Gap Analysis in 2025: Step-by-Step Guide and Free Template

Effort—what MacArthur Genius Grant winner Angela Duckworth famously dubbed “grit”—is essential to success. 

However, what unlocks potential is not so much brute force, but a wide-eyed recognition of 1) where we are, and 2) a vision for where we want to be.

In business, this process for unlocking potential and creating an action plan is known as gap analysis.

This article walks through a simplified process for conducting just such an analysis, along with a gap analysis template to guide your future research.

What is a gap analysis?

A gap analysis is a method for identifying gaps between the current performance of a business and its desired performance. This analysis can be quantitative or qualitative and often takes place before an initiative to "close" the gaps.

A gap analysis turns your goals into a plan. For example, instead of saying you want to “grow faster,” you can determine the current state of your business and figure out the roadmap to get there (e.g., “lift conversion by 15% within six months through checkout flow fixes and email automation”). 

Gap analysis vs. current-state assessment

A current-state assessment documents where your business stands right now. Gap analysis compares the current state against a future target and determines the distance between the two. 

The assessment tells you where you are, while gap analysis shows you where you’re headed and how to close the gap.

Example:

A lifestyle brand discovers its average order-to-ship time is 72 hours (current-state assessment). Its goal is same-day fulfillment. Running a gap analysis shows three blockers:

• Its WMS isn’t integrated with the ERP.
• Orders are released in once-daily waves.
• The warehouse is understaffed on weekends.

The brand assigns fixes with timelines and cost estimates:

• Deploy a real-time WMS–ERP API so orders flow to the floor continuously instead of in daily waves (cost: $40K).
• Convert to dynamic zone picking with put-to-light walls to cut walk time in half (cost: $25K).
• Partner with a 3PL for weekend crew (cost: $12K per month).

These improvements cut down order-to-ship time and help them reach their goal of same-day fulfillment. 

Understanding gap analysis in research

The gap analysis methodology goes by many names: need assessment, need analysis, or need-gap analysis. Whatever you call it, the core principle remains the same: to identify and then find solutions to the problems holding your business back.

Gap analysis addresses two questions:

• Performance: Where are we?
• Potential: Where do we want to be?

While the process starts with an inward look at current versus potential performance, it doesn’t stop there. Gap analysis should also include outside sources like industry benchmarks and your market’s competitive landscape to determine your desired state.

This type of 360-degree analysis can be performed at both strategic or operational levels. You can analyze your overall business goals or go granular into various processes or departments.

After going through the first phase of analysis—performance versus potential—you may find that your results exceed expectations. The same can also be true if your entire business is currently experiencing fast-paced growth. 

In those cases, the aim changes from finding problems to identifying success factors that can be repeated, applied to other areas of your business, and ultimately scaled.

Regardless of what you’re evaluating—be it problems or successes, human resources or logistical functions—the actual process of doing the analysis is the same. 

Types of gap analysis

Gaps can emerge in various forms, such as:

• Skills gap analysis: When the capabilities of your workforce fall short of what’s needed to achieve future goals. You can close these gaps through targeted hiring, upskilling programs, or role redesign.
• Market gap analysis: Occur when buyer needs or segments remain underserved by the current competitive landscape. You can bridge these gaps with new positioning, modifying pricing, or launching a new offering.
• Product gap analysis: Emerge when a feature, variant, or price point is absent from your lineup despite clear customer demand.
• Performance gap analysis: Arise when actual KPIs—like conversion rate or delivery lead time—miss internal targets. You can shrink them with a performance gap analysis, followed by implementation of the highest-ROI fixes.
• Strategic gap analysis: Show up when an organization’s vision is clear but the supporting resources, culture, or processes lag behind. Close these gaps by aligning budgets, incentives, and leadership accountability with long-term objectives.

Why gap analysis matters 

AI is helping companies move faster than ever. In fact, 78% of surveyed companies use AI in at least one business function. This rise in adoption is pushing companies to fill performance gaps continuously to stay competitive. 

In PwC’s June 2024 Pulse Survey, 73% of industrial-product leaders believe their average competitor will be out of business within 10 years if it doesn’t reinvent its operating model, showing how the implications of unaddressed execution gaps can become existential.

A performance gap analysis gives you a repeatable method to shrink the distance between targets and day-to-day performance. When every gap is costed and prioritized, budgets flow to bottlenecks with measurable payoff instead of shiny object pilots.

How to conduct a performance gap analysis 

The temptation with the gap analysis process is to start by going big. Unfortunately, when you try to tackle too much at once—to make everything better, all at the same time—resources get stretched thin.

Instead, prioritize the areas where either 1) the biggest potential positive impact exists, or 2) you feel the most pain.

This could be any one of a host of factors:

1. Sales numbers
2. Customer satisfaction
3. Retention rates
4. Shipping times
5. Marketing returns
6. Manufacturing costs
7. International expansion

Once you’ve isolated an area big enough to make an impact, but small enough to wrap your head and hands around, you’ve got a solid candidate for the focus of your gap analysis.

