan needs to be realistic. That means hard choices on prioritizing the business climate gaps to pursue closing in your community need to be made. The probability is that you will find gaps in three major areas – 1) assets, 2) infrastructure, and 3) public policy. Your business climate improvement plan will describe how to fill the gaps and the expected impact on your community’s economic prosperity. How do you decide which gaps are the highest leverage to close? You go back and ask the executives for their perspective. They are in the best position to give you advice, and by involving them you improve the odds they will be advocates of the change you need.

Discussion

I believe Gap Analysis is a team sport. Don’t try to do it alone. Involve both your public and private sector leadership. Their support in resourcing the final Gap Closing Action Plan is absolutely critical to success. Recognizing you are not the expert is a huge help because it opens you up to really listening to what the executives in your community believe they really need for success.

When you decide you want to create a better future for your community, consider conducting a Gap Analysis.

What Are Your Thoughts?

What has your experience been in trying to create strategic plans to improve your community’s economic success? What has worked for you? What has not worked that well? Do you have any tips to share that might improve the odds of success for any colleague working on designing a better future for their community?

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11 Comments so far

  1. Chris Manheim

    September 30, 2011

    Ed,

    Gap analysis is a tool I’ve used since my original NDC training back in the ’80s. Of course, we used it for financial incentives – determining how much and what kind of incentive was required. So often, communities ‘guess’ at what is required, or take the developer/business’s word for what is needed to close the deal.

    Applying gap analysis to a community’s strategic plan is a good concept. The feasibility studies they so often commission, are really a type of gap analysis.

  2. Jolene Struebbe

    September 30, 2011

    Hi Ed,

    I used this technique very successfully years ago when I was doing some consulting for a utility company. At that time, the Landis Group out of Florida facilitated it. Likely there are others now. Coming up with the statements to evaluate should involve some very careful thought.

    I’d be happy to dig out my old notes / files on this project, if you need more help.

  3. Stephen Paz

    September 30, 2011

    Ed, Thank you for reminding me of this very useful tool. Haven’t used it since b-school. but it will help us more clearly and structurally identify next-steps and objectives on an urban revitalization project we are working on.

  4. Brian Dowling

    September 30, 2011

    I would be satisfied at this point if we would just do a bit more analysis. I take your point about the experts of each industry being essential participants at the table but many communities have to decide on which industries to first invite to the table. This is more complex now than in the past as choices can take communities on divergent paths. The most notable is the so-called “green economy”. Short term there have been set backs Solyndra comes to mind (though Solar is suppose to be up 69%) discouraging investment but long term it is I would argue essential. There is also the problem of balancing between the best of class and the practical by officials. Even in going after the Green Economy not everyone will have the same resources and we have seen the problem of investing too much too fast making projects economically unsustainable. Gap analysis may only be the beginning and certain underlying premises need to be established first.

  5. tommy farkas

    October 2, 2011

    We use gap analysis in most consulting projects. Within the overall process flow of a project it seems the logical step following the “as is” analysis and the proposed alternatives and preceding the final recommendation.
    I hope this helps…

  6. Jason Husk

    October 4, 2011

    This can be a tremendous tool if you allow your team to really get their minds clear enough to define the ideal state. For the folks in the swamp fighting the alligators, it can be tough to see a true ideal state (which leads to disruptive innovation) rather than the more typical incremental improvement.

    Once the team’s minds are set free, the process outlined in the article works quite well!

  7. Chris Manheim

    October 7, 2011

    Gap Analysis is an area a CEcD is trained to do, but so often we are focused on inducements; not the need for financing assistance. The same could be said for economic development strategic planning. E.g., the competition for Sears Holding Company involves both the use of incentives and whether these incentives still apply to the original Economic Development District.

  8. Edward Burghard

    October 7, 2011

    This course was identified by Martin Postma as a good source of training on Gap Analysis. Thanks Martin!

    Please visit: http://nationaldevelopmentcouncil.org/index.php/site/training_schedule/category/certification/ That specific course is identified as ED202

  9. Alex Romero

    November 2, 2011

    Gap analysis is one of the best tools to drive continuous improvement. Keys to success are discipline, consistency and rigor.

    Discipline in making sure that the team adopts the culture and behavior changes along with the tools – the reward many times is in the analysis, which often companies want to cut short & oversimplify to standard reports.

    Consistency is key because it takes several business cycles to learn what works and not in terms of both identifying issues and resolving them. Consistency is also about building the team’s confidence in the method…

    Finally, rigor – is about getting to the root cause of the problem… Some methodologies state that you can get to the root cause by stating the issue or obvious consequence (e.g., volume gap in a region) and then repetitively ask “Why ?” … first and second rounds of why usually segment the issue (e.g., by team, by brand, by SKU, etc.)… however next rounds start to identify the true issues/reasons for the gap – getting to the root cause will enable the team to develop a solution that truly delivers gap closure.

    A great book about this – and it has been around for quite a while is “Building A Chain Of Customers” by Schonberger. Hope it helps!

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