We use Gap Analysis in Competitive Intelligence to study any differences between our clients and their rivals and to determine what they are doing to create the Gaps.
Competitive Intelligence has many meanings, but in my opinion the best definition is – “Competitive Intelligence is knowledge and foreknowledge about the entire business environment that results in action” - Seena Sharp.
The goal of Competitive Intelligence is to produce actionable intelligence for decision makers. Gap Analysis is one of the many Competitive Intelligence tools you can use to interpret the information you have on your competitive environment.
A Gap is simply the difference to where you and your competitors are. A Positive Gap indicates you are in a better position than your rivals while a Negative Gap clearly means the reverse - in a worse position.
Every project is different but we tend to follow this basic process:
1. Isolation
Make a list of all the known Gaps especially the obvious differences between your rivals and yourself.
Conduct a search for evidence to back up (and dismiss) the assumptions.
Place the Gaps into an order of priority based on what you think your customers need from you and your rivals.
For this you need to understand how they make a decision to use your product/service. Competitive Intelligence can help you with this too, but that is another subject!
Assemble lists of known Gaps by introducing groups sessions involving your management, R&D, business development and marketing teams.
Ensure each identified Gap is specific, fully understood, well described and the impact of each Gap is estimated. Determine which of your competitors is in a better position than you.
2. Potential Gaps
Potential Gaps do not meet the full criteria to be considered as known Gaps. This will be usually down to missing information about the exact nature of the Gap and its potential impact.
For instance, you discover your rivals may be introducing a “faster” product in the near future and it could have a significant impact on your operation. The size of the impact and your actions will be different if it is 8% faster in 4 years or 60% faster in 7 months.
Understanding which competitors are involved will help but you must keep track of the potential Gaps by assigning a member of your team to collect further information until you are able to dismiss the threat or promote the situation to an isolated Gap.
3. Triggers
Triggers are the events, activities, announcements etc which may signal Gaps in future.
You do not operate your business in a vacuum and these triggers are important. If you are aware of them and you know where to look your competitors tend to signal much of what they plan to do.
For instance the faster manufacturing example (above) could be isolated by monitoring new patents or watching investments in other businesses your rivals make to complement their current products.
Most triggers in your business and environment will become predictable and when a number are tripped you will be ready to investigate if a Gap is being created.
4. Trend Monitoring
Tracking your external environment is an important aspect of Competitive Intelligence and Gap Analysis. Monitor demographic, technology, product, legal and other areas which have an effect on your business.
Within technology, the trend of things getting smaller, faster, cheaper and more communicative is not a revelation but the key to trend monitoring is to find ones which affect your current and future customers.
Once a trend is identified then you should identify your rival’s response and how others not current considered competitors may gain some competitive advantage. Did they respond quickly or where they caught on the back foot. Sony’s response to Apple’s Ipod springs to mind here.
A classic example is the legal industry in the UK. 10 years ago who would have thought Tesco’s Supermarket or Wal-Mart could represent you in a law court? This is likely to happen with the environmental changes caused by the UK Government opening up the industry to competition.
5. Action Plans
Known Gaps
Assign each known Gap one to a person able to work across your organisation to define and execute an action plan to close the Gap.
Potential Gaps
The goal is to actively determine the significance, impact and size of the Gap.
If you have one assign these to the competitive intelligence function and ensure a periodic report is published. If you don’t have a function perhaps offer the project to an up and coming manager or outsource it.
Triggers
What triggers a Gap? Isolate the triggers and you may be able to predict Gaps.
Assign research of these triggers to outward facing functions of your organisation, such as your business development or product marketing teams.
They should search for the specific trigger information and feed it back to the project coordinator who evaluates the triggers and determines if and when new potential Gaps have been identified.
Trends
Finally, monitor and understand when a trend accelerates to the point when specific, compelling market responses occur.
Once market responses are isolated, identify the triggers for each competitor to understand how they intend to act.
Summary
You do not need specialist software or special skills. To start Gap Analysis simply create four Work Sheets and track known Gaps, potential Gaps, Triggers and Trends.
Gap analysis can be a straightforward, good team building and productive exercise.
The key is to understand the different types of information, assign responsibilities correctly for each and establish a process of regular review with management.
I hope you have found this article of great interest and thank you to Tom Hawes of JTHawes Consulting for inspiration and creating the concept. Thank you for your time.
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