Gap Analysis:

In business and economics, gap analysis is a business resource assessment tool enabling a company to compare its actual performance with its potential performance. At its core are two questions:

Where are we?
Where do we want to be?

If a company or organization is under-utilizing resources it currently owns or is forgoing investment in capital or technology then it may be producing or performing at a level below its potential. This concept is similar to the base case of being below one's production possibilities frontier.

This goal of the gap analysis is to identify the gap between the optimized allocation and integration of the inputs and the current level of allocation. This helps provide the company with insight into areas that have room for improvement. The gap analysis process 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 level of performance at which the company currently functions. This comparison becomes the gap analysis. Such analysis can be performed at the strategic or operational level of an organization.

Note that 'GAP analysis' has also been used as a means for classification of how well a product or solution meets a targeted need or set of requirements. In this case, 'GAP' can be used as a ranking of 'Good', 'Average' or 'Poor'.