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Digital Maturity: Conceptualization and Measurement Model

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 Digital Maturity: Conceptualization and Measurement Model

Digital Maturity:
Conceptualization and Measurement Model
Short Paper

Alexander Rossmann
Reutlingen University
Alteburgstr 150, 72762 Reutlingen, Germany
alexander.rossmann@reutlingen-university.de

Abstract
The rise of digital technologies has become an important driver for change in multiple
industries. Therefore, firms need to develop digital capabilities to manage the
transformation process successfully. Prior research assumes that the development of a
specific set of digital capabilities leads to higher digital maturity. However, a
measurement framework for digital maturity does not exist in scholarly work. Therefore,
this paper develops a conceptualization and measurement model for digital maturity
with focus on three research questions: (1) How is the construct of digital maturity
conceptually defined? (2) Which capabilities are incorporated in the concept of digital
maturity? and (3) How can firms measure digital maturity? The findings indicate that
digital maturity incorporates eight capability dimensions dealing with strategy,
leadership, business and operating model, people, culture, governance, and technology.
Firms can use the developed model to measure their current status quo and to target their
strategies along digital transformation.

Keywords: Digital Maturity, Digital Capabilities, Measurement

Introduction
The rise of digital technologies has become an important driver for change in multiple industries. Digital
technologies affect all levels of the firm, including business model frameworks, customer interfaces,
customer experience, and internal processes (Sugathan et al. 2018). Therefore, firms need to develop digital
capabilities to manage the transformation process successfully (Kane et al. 2017; Perakslis 2017). Prior
research assumes that the development of a specific set of digital capabilities leads to higher digital maturity
(Westerman et al. 2014). Moreover, the degree of digital maturity can have an impact on corporate
performance. However, a measurement framework for digital maturity does not exist in scholarly work.
To close this research gap, this paper develops a conceptualization and measurement model for the
construct of digital maturity and provides insights into the most important capability dimensions of digital
maturity. In doing so, this paper focuses on three research questions: (1) How is the construct of digital
maturity conceptually defined? (2) Which capabilities are incorporated in the concept of digital maturity?
and (3) How can firms measure digital maturity?
After a systematic review of related research, we conducted six independent studies to answer these
research questions. The first four studies follow mainstream psychometric scale development and
validation procedures (Gerbing and Anderson 1988) to develop a well-grounded set of items for the
construct of digital maturity. The final two studies define a reflective and formative measurement model
for digital maturity (Gudergan et al. 2008). We test the corresponding measurement models among a
sample of 240 executives responsible for digital transformation initiatives in Germany, Austria, and
Switzerland.

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 Digital Maturity: Conceptualization and Measurement Model

The findings indicate that the concept of digital maturity incorporates eight capability dimensions dealing
with strategy, leadership, business and operating model, people, culture, governance, and technology.
Firms can use the developed measurement model for digital maturity to measure their current status quo
and to target their strategies along digital transformation.

