What is the Digital Transformation Maturity Model?

Understanding standard stages and how to assess the digital maturity of your organization

In recent years, organizations have been challenged to commit to digital transformation and digital maturity. The rapid pace of technological advancements has meant that no industry can escape the need for digital transformation – be it an increased online presence, 24/7 availability, or other demands that technology and society have created.

Understanding a company’s digital maturity is essential for making informed decisions and investments, leading to better financial performance and competitive advantage in the market.

Digital transformation means different things to different industries and organizations, and organizations are taking time to grasp what it means for their unique circumstances and business goals.

The focus has shifted from digital transformation to digital maturity. This article will discuss digital maturity and why it’s necessary.

What Is Digital Maturity?

Emerald Insight quotes research that defines digital maturity as “… a systematic way of ensuring the preparedness necessary to adapt to continual digital transformation consistently and enables structural changes over time”. It involves a continuous and procedural effort to find strategic options to accomplish digital transformation that matches company goals, which researchers admit is challenging.

Digital transformation maturity models are tools that help organizations assess their current digital capabilities compared to those of competitors.

Put differently, digital maturity is about continual digital transformation. It is essential to understand that digital maturity is not an endpoint – no ‘most digitally mature’ companies exist. Technology keeps evolving, so there will always be the next cutting-edge technological innovation to implement. Digital maturity is about being ready and prepared to implement these innovations when they arrive.

Digital innovation plays a crucial role in achieving and maintaining digital maturity. Organizations must embrace digital innovation to adapt to evolving customer needs, maintain relevance, and effectively integrate digital technologies to enhance business processes and create value.

An evolving digital process is thus more than periodic digital updates, even if they involve cutting-edge technologies. Digital maturity presupposes the expertise to devise strategic initiatives to pinpoint the critical elements in digital transformation that will translate into the organization’s growth and financial success. Updates without strategy won’t reap optimal benefits.

Research has found that most digital transformation initiatives do not succeed. A significant reason is that business leaders implement digital initiatives without a clear picture of the company’s position regarding digital alignment and application.

Introducing the Digital Maturity Model

One way to align digital initiatives to company goals so digital transformation projects can succeed is to understand where your organization stands regarding digital maturity. Organizations progress through different levels of digital maturity. These stages are determined using a digital maturity model, often called the digital transformation maturity level. Many have been created over the years, consisting of 4-6 stages that begin from something akin to ‘non-existent’ and progress to ‘exceptionally formed.’

A digital maturity scale determines an organization’s level of digital maturity—is it just in the beginning stages, or does it have a long history of digital transformation?

Digital maturity models are frameworks that organizations use to assess their current level of digital maturity and to guide their digital transformation strategies. Because it’s impossible to devise one standard digital maturity assessment scale that would apply across all industries, several models have been developed to account for differences. The digital maturity index developed by Google and Boston Consulting Group (BCG) is currently the most popular one. It names four development stages: nascent, emerging, connected, and multi-moment.

Organizations use these stages as a digital maturity assessment tool to help them understand their current level of digital maturity.

What Is the Purpose of Digital Maturity Assessment?

Companies use their digital maturity assessment to achieve different goals:

1. Measure the current maturity level of different aspects of an organization to identify strengths and areas for improvement so leaders can prioritize actions to improve digital maturity.
2. Companies can use digital maturity assessments to gain a competitive advantage. According to Boston Consulting Group (BCG), Companies with high levels of digital maturity have a competitive advantage in revenue growth, time to market, cost efficiency, product quality, and customer satisfaction.
3. A digital maturity assessment can also reveal where technology can solve specific problems a business is experiencing.
4. Understanding and implementing digital strategies and processes is crucial for effective digital transformation, as it helps assess manual versus digital processes to drive change.
5. Establishing a company’s digital maturity level ensures that digital transformation efforts are not jeopardized by unforeseen complications that are a time and cost burden.
6. Digital maturity assessment is a great tool to build internal support for your ongoing transformation.

Why is Digital Maturity Important?

Digital maturity is necessary because it helps businesses stay competitive and relevant in the current digital world. A company that refuses to evolve, like Blockbuster, will be left behind with Netflix’s advent.

Digitally mature organizations achieve significantly better results in key metrics than their less mature counterparts, leading to superior business outcomes and higher revenue growth.

It has been shown that companies with high levels of digital maturity and successful digital transformations are better prepared to respond to changing market conditions and customer demands.

According to MIT Sloan Management Review, digital maturity is crucial because it enables companies to achieve better financial performance. The Review refers to maturing companies rather than digitally mature companies, which makes sense since digital maturity is a moving goalpost.

The Importance of Digital Maturity for Business Growth

In today’s fast-paced digital landscape, achieving digital maturity is crucial for business growth. Organizations with high levels of digital maturity can swiftly respond to changing market conditions, customer needs, and technological advancements. By integrating digital technologies into their operations, businesses can significantly improve their operational efficiency, enhance customer experiences, and boost their competitiveness in the market.