1. Identify your states

Once you have chosen your areas of focus, your first step is to identify both where you currently are—performance—and where you want to be in the future—potential.

For illustrative purposes, let’s select:

• Multichannel sales as your focus
• Specific outlets as the channel
• Current monthly sales as performance
• Industry averages as potential

Your current performance

Every gap analysis starts with introspection. Where are you currently within the key performance indicator (KPI) that you’re analyzing? The idea is to list all the attributes—in this case, channels—that play a role in success or failure.

The attributes (and thus the analysis) can be quantitative or qualitative. The key is to be specific and factual when identifying possible weaknesses. The required data can be collected from a variety of sources, depending on what gap is being analyzed, including:

• Industry averages
• Historical benchmarks
• Internal documentation
• Customer interviews

Your potential state

The future state represents the ideal condition in which you want your business to be. For quantitative analysis, like tracking sales metrics, you would include either data from the industry or projected sales (i.e., goals).

When planning for the future, you want to be highly specific by choosing goals within a specific time period (e.g., increase sales by 40% overall by the end of Q3).

Your gaps

Defined quantitatively, gaps are straightforward. What are the numerical differences between where you are and where you want to be?

Qualitatively, this will take a bit more introspection and collaboration.

2. Describe the gaps

Having identified the gaps, the next step is to describe each gap to better understand the reasons behind their existence.

If you’re currently ahead of your targets, then it’s a great time to analyze what exactly made the results possible and if there are ways to use the same principles in other areas of your company.

Even a well-performing system can always be optimized, so going through this step is crucial.

• Gap: This one is easy. Simply carry over the gaps you identified in the previous step, starting with the most underperforming areas first. In our example, we’ve chosen email, because that’s where the widest gap between performance and potential exists.
• Description: The point of a gap description is to record all the contributing factors responsible for the gap. Therefore, the description has to be consistent with those states. These can either be quantitative or qualitative. However, more often than not, to address the reasons behind the gaps, you’ll use qualitative descriptions.
• Why? The challenging question here is not how far your actual performance fell below target, but why the gap exists. To be of any use, this list has to be specific, objective, and relevant to the issue at hand. It helps to brainstorm possible causes of poor performance, and then narrow those down using tools like the “five whys” analysis.

💡 Tip: Before you brainstorm fixes, spend an hour uncovering why the highest-impact gap exists. 

Run a five whys exercise (keep asking ‘Why?” until the root cause appears) or sketch a simple Ishikawa diagram to map how people, process, tech, and policy feed the problem. Capture each root cause in a worksheet—you’ll need them for the solution stage.

3. Bridge the gaps

The third and final step in your gap analysis report is to brainstorm all the possible solutions to the gaps and the reasons behind them. These solutions must be specific and directly impact the factors listed in the previous step.

To do that, let’s return to the multichannel focus from before:

By creating an exhaustive list of solutions to the gap you’ve described, you enable yourself to think wide and yet position yourself for practical implementation.

When formulating possible solutions, it’s important to keep in mind that there may be implementation costs involved. Those costs can include time, money, and human resources.

Examples of gap analysis

Ecommerce

The five whys is an iterative technique used to explore the cause-and-effect relationships underlying a particular problem. Its primary goal is to determine the root cause of a problem by repeating the question “Why?” with each question forming the basis for the next question.

Although this technique is called the five whys, it doesn’t mean you have to ask “Why?” exactly five times. The idea is to repeat the process for as long as it takes to identify the root cause(s). It can take fewer or more than five whys before you arrive at the underlying issue.

Rather than go the multichannel ecommerce route, let’s use whys to look at a situation where customers are unhappy because they’re being shipped products that don’t meet their expectations. 

1. Why are customers being shipped bad products?

Because manufacturing built the products with materials different from what the customer expected based on advertising.

2. Why did manufacturing build the products with different materials than advertised?

Because the supply-chain manager expedites work on the shop floor by calling the head of manufacturing directly to begin production. An error occurred when the specifications were being communicated.

3. Why does the supply-chain manager call the head of manufacturing directly to start work instead of using written communication?

Because the “start work” form requires the supply-chain manager’s direct approval before work can begin.

4. Why does the form require approval from the supply-chain manager?

Because the manufacturer does not offer a digital integration with your company’s current ecommerce platform.

In this case, only four whys were required to find out that a non-value-added signature—driven by a lack of integration—caused the gap.

Industry analysis

In industry-focused research, gap analysis often involves analyzing market trends, customer needs, and competitor offerings. 

By understanding the unmet needs and opportunities within the industry, researchers can develop innovative solutions and strategies to bridge these gaps and create a competitive advantage.

Profit gap analysis

Ecommerce brands can use profit gap analysis to identify areas where they are underperforming financially. 

A target profit is determined based on historical performance or industry benchmarks. Profits are then compared to targets, and areas for improvement are identified in revenue generation or cost cutting. Ecommerce brands use this analysis to make strategic decisions and improve their profitability.

