Capability Gap Analysis – Template Included!

Any organization needs a strong foundation on which goals, objectives, tactics, and strategies are built for strategic planning to be effective. A Capability Gap Analysis lets the organization assess its foundation by determining if there exist any key components which need to be addressed before implementing a particular strategy or product.

Business Capability Mapping is the method of modeling what the organization does to reach the objectives rather than how it achieves them. This process is being increasingly used by IT people and it helps align the IT strategy within the organization with the business strategy.

Though the way in which an organization implements the processes may change frequently, its basic capabilities are likely to remain stable over time. Gap analysis using capability maps promotes a strong relationship between the business model and the technical architecture supporting the business requirements.

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Capability Gap Analysis – What It Is & How To Use It?

Capability Gap Analysis involves identifying the gaps between how the current capabilities are performing in the business and how you would want them to do within a specific timeframe.

The purpose of capability gap analysis is to assess the current capabilities of the organization and identify the gaps which obstruct it from meeting business needs and desired goals. If the business finds that it can meet the needs using the existing capabilities, the resulting changes are small and straightforward. However, if existing capabilities are not sufficient, a project should create new capabilities.

This demands changes to business processes and organization as a whole. A capability gap analysis is performed by documenting the capabilities needed for the business requirements, documenting the current state of each of the capabilities, their future states and then determining what gaps exist between the current and the future states.

Capability Gap Analysis Template

The capability gap analysis outlined below can be used within a department, for a single process, or within the entire business. You can list categories for your organization and approach the analysis this way. The four steps in the template help you identify the issues you are facing and the ways to fix them.

1. Identify the current state of the department.
If your banking organization wants to increase its growth by 25% and it is currently growing at 6% a year, the current state is 6% growth. If a nonprofit organization currently serves 10000 meals a week, this is its current state. Organizations can have multiple current states and it is possible to perform a gap analysis on all of them.

2. Identify the desired state of the department.
The desired state, future state or future target is the future goal of the organization. To accomplish this, it is necessary to think about the present performance in the current state. You can then identify where you want to be after a specific timeframe. Consider targets over three to five years and consider the current state areas. You could even chart out the future targets and compare them easily with the current state.

3. Identify the gaps within the department.
Now that you know the current and future states of your department, you can proceed to bridge the gap between the two. If you are growing at 6% and you want to be growing at 25% for three years, it is important to consider the revenue you have at present and the revenue you will have in the coming three years. These considerations would give you the right gap. Some businesses may not project for three years. They would, instead, want their kitchen to serve 25,000 meals in a day instead of 10000 meals. The gap is 15,000 for them. Dig deeper to find out why the gap has occurred. You can ask some questions and find answers to make the root causes of gaps clear.

4. Formulate improvements to close the identified gaps.
Once you find out why there are gaps in the department, it is the time to figure out the appropriate course of action to close them. The first tip to make this possible is to base all your improvement plans on the information found while identifying the gaps. The next thing to consider is the cost of implementation of the solutions. You can then identify or decide on the end dates by which you would want the gaps to be resolved.

5. Prioritize the gaps (Bonus)
This step is optional, but it makes sense to prioritize the gaps identified so that you tackle the ones you think required the highest priority. You could also prioritize in a way where you focus on the ‘quick wins’ and focus on the smaller gaps first, before working your way to the larger ones.

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Capability Gap Analysis Examples

The purpose of capability gap analysis is to assess the current capabilities of the organization and determine the gaps which prevent it from meeting requirements and achieving desired results. An example is a retail bank that requires hundreds of capabilities across a number of products and channels.
A capability gap analysis delivers a heat map which shows the status of each of the capabilities for every combination of the product and channel. For example, it shows the status of a capability like fraud detection for a credit card product for the mobile banking channel.
If the capabilities are found to be inadequate, more of them will need to be created. Adding or altering capabilities demands significant changes to the business processes, rules, staff, workflow, locations, structures, skills, training, information systems, and infrastructure.

Strategic Gap Analysis Examples

This type of gap analysis is actually an evaluation of the difference between the actual outcome and the desired outcome and determines the actions to be taken to achieve a set goal. Strategic Gap Analysis works to identify what a business should do to achieve a goal by considering the management, time frame, budget, and other factors to determine where it lacks. An example is a small restaurant aspiring to become the top tourist attraction but presently serves only locals. A strategic gap analysis would consider the changes required in the restaurant to achieve the goals. The changes can include modifying the menu to appeal to outsiders, relocating the place to access tourists and hiring more staff to make the restaurant hours convenient for travelers. This analysis also determines how to implement the changes.

Performance Gap Analysis Examples

Identifying your performance gaps helps you improve your business. Gap analysis identifies how big the gap is between your current performance and the desired performance. You can then work at filling the gap to improve the business continually. An example of performance gap analysis is determining what aspects are lacking in the performance of an employee of a company when compared to competitors.

In this case, actual performances are measured with reference to the standards established for the desired performance in a particular position. Another type of performance gap analysis checks the additional skills and training required to raise the standards of the employees or the entire organization to the desired standard. This type of performance gap analysis is often done when newer technologies are introduced into a business workplace.

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