Digital maturity also opens the door to innovation. Companies that embrace digital transformation can experiment with new digital technologies, products, and services, creating new revenue streams. This continuous cycle of innovation and adaptation drives business growth and ensures long-term sustainability in an ever-evolving digital world.

What Are the Benefits of Evolving our Digital Transformation?

Companies with higher levels of digital maturity perform better financially. An MIT survey of 184 publicly traded firms found that digitally mature companies outperform industry competitors along different dimensions of financial performance—they outperform less mature companies on numerous financial measures.

Deloitte reports that 43% of highly digital mature companies see significantly higher net profits than their industry averages.

According to Deloitte, these financial benefits can be attributed to digital maturity’s ability to improve efficiency, product and service quality, customer satisfaction, and employee engagement. It also sparks a greater focus on growth and innovation. The effective use of digital tools enhances employee capabilities and customer experiences, ultimately facilitating successful digital transformation initiatives.

The transformation maturity model provides a structured framework for evaluating businesses’ progress in adopting digital technologies. Companies that commit to rapid digital transformation develop a high baseline of digital maturity that enables them to adapt quickly to market changes, giving them a competitive advantage. This was particularly evident during the COVID-19 pandemic when agile companies outperformed their peers.

Digitally advanced firms grow faster. This was the finding of an analysis of the digital maturity of 793 enterprises in North America and Europe Digitally by Forrester. Contributing factors are the ability to reinvent business models and focus on customer experience.

What Are the Stages of Digital Maturity?

We’ll limit our discussion to the most common digital maturity stages.

The Impact of Digital Maturity on Business Growth

The impact of digital maturity on business growth cannot be overstated. According to a study by the Boston Consulting Group, companies with high levels of digital maturity are more likely to achieve higher revenue growth and profitability than their less mature counterparts. This correlation highlights the importance of investing in digital transformation initiatives to enhance a company’s digital maturity.

Beyond financial performance, digital maturity improves customer satisfaction, increased employee engagement, and better decision-making. By fostering a digitally mature environment, businesses can create a strong foundation for sustainable growth and maintain a competitive edge in the digital age.

Stage 1: Nascent

This is the first level of digital transformation. Data collection is not prioritized. Essential digital marketing techniques are used, with minimal manual optimization efforts and limited team collaboration.

The organization operates in silos with limited collaboration between teams. At this stage, automation has not been implemented.

Companies at this stage need leadership to take ownership of the digital transformation journey to improve business results and stay relevant.

Stage 2: Emerging

At this stage, the silos start to crumble. Different departments start working together and sharing data, which now guides business decisions. In addition, the use of automation of repeatable processes becomes more pronounced.

Basic segmentation and testing are implemented to improve results. The organization begins aligning business units, defining KPIs, and documenting processes. Collaboration and sharing data across different languages become essential, as do technologies that enable this business need.

Stage 3: Connected 

In the connected stage, data collection includes first-party and third-party sources. Businesses at this stage use advanced segmentation and attribution models and multiple advertising channels and formats.

Platform integration is emphasized, which, among other benefits, enables cross-channel campaign management and closer cooperation within the organization.

Silos are becoming something of the past, with project teams consisting of members from different departments working together and sharing the same data.

There is a stronger emphasis on technology, including the potential adoption of cloud solutions.

Stage 4: Multi-Moment 

The multi-moment stage is the highest level of digital maturity. Organizations in this stage use automated and technology-driven processes to handle and leverage data for various purposes, including marketing activities.

However, it’s important to note that 78% of digital transformation initiatives fail, often because they do not align with customer needs and expectations. Understanding the current digital maturity is crucial for the success of these initiatives.

Marketing strategies become highly personalized in terms of target audience and messaging. Customized experiences are delivered across all advertising platforms, and personalized attribution models are utilized. Machine learning and data-driven insights play a significant role in optimizing marketing efforts.

It’s important to realize that very few companies have reached this last advanced stage of digital maturation. In 2019, a study by MIT Sloan Management Review and Deloitte found that only 11% of companies surveyed considered themselves to have “fully transformed” digitally. Other studies put the percentage as low as 2% and 5%.

Organizations can use the stages as a roadmap to understand their current position and set targets toward digital maturation.

How Do I Know Where We Rank on the Scale?

Before we start ranking ourselves against our peers and competition, it’s important to understand that there is no one overarching diagnosis for positions of digital maturity. This is not the DSM-V. However, there are some clear guidelines to start your investigation and larger-stage accomplishments or hurdles to tackle before you can set yourself in the next stage.

