What Is Current State Analysis? Benefits and Steps

Updated June 24, 2022

Businesses often look for the most efficient way to produce a product or service. A current state analysis is a popular technique for evaluating processes, determining their strengths and understanding how they can be more effective. Using this process may help businesses increase profits and remain competitive. In this article, we define current state analysis, explain why this evaluation is important and provide instructions for conducting one.

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What is a current state analysis?

A current state analysis is the evaluation of a business' processes to determine their effectiveness. By identifying the strengths and weaknesses of various procedures, these evaluations help businesses improve processes to increase profits and overall efficiency. Some professionals call this practice an "as-is" state analysis because it focuses on present operations instead of future goals. You can use current state analysis to assess the efficiency of one or multiple processes within a single team or department or an entire organization.

Related: 12 Business Processes To Help Your Organization Succeed

Benefits of current state analysis

There are several reasons why a current state analysis is beneficial, including:

  • It optimizes procedures. A current state analysis can help improve efficiency and reduce costs of procedures, allowing the company to increase its profits.

  • It prepares companies to implement new programs. When a company wants to enforce a new program, it may want guidance for organizing the operation. It can review its current processes to determine which methods might make the new program successful.

  • It aligns a company with its business strategy. If a company deters from its original business strategy, it may take longer to achieve its goals. A current state analysis can ensure procedures are consistent with a company's overall objectives.

  • It helps companies learn from situations. If the company experiences a situation that affects worker morale or profits, a current state analysis can help determine the cause and effectively address the situation.

  • It appeals to stakeholders. After conducting a current state analysis, companies can present the findings to stakeholders. These investors can then use the report to gauge the company's financial health and determine whether to provide more funding.

  • It prepares companies for audits. Passing audits is a good way to show whether a team is efficient. By evaluating processes before the audit, teams can make any necessary adjustments and increase their chances of receiving a good score.

  • It ensures companies remain competitive. Companies that perfect their processes can offer optimal products and services, allowing them to increase customer satisfaction and outperform competitors.

Related: A Guide to Procedural Knowledge in the Workplace

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Seven steps for conducting a current state analysis

To perform a current state analysis, follow these seven steps:

1. Focus on a single product or service

List all the business' products and services. Then, select a focal product or service. Choose something that's relatively easy to produce and involves few processes. Starting with a simple product can help you familiarize yourself with the current state analysis process so you can conduct it successfully for more complicated products.

2. Identify processes for the product or service

Identify every process the business uses to produce the product or service. Try to be as comprehensive as possible and list steps chronologically. You can consult a supervisor or use your own reasoning to determine a product's processes. For instance, if you want to identify the processes a manufacturer uses to produce a toy, your list might look like this:

  • Research and development

  • Product design

  • Sourcing materials

  • Manufacturing

  • Testing

  • Product release

Related: How To Account for Research and Development Costs: A Guide

3. Conduct additional research

To ensure you identify every process, consider conducting additional research. Communicating with the employees directly involved in production can help you list all steps. Here are some ways to collect more information:

  • Direct observation: Observing production in person can help you identify processes you may have disregarded. For instance, seeing raw materials in a manufacturing plant can remind you to consider sourcing as a process.

  • Surveys: Create a survey that asks employees about what they do to create a product and what parts of the production process may not be immediately obvious.

  • Personal interviews: Through personal interviews, you may collect feedback from someone with direct production experience. Consider interviewing multiple people to gain a diverse perspective.

You could also hold group meetings with stakeholders to identify processes and confirm the results of the previous methods. Group meetings often use a general approach, allowing you to identify processes that many people disregarded. For instance, stakeholders might emphasize the importance of talent acquisition and training, which would allow you to make your process list more comprehensive.

4. Create a model for each process

Once you list all the product's processes, evaluate each one individually. Start analyzing the first process by writing down all of its components. You can consider planning procedures and the actual implementation of the process. A description of the research and development process for a toy might look like this:

  • Creating a research and development budget

  • Conducting market research

  • Finding reputable sources for sales data

  • Analyzing sales data relevant to the company's audience

  • Analyzing products from competitors

  • Drafting designs for potential products

You can also note details like how long each process takes and what equipment and teams it involves. To make it easier to visualize the procedures, consider outlining them in a business process model. A diagram like a flowchart can represent straightforward processes with sequential steps. If the process is more complicated, consider using a dynamic system like business process modeling notation to depict nonlinear workflows.

Related: 7 Business Process Modeling Examples

5. Identify strengths and weaknesses

After creating a business process model, analyze it to determine its strengths and weaknesses. You can complete this evaluation to see what's working well and what improvements the company can make. For instance, you might discover your team uses an effective budgeting strategy for the research and development process. This strength permits you to allocate funds to other departments and provides a budgeting example that other teams can mimic.

While the research and development's budgeting practices are efficient, the team's market research strategy may benefit from adjustments. Your business process model might highlight the drawbacks of the current target audience and advocate for a campaign that aims for more relevant consumers. Besides improving efficiency, adjusting processes may reduce redundancy and increase profits.

6. Repeat these steps for other products and services

While a company's products and services may involve similar processes, you can create separate business process models for each. Individually considering products allows you to notice their slight process differences and make customized adjustments. For instance, even though the budgeting process for the research and development process may be efficient, your team may spend too much money on the manufacturing process. Focusing on these weaknesses can help you dedicate time and effort to the appropriate adjustments.

Related: 11 Jobs for a Product Manager That Pay $70,000 or More per Year

7. Create a report

While current state analyses are practical for internal affairs, you can share the results with investors. Delivering a report can help them understand how the business operates and which adjustments it can make to improve efficiency. A report can simply contain the business process models you created but you can also compose a more formal report. Sharing a report might give more detailed process descriptions and recommend appropriate changes to address weaknesses.

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