After years of “going digital,” companies find it’s becoming more difficult to raise their digital maturity, or Digital Quotient (DQ). The DQ is a measurement coined by McKinsey, involving strategy, capabilities, organizational practices, and culture. So what makes this metric tough to raise?
Partly because it’s difficult to keep pace with technology. And partly because digitization involves every function from HR to operations. However, no matter how challenging the task, companies must raise their digital maturity or risk succumbing to digital disruption.
Why most companies are vulnerable
Although digitization has been a priority for many companies these last few years, less than 40% of industries are digitized. Of the efforts made, they’re usually focused only within products and services, and marketing and distribution. Meanwhile, huge opportunities remain in finance, supply chain, and other functions. However, these opportunities can also be seen as warnings.
Because most companies aren’t as digitized as they could be, nearly every business remains vulnerable. Globally, digital disruption is robbing 45% from corporate revenue growth and 35% from their earnings. This means, companies don’t digitize to gain a competitive advantage, they digitize to simply stay in the game.
What high DQ companies have in common
Companies with very high Digital Quotients aren’t afraid to fail. They are bold risk takers that want to provide game-changing customer experiences. From operations to marketing, the entire organization collaborates very effectively together. Without fear of failure, they test quickly, learn fast, and deliver solutions rapidly.
They also seek knowledge from their external network. They welcome partnerships with other organizations, vendors, and customers. High DQ companies uncover how digital can enhance every internal process and every step of the customer journey. They also understand the searching never stops. Every day, they seek ways to improve what’s already working well.
4 tests to raise your digital maturity
Research from McKinsey predicts that every company, in every industry, will feel increased pressure from digitization. No company is immune from this pressure, no matter how large or how successful they are now. To gauge and raise your Digital Quotient, McKinsey research suggests asking questions in the following areas.
1. How strong is your digital strategy?
A strong strategy is the biggest differentiator between high and low DQ companies. Start by establishing a clear definition for what going digital means. Then develop a digital strategy that’s fully integrated with your overall corporate one. McKinsey suggests asking yourself:
- Where will the most interesting digital opportunities and threats open?
- How quickly and on what scale is the digital disruption likely to occur?
- What are the best ways to proactively embrace these opportunities? And to reallocate resources away from the biggest threats?
2. Do you have the right capabilities?
The most important capabilities are those that build foundations for other key processes and activities. Such as modular IT platforms and agile technology-delivery skills. As mentioned earlier, high DQ companies are skilled at digitally engaging customers. So part of their capabilities include using big data for insights into where and how to improve the customer experience.
High DQ companies maintain a fast-paced, product development culture. As you can imagine, this can strain in-house resources. Instead of overburdening their employees, large companies often use agencies, online marketplaces like Upwork, and consulting firms to test ideas and pilot new programs.
3. Is your culture agile enough?
Many companies with a high DQ score use a test-and-learn approach like software development. This approach incorporates automation, monitoring, community sharing, and collaboration. By adopting a test-and-learn approach, companies break down silos and speed up processes.
To test your agility, consider asking:
- How well do you rely on your external network, like independent contractors and agencies, to pilot new theories?
- How willing are you to take bigger risks?
- How amenable are you to testing and learning, rather than waiting for perfection?
- How strong is your internal culture for collaboration and teamwork?
4. How supportive is your digital structure?
Leading digital companies are obsessed with using processes and structures that promote efficiency. They track and communicate digital key performance indicators (KPIs) frequently, if not in real time.
Take it one byte at a time
Although there are four tests, you don’t have to be great at each one to raise your DQ. You may find that you’re extremely strong at capabilities. Or that you have a great digital culture. What usually happens is that a strength in one area propels progress in other areas. The most important thing to do is to take action now. Because companies that stand still will suffer the most.