Theoretical Foundation
The term “digital maturity” receives particular attention in the work of Westerman et al. (2014). Westerman
et al. provide evidence that firms with higher digital maturity earn superior corporate performance. This
research stream separates the concept of digital maturity into digital capabilities (e.g., strategy,
technological expertise, business models, customer experience) and leadership capabilities (e.g.,
governance, change management, culture). Firms with mature digital capabilities and weak leadership
capabilities are coined Fashionistas, while firms with mature leadership capabilities and weak digital
capabilities are coined Conservatives. Corresponding to Westerman et al., firms need to develop both
capability dimensions to achieve digital mastery. Firms that do so show superior corporate performance,
measured by indicators such as revenue per employee, earnings before interest and taxes, and product
margins. Management practice has heavily adopted Westerman et al.’s (2014) model. Multiple consultancy
companies have developed a corresponding framework to measure digital maturity, including KPMG, 1
McKinsey, 2 and Boston Consulting Group. 3 Capgemini Consulting (2012) disseminates corresponding
measurement models to estimate its clients’ digital maturity. Thus, a tremendous number of corporate
transformation projects have been inspired by frameworks and models for digital maturity.
As such, it is of major interest to evaluate whether the practical discussion around digital maturity and the
implementation of corresponding measurement models are supported by research. Therefore, in
preparation for the development of a well-grounded measurement model, we conducted a systematic
literature analysis. To ensure reliable identification of the conceptual body of related research, we executed
the review approach of Webster and Watson (2002) in three corresponding steps: (1) search strategy, to
identify relevant search strings and databases; (2) evaluation, to remove duplicate and irrelevant articles
through a title and abstract review; and (3) full text reading and backward search.
In step 1, we conducted a structured query in three relevant databases for scholarly work: Web of Science
Core Collection (to adopt a broad analysis on different research areas), EBSCO Business Source Complete,
and IEEE Xplore (to adopt focused research in the business and IT domain). The search was restricted to
research published between 2006 and 2018. A search on the term ‘digital maturity’ on a topic level resulted
in 363 hits in the three databases (340 in Web of Science, 14 in EBSCO, and 9 in IEEE). The quota of
published articles per year shows a growing interest in the topic of digital maturity, with a top quote of 62
research results in 2017. After step 2, which included the removal of duplicates and an evaluation of relevant
articles based on an analysis of title and abstract, 25 search results built the database for full-text analysis
(Anand et al. 2016; Andersen et al. 2011; Balaban et al. 2018; Burke 2018; Chaffey 2010; Chen 2017; Đurek
et al. 2018; Dwivedi et al. 2011; Gonzalez-Rojas et al. 2016; Gottschalk 2009; Hanaei and Rashid 2014;
Heberle et al. 2017; Isaev et al. 2018; Kane et al. 2017; Kerrigan 2013; Maemura et al. 2017; Mettler and
Pinto 2018; Morais et al. 2011; Perakslis 2017; Pflaum and Gölzer 2018; Poruban 2017; Seitz and Burosch
2018; Tarhan et al. 2016; Valdez-de-Leon 2016; Whelan et al. 2015).
The focus of current literature is on how to achieve digital maturity (Kane et al. 2015, 2017; Pflaum and
Gölzer 2018; Seitz and Burosch 2018), digital maturity of specific sectors and functions (Andersen et al.
2011; Chaffey 2010; Đurek et al. 2018; Gottschalk 2009; Hanaei and Rashid 2014), specific tools (Anand et
al. 2016; Burke 2018; Heberle et al. 2017), or general and conceptual models (Isaev et al. 2018; Poruban
2017; Valdez-de-Leon 2016).

1 https://assets.kpmg.com/content/dam/kpmg/pdf/2016/04/ch-digital-readiness-assessment-en.pdf.
2 https://www.mckinsey.com/solutions/digital-quotient.
3 https://www.bcg.com/de-de/capabilities/technology-digital/digital-acceleration-index.aspx.

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 Digital Maturity: Conceptualization and Measurement Model

Overall, however, the scientific foundation for the construct of digital maturity remains vague. Although
the concept of digital maturity clearly refers to the formation of specific capabilities to manage digital
transformation, a measurement framework for digital maturity is not available.

Methods and Results

This research follows well-accepted, mainstream psychometric scale development and validation
procedures (Gerbing and Anderson 1988). The research process is based on a construct working definition;
in this case, digital maturity represents the degree of adoption and application of digital technologies in
corporate business models. Table 1 summarizes the research process.
The first stage of research involves four qualitative studies to develop a comprehensive item pool for digital
maturity. These studies include self-descriptions from firms about their digital maturity and qualitative
surveys with internal executives and external experts. Studies 1 and 2 focus on detailed descriptions of
firms, and study 3 includes a larger sample to integrate executive perspectives in the process of item
exploration. Study 4 aims to validate the proposed item pool conducted by experts.
The second stage involves quantitative research methods to explore the dimensional space and refine scales
for digital maturity. In particular, exploratory factor analysis (EFA) provides insights into the dimensional
structure of the item pool based on a reflective measurement model (study 5). Finally, study 6 carries out a
confirmatory tetrad analysis (CTA) to test the appropriateness of using formative measurement models
versus reflective models.