1. Evaluate your company’s culture and general attitude toward digital transformation. Is there leadership support and willingness to experiment and adapt to changes? What is the level of digital literacy and digital skills of the workforce?
2. Investigate and evaluate your company’s ability to leverage digital technologies, make data-driven decisions, implement automation, and accomplish integration.
3. Evaluate the company’s data management practices. Are you able to leverage data for insights and decision-making?
4. Scrutinize your data collection methods, data quality, data integration, and your use of analytics tools. Do you need some improvements to generate actionable insights?
5. Review your technological infrastructure and digital platforms. What is the level of integration and connectivity among these systems? Are you using cloud services to improve scalability?
6. Consider factors like user experience design, omni-channel integration, personalization capabilities, and customer engagement through digital channels. Can you deliver a seamless and personalized customer experience across digital touchpoints?
7. Use Benchmarking. Compare your company’s digital capabilities and strategies to those of industry peers or competitors. Study industry reports that provide insights into digital transformation trends and best practices within your industry to see how your digital transformation efforts compare with those of your peers.

Key Metrics for Measuring Digital Maturity

Measuring digital maturity is essential for understanding an organization’s current digital transformation level and identifying improvement areas. Here are some key metrics to consider:

• Digital Strategy Alignment: Assess how well the organization’s digital strategy aligns with its overall business strategy. This alignment is crucial for ensuring that digital initiatives support broader business goals.
• Digital Capabilities: Evaluate the organization’s digital capabilities and how effectively they are utilized. This includes the use of digital tools, automation, and analytics.
• Digital Processes: Examine how well digital processes are integrated into the organization’s operations. Effective integration can streamline workflows and enhance efficiency.
• Technology Landscape: Review the organization’s technology landscape, including cloud services and other digital platforms. A well-utilized technology landscape can improve scalability and innovation.
• Customer Experience: Measure how well the organization delivers customer experiences through digital channels. A seamless and personalized customer experience is a key indicator of digital maturity.
• Innovation: Assess the organization’s ability to innovate and experiment with new digital technologies and products. Continuous innovation is a hallmark of a digitally mature organization.

How to Start a Digital Maturity Initiative

You’ve assessed your organization against maturity stages and benchmarked your progress. You’re ready to start your next focused, supported digital initiative. Starting a Digital Maturity Initiative won’t be the same for all organizations, but here are some steps to help you get started:

• Create a Roadmap
  A digital maturity roadmap will help you to outline the steps and milestones needed to progress in your digital maturity journey. It provides a structured approach that includes your current state of digital transformation maturity, clear milestones with clear deliverables, and applicable timelines.
• Get Internal Buy-in
  Digital transformation projects fall apart when all stakeholders are not committed to improving digital maturity. Change is hard, and not everybody in your organization will see the point of it all. To win everyone over, you must show them how digital maturity will benefit them.
• Start Small 
  Introduce changes on a small scale to see what works and what doesn’t. This approach will minimize risk and make projects more manageable. An iterative approach toward digital maturity makes sense since it’s an ongoing process.
• Seek External Expertise
  Consider engaging digital transformation experts to help you conduct digital maturity assessments. External expertise can save you hours of agonizing over your digital transformation needs. Let them save you time and money with the insights they have gained over years of experience and industry knowledge.

After reading this article, you may be rearing to get going on your road to your new digital future. TMG can help you with that. To begin with, read our strategy blog and then contact us to discuss creating a digital maturity roadmap.

Overcoming Challenges and Limitations

Achieving digital maturity is not without its challenges and limitations. Common obstacles include employees’ lack of digital literacy and skills, limited budgets and resources for digital initiatives, and resistance to change from employees and stakeholders. Additionally, the complexity of digital technologies and systems can pose significant hurdles.

Organizations should invest in digital literacy and training programs to overcome these challenges and enhance employee skills. Allocating sufficient resources and budget for digital initiatives is also crucial. Change management strategies can help address resistance to change, ensuring all stakeholders are on the digital transformation journey. Simplifying and streamlining digital technologies and systems can make the transition more manageable.

Common Challenges and Limitations of Digital Maturity

Despite the clear benefits, many organizations face challenges and limitations in achieving digital maturity. These include:

• Decentralized Organizations: Siloed teams and software redundancy can hinder digital transformation efforts. Breaking down these silos and fostering collaboration is essential.
• Varying Digital Literacy: Digital literacy and skills can vary widely across large workforces, leading to digital adoption and usage inconsistencies.
• Productivity Loss: Employees may experience a temporary loss of productivity as they learn new digital applications and processes.
• Complex Applications: Large organizations often require highly customized digital solutions, which can be complex and have steep learning curves.
• Outdated Support Processes: Internal support processes for employee issues may be outdated, slowing the adoption of new digital tools.
• Resistance to Change: Internal resistance to change can be a significant barrier to achieving digital maturity.

Understanding these challenges and limitations allows organizations to develop targeted strategies to overcome them. This proactive approach will help them achieve digital maturity and unlock the full potential of their digital transformation efforts.