How to Define, Develop & Assess Digital Capability in Your Organization

This article first appeared on Acorn Labs in May 2023.

Digital capability refers to the digital skills, knowledge, tools, processes, and behaviors that combine to enable an organization to achieve its strategic goals. Digital capabilities are defined with a specific digital strategy in mind.

Define digital capabilities in 3 steps

As we said, digital capabilities are designed to work with specific digital strategies, so it goes without saying that you need to define what your organization needs to achieve those strategies.

Step 1: Define the landscape

The first step is to look at your organization’s values and mission. This means asking why the business exists, how it runs, and what makes it different in the market. Then ask yourself where the digital aspect fits into the picture.

There will be a touch point for digital capabilities in every job or function. Think along the lines of digital communications, digital marketing, or digital innovation. You need to be detailed when outlining your digital strategy’s prerogative—understand what value digital generates for your business, and how that may evolve.

With this information, you can align a digital capability framework with business performance.

Step 2: Define the purpose

Each of your digital capabilities needs a specific purpose within your business, beyond supporting digital transformation alone. There are five questions to ask to define a capability’s purpose:

1. How will this capability support long-term goals?
2. Is there a need or demand in the market or it?
3. Do you have the right resources to sustain the capability?
4. Is it competing or complementing current capabilities?
5. Are there risks associated with building it?

Step 3: Name the work

Define what employees need to do in plain terms. Every capability will describe work being done or the outcome of it being done, like digital literacy, digital communication, or digital security. If the name isn’t immediately clear to employees, they aren’t going to understand what the capability actually is.

Strategies for building digital capability

The process of developing digital capability is fairly involved owing to the fact it touches pretty much every corner of your business. In general, there are six steps you need to follow to build digital capability.

Engage leadership

Leaders are ground zero for employee engagement in learning and capability building, so if you don’t get leaders to engage and support L&D, your L&D activities will be dead in the water.

To combat this, you need to think hard about what leaders actually want. Is it process improvement, increased customer satisfaction, or team effectiveness? Once you know this you can also work out what leaders stand to lose if they don’t buy into capability building. This goes beyond just “not” being able to see improvements in processes, or not having satisfied customers. This is about the impact not developing capability will have on the organization.

Create co-ownership between HR and business units

No single department has all the answers when it comes to digital capability. Think of it this way: Some digital capabilities—like digital literacy—will touch everyone, while others—like digital innovation—may only touch a select few roles. This is why HR needs to establish co-ownership between teams when it comes to digital capability building.

HR and business units need to share the load to ensure that digital capability building is optimized across the whole organization, rather than just centered around one specific function.

Understand digital capability gaps

Use capability assessments to understand the gaps in individuals’ digital capabilities. Using both self-assessments (where individuals assess their own competency in a given capability) and manager assessments (where managers assess the individuals’ competency) is crucial for gaining an objective view of how individuals perform. You can also bring in assessments by subject matter experts where digital capabilities are more specialized.

Across all these assessments, the competency levels you use to measure digital capability should be consistent. In its most basic form, it should cover whether performance needs development, meets expectations, or exceeds expectations.

Assess digital capability maturity

When you want to understand digital capability at the business level, you should assess maturity rather than competency levels. Capability maturity is the collective view of digital capability, allowing you to identify and prioritize areas that need digital capability development based on risk to the business.

You can arrange maturity on a heat map so that you have a visual representation of which capabilities need urgent development (or which ones are “hot”) and which ones can wait (the capabilities that are readily available to the business already).

Build digital capability

The best way to build digital capability? Embed learning in the flow of work. You can do this most easily with a knowledge management system like a performance learning management system (PLMS). These allow employees to access relevant learning when it’s needed and apply it to their everyday jobs. The learning could be bite-sized or more of a collaborative environment to enable the transfer of knowledge between employees.

Track progress

Developing digital capability isn’t a one-and-done process. Tracking the performance of digital capability over time is essential for identifying and prioritizing development going forward, allowing businesses to minimize risks. When you’re proactive with your tracking, such as by embedding performance management in L&D, you can get a better idea of your ROI and its impact on organizational performance.