Study 1: Self-description of Digital Maturity

Study 1 identifies items firms use to describe their current or intended digital maturity. Annual reports,
websites, and external publications from firms commonly contain self-descriptions that encompass current
or intended digital maturity. The inspection process included annual reports and corporate websites of 30
firms listed in the German DAX stock index. During analysis of these 30 firms, data collection reached
theoretical saturation (Guest et al. 2006). Therefore, the marginal return on examining more firms
diminished. In total, the process yielded 56 firm-related descriptions of digital maturity. The research
process was supported by an analysis of three publications in German newspapers about the competition
on digital maturity. However, the articles discuss this competition among firms on a subjective level without
clear academic rigor. Despite this, the description of firms with a relatively high digital maturity provides
additional impetus to the discussion of potential facets of digital maturity. Finally, self-descriptions and
external publications yielded 42 firm-related descriptions for digital maturity.

Study 2: Identification of Items Executives Use to Describe Digital Maturity

Study 1 focuses on firms’ current or intended perception of digital maturity, but the findings do not indicate
how such descriptions correspond to executive perceptions. Therefore, we undertook semi-structured, in-
depth interviews with eight executives responsible for digital transformation programs in German,
Austrian, and Swiss firms. We selected the executives on the basis of the industry of their firms and their
role in managing digital transformation projects. Finally, we arrived at a sample of eight different industries
(i.e., automotive, manufacturing, banking, insurance, retail, pharmaceutical, consulting, and utilities). The
main purpose of the interviews was to describe the digital maturity of the firms and determine the different
elements of digital maturity. After interpreting the results, we added 63 additional firm-related descriptions
for digital maturity to the pool, which brought the total to 105 items.

Study 3: Supplementation of the Items

Study 3 involves a larger sample than study 2. Here, 143 respondents of an international program in
professional education completed an online survey. The respondents of the education program (ageAVE:
33.4; male: 54%; female: 46%) described the digital maturity of their firms in a well-designed survey that
included an open-ended questionnaire (Smyth et al. 2009). Study 3 compiled another 88 new items.

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 Digital Maturity: Conceptualization and Measurement Model

Study Objective Sample/Method Findings

1 Identification of items Content analyses of annual reports and 42 items
corporate websites of 30 firms listed in the
German DAX

2 Identification of items Eight semi-structured qualitative interviews 63+ items

with executives responsible for digital
transformation in firms

3 Identification of items Online survey with 143 respondents of an 88+ items

international program in professional (in total: 193 items)
education. Qualitative analysis of responses to
open-ended survey questions.

4 Reduction of items Item-reduction based on rating from multiple Reduced:

stakeholders and groups. 78 items

5 Definition of reflective EFA/CFA among 253 respondents of a 8 dimensions;

measurement model professional education program in Germany. 32 items

6 Definition of formative Online survey with 240 executives responsible Preference

measurement model for digital transformation from firms in for formative
Germany, Austria, and Switzerland; CTA. measurement
models

Table 1. Research Overview

Study 4: Item Reduction

Studies 1–3 yielded 193 items in total. Thus, we took several steps to reduce the initial items. The goal of
the process is first to eliminate items not used in everyday language (Rossiter 2002). To do so, two scholars
rated the frequency of each word in everyday language (1 = very rarely, 7 = very frequently), and two
scholars rated the appropriateness of items in describing a firm (1 = not qualified at all, 7 = very qualified).
Then, expert judges rated face and content validity (Diamantopoulos 2005; Rossiter 2002). Two executives
from digital departments of firms rated item appropriateness based on the digital maturity concept. Mean
scores for each step (i.e., for appropriateness of use, to describe a firm, and to measure a firm's digital
maturity) provided a screening mechanism. The resulting pool retained only items with an average
appropriateness of at least 5 across each respondent group. For further validation of these preliminary
items, an academic scholar familiar with digital transformation programs compared the complete and
reduced list of items. This led to the inclusion of seven previously deleted items, providing a final pool of 78
items.

Study 5: Identification of Digital Maturity Dimensions

in a Reflective Measurement Model
Study 5 identifies the potential factor structure of digital maturity in a reflective measurement model by
applying calibration procedures. In total, 253 respondents of professional education programs (ageAVE:
35.6; male: 58%; female: 42%) participated in a survey titled “digital maturity of firms.” Respondents
answered the following question: “We are interested in the characteristics that come to mind when thinking
about your firm. To what extent do the following items describe the digital maturity of your firm?” Items
were evaluated with 7-point Likert-type scales (1 = does not apply, 7 = totally applies).

