How to Determine Your Company’s Digital IQ

As we wade further into the digital age, it’s apparent that computers are at the center of everything. Yet, what seems like radical advances in hardware, coding and more, pales in comparison to what lies ahead. We have only begun to feel the impact of digital technologies.

Last year, McKinsey & Company pointed out that the “topple rate” at which companies lose their leadership positions has increased by almost 40 percent from 1965 to 2012. What’s more, the pace of digital disruption continues to accelerate. When McKinsey conducted an in-depth diagnostic study of 150 companies globally, it found that 18 practices related to digital strategy, capabilities and culture lead to a factor it calls a digital quotient, or DQ.

The consulting firm ultimately identified four key factors:

Strategy Matters. It’s critical to differentiate between disruption and pure-play play disruptors such as Square, Airbnb or Uber. “Rarer still are the ecosystem shapers that set de facto standards and gain command of the universal control points created by hyper-scaling digital platforms,” it notes. The upshot? Companies must understand where they reside, where they want to go and establish a roadmap.

Investments Are Critical. Investments must support the strategy and they must scale to the task. “The right capabilities help you keep pace with your customers as digitization transforms the way they research and consider products and services, interact, and make purchases on the digital consumer decision journey,” McKinsey noted.

Technical Capabilities Aren’t Everything. The study found that while strong technical tools such as big data analytics, digital content management and search engine optimization are crucial, there’s also a need for a strong and adaptive culture.

Alignment Is Imperative. An organization must align its organizational structures, talent development, funding mechanisms, and key performance indicators (KPIs) with the digital strategy it has chosen.

Getting the strategy right is where the heavy lifting begins. A starting point is to establish a clear definition of what digital is and what it means to the organization. This, the firm notes, revolves around three primary issues: First, where will the most interesting digital opportunities and threats open up? Second, how quickly and on what scale is the digital disruption likely to occur? Third, what are the best responses to embrace these opportunities proactively and to reallocate resources away from the biggest threats?

Ultimately, CIOs must collaborate with other business and technology leaders to define the strategy, deploy technology and processes to scale capabilities, build a fast, agile and innovative culture, and find the talent to support a high organizational DQ.