Gap Analysis: from current to desired state
Gap analysis turns the distance between today and the goal into a number you can act on. Here are six steps, three types of gaps, a Danish example with KPIs, and a template showing if initiatives actually close the gap.
Published · 7 min read
In short
- Gap = desired level minus baseline, measured in unit and currency.
- Distinguish between results gaps, capability gaps, and process gaps.
- The estimated effect of initiatives must sum up to the gap.
- Follow up on the gap's KPI — not on the activities.
What is a gap analysis?
A gap analysis compares where the company is today with where it needs to be — and quantifies the difference. The gap is not a feeling that “we should be further along,” but a numerical value: 5 percentage points in contribution margin, 18 days delivery time, 12 missing service hours per week.
This method is the shortest path from strategic ambitions to prioritized initiatives. Once the gap is quantified, you can calculate what it will take to close it, and thus assess whether the initiative is worth implementing.
Gap analysis is used in three areas of strategic work: on results (revenue, margins, customer satisfaction), on capabilities (competencies, systems, capacity), and on processes (delivery time, error rate, waste). Start with the results gap — that's what the ownership group actually asks for.
Gap analysis in six steps
Set aside two hours with management. The analysis is only valuable if the baseline is a real number from your own data.
1. Describe the desired state
What should be true in three years? Formulate it as a SMART goal with a unit and a level, not as an ambition. “Contribution margin of 36%,” not “better earnings.”
2. Measure current state
Retrieve baseline data from your accounting system, ERP, CRM, or time tracking. If there's no data, that's the first gap: you lack measurement.
3. Calculate the gap
Gap = desired level minus baseline. Write it both in the unit and in currency, where possible — this makes prioritization much easier.
4. Find the causes
Ask “why” about the gap three to five times. Distinguish between causes you can influence (pricing, staffing, process) and conditions you can only adapt to (market price, legal requirements).
5. Choose initiatives and estimate the effect
For each initiative: how much of the gap does it close, what does it cost, and when will the effect materialize? Sum up and see if the initiatives actually cover the gap.
6. Assign owner, KPI, and follow-up
Each gap gets an owner and a KPI, which is closed when the baseline is reached. Follow the gap — not the activities — in the quarterly review.
Example: gap analysis in a manufacturing company
The numbers are an example, but the structure is what you should copy: now, target, and gap on the same line.
| Area (KPI) | Now → Target | Gap and main cause |
|---|---|---|
| Contribution margin, service | 31% → 36% | 5 percentage points ≈ 1.8 million DKK. Cause: prices not adjusted for three years. |
| Delivery time, standard order | 22 days → 12 days | 10 days. Cause: planning in spreadsheets and bottleneck in surface treatment. |
| Revenue per employee | 1.4 million DKK → 1.8 million DKK | 0.4 million DKK. Cause: manual processes in order entry. |
| Customer concentration | 34% → under 25% | 9 percentage points. Cause: no systematic sales to medium-sized customers. |
| Certifications | 0 → ISO 9001 | Full capability gap. Cause: no documented quality management. |
Three types of gaps — they require different initiatives
Don't mix them up. A results gap is not closed by a course, and a competency gap is not closed by a campaign.
Results Gap
Output
The difference between the results you deliver today and the results the strategy requires.
Examples: Revenue, contribution margin, customer satisfaction, market share.
Capability Gap
Ability
Competencies, systems, capacity, or data you lack to deliver the desired result.
Examples: Missing data analysis, no CRM, too few skilled workers, no certification.
Process Gap
Method
Workflows that create waste, waiting time, or errors between two functions.
Examples: Double data entry, unclear handovers, missing standard prices.
Template: one line per gap
Gap: Service contribution margin 31% → 36% (5 pp ≈ 1.8 million DKK) Type: Results Gap Owner: Service Manager KPI: Contribution margin, service Initiative Share of gap Cost Effect from ------------------------------------------------------------------------ Price adjustment service agreements 2.5 pp 0 DKK Q1 Time registration at task level 1.5 pp 180,000 DKK Q2 Termination of 3 unprofitable agreements 1.0 pp 0 DKK Q2 ------------------------------------------------------------------------ Total 5.0 pp 180,000 DKK
The columns “share of gap” and “effect from” are the two that make prioritization objective.
Common mistakes
- The gap is described with words instead of numbers, so no one can see if it's getting smaller.
- Baseline is a guess rather than data pulled from your own systems.
- Initiatives do not sum up to the gap — the plan cannot mathematically succeed.
- Capability gaps are overlooked, so result targets are set without the ability existing in-house.
- Follow-up is on activities (“we've held three meetings”) instead of on the gap's KPI.
- All gaps are attacked simultaneously. Choose the three most important and close them before starting the next ones.
Frequently asked questions
What is a gap analysis?
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A gap analysis compares the current state with the desired state and expresses the difference as a measurable gap. Then, the causes are identified, and initiatives are chosen whose combined effect should be able to close the gap.
How do you perform a gap analysis?
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Describe the desired state as a SMART goal, measure the baseline using your own data, calculate the gap, find the causes, select initiatives with estimated effect and cost, and assign an owner, KPI, and quarterly follow-up.
What is the difference between gap analysis and SWOT?
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SWOT qualitatively describes strengths, weaknesses, opportunities, and threats. Gap analysis quantifies the distance to a specific goal. SWOT is used to find direction, gap analysis to dimension the effort.
What types of gaps are there?
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Results gaps on output like revenue and margins, capability gaps on competencies, systems, and capacity, as well as process gaps on workflows, lead time, and errors.
How often should the gap analysis be updated?
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The baseline is updated in line with KPI reporting, typically monthly or quarterly. The analysis itself, with targets and initiatives, is revised once a year along with the strategic plan.
Related guides
These guides are closely connected to gap analysis and are natural next steps in your strategy work.
- SMART goals you can follow up onGoals with baseline, owner, KPI and deadline.
- What is a KPI? Guide with examplesGood KPIs, baselines, target levels and data sources.
- SWOT analysis: guide and templateStrengths, weaknesses, opportunities and threats — with TOWS to turn insight into action.
- Strategy plan: template and contentWhat a usable strategy plan contains — and what to leave out.
More strategy guides
Analysis and environment
Goals, KPIs and performance
Strategy process and planning
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