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GAP Analysis

In business and economics, gap analysis is a tool that helps companies compares actual performance with potential performance. At its core are two questions: "Where are we?" and "Where do we want to be?" If a company or organization does not make the best use of current resources, or forgoes investment in capital or technology, it may produce or perform below its potential. This concept is similar to the base case of being below the production possibilities frontier.

Gap analysis identifies gaps between the optimized allocation and integration of the inputs (resources), and the current allocation level. This reveals areas that can be improved. Gap analysis involves determining, documenting, and approving the variance between business requirements and current capabilities. Gap analysis naturally flows from benchmarking and other assessments. Once the general expectation of performance in the industry is understood, it is possible to compare that expectation with the company's current level of performance. This comparison becomes the gap analysis. Such analysis can be performed at the strategic or operational level of an organization.

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