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 Digital Maturity: Conceptualization and Measurement Model

Results. Principal component analysis (PCA) followed by oblimin rotation allows examination of
dimensionality and suggests items for deletion. An eight-factor solution was the most appropriate according
to a variety of commonly applied criteria: inspection of scree plot, interpretability, and eigenvalues greater
than unity. To improve and validate the factor structure, we deleted items with low factor loadings (<0.50)
and/or high cross-loadings (>0.30) (Hair et al. 2006; Peterson 2000). The final eight-factor solution
explains 72.1% of the total item variance, which is above the recommended threshold of 0.50.
Scale inspection. Reliability analyses show alpha coefficients above the established threshold of 0.70
(Nunnally and Bernstein 1978) for each dimension. Through a meta-description for each dimension, the
following eight facets of digital maturity evolved: (1) strategy (explicit, cross-functional, transformative,
evaluated), (2) leadership (commitment, style, role, leadership adoption), (3) business model (customer
value, innovation, digitalization, co-creation), (4) operating model (agility, integration, resources,
cooperation), (5) people (expertise, learning, employee adoption, specialization), (6) culture (transparency,
dynamic, empowerment, attitude toward chance), (7) governance (coordination, alignment, measurability,
target orientation), and (8) technology (data, interaction, automation, workplace). Overall, this led to an
eight-factor structure in the conceptualization of digital maturity with 32 items. Table 2 displays the full
item formulation for each capability dimensions.
Robustness tests. Replications using different estimation (e.g., PCA, maximum likelihood) and rotation
(e.g., varimax) methods led to similar solutions. A series of replications based on different sub-samples,
such as gender, firm size, and age, confirmed the avoidance of biases caused by sample distribution. In
addition, a confirmatory factor analysis on the eight-factor structure provided evidence of good
psychometric characteristics. In summary, supplementary analyses confirm the robustness of the model.
The Fornell and Larcker (1981) procedure examines discriminant validity. The average variance extracted
(AVE) within each pair of dimensions is compared with the square of bivariate correlations between these
two dimensions. Evidence of discriminant validity exists in this study, as AVE values are all above each
squared construct correlation (Fornell and Larcker 1981; Hair et al. 2006).

Study 6: Evaluation of the Digital Maturity Scale

in a Formative Measurement Model
Study 6 aims to develop and test a formative measurement model for digital maturity. Such models are
appropriate when an explanatory combination of indicator variables underlies the latent construct
(Diamantopoulos 2006). To test the appropriateness of using formative models versus reflective
measurement models, Bollen and Ting’s (1993) CTA can be applied. Within the context of CTA, it is common
to analyze the homogeneity of correlations among manifest variables in the measurement models to decide
between reflective and formative modeling (Gudergan et al. 2008).
Therefore, we conducted an additional study to apply CTA to a sample of respondents of a professional
education program in Germany, Austria, and Switzerland. Overall, 240 executives responsible for digital
transformation projects in their corresponding firms agreed to answer an online survey (ageAVE: 39.4; male:
62%; female: 38%). The scale for digital maturity was executed based on the 32 items derived in study 5.
The corresponding items for digital maturity were measured with a 7-point Likert scale. The results of a
CTA-PLS computation with 5,000 bootstrap subsamples show that for at least one model-implied non-
redundant vanishing tetrad, the parameter value of H0 (τ = 0) is not in the bias-corrected 90% (two-tailed)
Bonferroni-adjusted confidence interval. Thus, CTA-PLS rejects H0 and gives evidence of a formative
measurement model specification (Gudergan et al. 2008).

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 Digital Maturity: Conceptualization and Measurement Model

# Capability Items
1 Strategic Our firm has implemented a digital strategy.
Capability The digital strategy of our firm is documented and communicated.
The digital strategy of our firm has a significant influence
on existing business and operating models.
The digital strategy is being continuously evaluated and adapted.

2 Leadership Our executives support the implementation of the digital strategy.

Capability The digital strategy is only implemented in individual functional areas (inverse).
The culture of leadership in our firm is based on transparency,
cooperation and decentralized decision-making processes.
The digital strategy of our firm has an influence on the task
and role profiles of executives.

3 Market Digital products and services are embedded in our business interfaces and
Capability business processes and create a perceptible impact on customer experience.
There is a direct added value created by the progressive digitization of products
and services of our firm (e.g., cost reductions, increased productivity, better
customer experience, customer differentiation).
Digital products and services have a large impact
on the overall performance of our firm.
Our firm is creating significant sales volume via digital channels.

