With the pace of change in the world accelerating around us, it can be hard to remember that the digital revolution is still in its early days. Massive changes have come about since the packet-switch network and the microprocessor were invented, nearly 50 years ago. A look at the rising rate of discovery in fundamental R&D and in practical engineering leaves little doubt that more upheaval is on the way.
For incumbent companies, the stakes continue to rise. From 1965 to 2012, the “topple rate,” at which they lose their leadership positions, increased by almost 40 percent1 as digital technology ramped up competition, disrupted industries, and forced businesses to clarify their strategies, develop new capabilities, and transform their cultures. Yet the opportunity is also plain. McKinsey research shows that companies have lofty ambitions: they expect digital initiatives to deliver annual growth and cost efficiencies of 5 to 10 percent or more in the next three to five years.
To gain a more precise understanding of the digitization challenge facing business today, McKinsey has been conducting an in-depth diagnostic survey of 150 companies around the world. By evaluating 18 practices related to digital strategy, capabilities, and culture, we have developed a single, simple metric for the digital maturity of a company—what might be called its Digital Quotient, or DQ. This survey reveals a wide range of digital performance in today’s big corporations (exhibit).