Gap analysis tools and techniques

Several tools and techniques can be employed to facilitate gap analysis in research, such as:

Shopify Sidekick

Sidekick is a 24/7 commerce assistant that pulls from your store’s data. Everything from orders, products, traffic, and customer behavior gets routed into one data model, and Sidekick can surface insights and execute tasks on your behalf. 

Since it knows your catalog and historical performance, you can question Sidekick about potential gaps and get instant answers. For example, you could:

• Pull the baseline automatically. Ask: “What was our average order-to-ship time last quarter?” Sidekick queries your fulfillment data and returns the KPI in seconds.
• Compare against the target. Prompt: “Benchmark that against our 24-hour SLA and express the gap as a percentage.” Sidekick calculates and labels the shortfall (e.g., 48% over target).
• Run a quick root-cause probe. Follow with: “List the top three operational factors driving this delay, ranked by impact.” Sidekick analyzes timestamp patterns and replies with a reason.
• Generate costed action items. Prompt: “Draft an action plan with owner, timeline, and rough cost ranges to close the gap in 60 days.” Sidekick outputs a table you can copy straight into your project tracker.

SWOT analysis

SWOT analysis is a strategic planning tool that helps identify an organization’s strengths, weaknesses, opportunities, and threats. 

By categorizing internal and external factors, it helps decision-makers plan and strategize better. The tool is used for setting goals, analyzing markets, and assessing competition.

Fishbone diagram

A fishbone diagram, also known as an Ishikawa diagram or cause-and-effect diagram, is a visual tool for identifying and analyzing root causes. 

It helps teams systematically explore contributing factors by categorizing potential causes into categories and displaying them in a “fishbone” structure. A lot of companies use this kind of diagram for quality management, business process improvement, and problem-solving.

McKinsey 7S

The McKinsey 7S framework measures how well an organization’s strategy, structure, systems, shared values, skills, and style align. 

These seven elements are interconnected to identify areas for improvement or change. This framework is used for organizational changes, mergers and acquisitions, or diagnosing and fixing performance problems.

Nadler-Tushman model

Also known as the Congruence model, the Nadler-Tushman model evaluates the fit between an organization’s work, people, structure, and culture. 

The tool analyzes the congruence between each of the four components to identify gaps, misalignments, and areas for improvement. The model is used to analyze organizational performance, guide change initiatives, and design new structures and processes.

PEST analysis 

A PEST analysis takes a wide-angle look at the political, economic, social, and technological forces that could widen or close your internal gaps. Run it before you lock future-state targets so outside headwinds don’t blindside your roadmap.

• Political: Monitor incoming regulations (e.g., the EU Digital Services Act) that may create an immediate compliance gap in data governance.
• Economic: Factor in macro shifts like the expected late-2025 US rate cuts, which could lower inventory-financing costs and shrink cash flow gaps.
• Social: Track cultural swings, like Gen Z’s preference for “recommerce” pushing demand for refurbished products, to reassess merchandising gaps.
• Technological: Watch for breakthroughs such as AI copilots, which can expose new skills gaps and offer solutions to close performance gaps.

Pros and cons of gap analysis in research

Pros

Gap analysis in research offers several benefits, including:

1. Enhanced research relevance: By focusing on addressing gaps, you can ensure your work is more relevant and valuable to your business.
2. Improved research design: Gap analysis helps refine your research questions and objectives, leading to more targeted and effective research designs.
3. Increased research impact: Addressing performance gaps can lead to more significant outcomes and a greater potential for real-world impact.
4. Informed decision-making: Gap analysis provides you with insights to make more informed decisions about research priorities and resource allocation.

Cons

Despite its benefits, gap analysis in research also presents some challenges and limitations:

1. Incomplete or biased literature: Gaps identified through literature reviews may be influenced by the availability and quality of existing literature, which can sometimes be incomplete or biased.
2. Dynamic nature of knowledge: As new research is continually being conducted, gaps may quickly become outdated or irrelevant.
3. Resource constraints: Addressing all identified gaps may not be feasible due to time, funding, or expertise constraints.

Best practices for effective gap analysis

To conduct effective gap analysis in research, consider these best practices:

1. Maintain a systematic approach: Use a structured and transparent process for reviewing literature and identifying gaps to ensure the reliability and validity of your findings. 
2. Stay current with research developments: Regularly update your knowledge of the research landscape to account for new findings and emerging trends.
3. Collaborate with stakeholders: Engage with relevant stakeholders, such as industry experts, policymakers, and practitioners, to gain insights into practical gaps and real-world needs.
4. Balance ambition with feasibility: While it’s essential to aim for impactful research, ensure that your research objectives are achievable within your resource constraints.

Improve your strategic planning with a gap analysis

In the end, gap analysis yields a detailed examination of:

1. The problems that exist in your current performance
2. The reasons behind those problems
3. The possible solutions and their associated costs

Instead of brute force—or “shooting from the hip”—you’ll have hard data on which to base your new products and initiatives, along with a roadmap to guide you.