4 Operational There are sufficient resources (time, people, budget) available

Capability to implement the digital strategy within our firm.
We established a strong cross-functional cooperation and co-creation with
stakeholders throughout our value chain.
Digital and physical processes are fully integrated by holistic process models.
The impetus of our digital strategy is leading to innovations in operations.

5 People and Within our firm, there are sufficient experts on digital core issues.
Expertise Within our firm, further education opportunities
Capability for digital core topics are available.
Within our firm, comprehensive measures to strengthen
digital literacy development are implemented.
Within our firm, new job profiles have been created for employees
with expertise in digital core topics.

6 Cultural Decisions within our firm are transparent to our own employees.
Capability Digitization has an impact on the decision-making agility of our firm.
In day-to-day business, employees and executives exchange information about
the digital transformation of our firm.
Continuous change is part of our corporate culture.

7 Governance Guidelines for the use of digital technologies are communicated

Capability and used by employees.
Our firm implements a holistic management model
for the digital strategy and corresponding key metrics.
The key metrics for the digital strategy are fully integrated into controlling.
The corporate strategy and the digital strategy are intensively
networked and complement each other.

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 Digital Maturity: Conceptualization and Measurement Model

# Capability Items
8 Technology Our firm uses large amounts of data to optimize strategies,
Capability processes and products.
Within our firm, we use tools for digital modeling, automation
and control of business processes.
Our firm has implemented enterprise-wide digital workplace
concepts. Digital platforms are used for day-to-day collaboration.
Digital technologies are the mainspring for the further development
of products and services.

Table 2. Digital Maturity, Capability Dimensions, and Items

Discussion, Limitations, and Conclusion

The aim of this research was to provide a conceptualization for the construct of digital maturity and a
corresponding measurement model. To do so, we carried out a systematic review of related research and
different empirical studies to develop a well-grounded conceptual definition and measurement model for
digital maturity. As the results indicate, the construct of digital maturity contains eight dimensions and 32
items along strategy (explicitness of strategy formulation, cross-functional implementation,
transformative impact, degree of evaluation), leadership (commitment, style, role, adoption of digital
strategy by executives), business model (generated customer value, relative innovativeness, degree of
digitalization, implemented value co-creation), operating model (degree of agility, level of process
integration, quality of resources, quality of cooperation), people (degree of expertise, implementation of
learning routines, employee adoption of digital strategy, specialization on digital assets), culture (level of
transparency, agility, empowerment, attitude toward change), governance (coordination mechanisms,
level of alignment, measurability, target orientation), and technology (adoption and usage of technologies
for data management, customer interaction, process automation, digital workplace).
The results contribute to the theoretical understanding of digital maturity as a construct and the different
factors driving digital transformation initiatives in firms. Currently, a clear conceptual definition and
measurement framework for digital maturity and for the corresponding capabilities is not available in
scholarly work. Therefore, this paper provides a clear theoretical contribution in the field of construct
conceptualization and operationalization and leads to an extension of the work of Westerman et al. (2014)
and others (Isaev et al. 2018; Poruban 2017; Valdez-de-Leon 2016). Moreover, the results provide
executives with practical recommendations on what to focus on and how to proceed in the digital
transformation of their firms. The developed scale for digital maturity can also serve as a framework in the
analysis of the current state of digital transformation and for continuous controlling.
In addition, the formative measurement model for digital maturity aligns with further theoretical
evaluations of the relationship of digital maturity with other constructs. The current research provides the
basis for further research on the relationship between digital maturity and other constructs. In particular,
further research projects might explore the causal effects between digital maturity and corporate
performance, evaluating the general hypotheses of Westerman et al. (2014). Limitations of the presented
research include the empirical foundation of the measurement model, which was constrained by empirical
findings from Central Europe. Future research might use the defined measurement model for item testing
in a different cultural context.
In conclusion, this research provides a conceptual foundation and a defined measurement model for digital
maturity. This might be viewed as an important basis for a large array of corresponding research initiatives.
Practitioners can immediately adopt the measurement framework and use the defined metrics to evaluate
the current state and progress of their digital transformation efforts.

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 Digital Maturity: Conceptualization and Measurement Model

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