The convergence of information technology, media, and telecommunications has altered consumer behavior in terms of searching, obtaining, processing, and responding to a company’s information or services. The ability of a company to plan, implement, and manage digital marketing to increase its competitiveness in the eyes of consumers is referred to as digital marketing capability. This research presents a digital marketing utilization index (DMUI) to evaluate and improve a company’s digital marketing capability. DMUI is made up of three components: the innovation ecosystem readiness, the adoption of digital marketing technology, and the company’s digital transformation. Based on data from 217 companies in Indonesia, the results show that the DMUI of companies in Indonesia has an average of 71.97, indicating that the level of digital marketing capabilities of companies in Indonesia is in the medium category. They can improve their digital marketing capabilities by increasing the role of managerial innovativeness, organizational readiness, and perceived usefulness. Furthermore, businesses must carry out digital transformation by governing the transformation and reinvention of new business models. Finally, in addition to implementing digital marketing via websites, social media, mobile marketing, and content marketing, they must emphasize the importance of digital analytics, digital CRM, digital advertising, and display advertising to improve their company’s digital marketing capabilities.

The development of information technology, media, and telecommunication technology, in this case, digitalization, impacts consumer and producer behavior changes. Companies must undergo marketing transformations in order to improve their marketing performance in the digital era. Research on the adoption of digital marketing, the factors that drive the use of digital marketing, digital transformation, and digital marketing capability have been widely carried out. However, research that aims to investigate the relationship between these four concepts simultaneously and in an integrated model is still very rare, especially research models to build the digital marketing capability of companies in Indonesia. This study aims to develop a strategy for improving the firm's Digital Marketing Capability (DMC) in Indonesia based on the innovation ecosystem readiness, adoption, and digital transformation. We collect samples from 2,759 business contacts from one of Indonesia's national television stations via email and WhatsApp applications. After that, we have 217 volunteers who fill out a website with these research questions. Partial Least Squares Structural Equation Modeling (PLS-SEM) is used to analyze data successfully collected. The innovation ecosystem readiness directly impacts a firm's digital marketing capability, as well as digital transformation and digital marketing adoption. Furthermore, digital transformation and adopting digital marketing technologies significantly mediate the relationship between innovation ecosystem readiness and digital marketing capability. Therefore, companies must build an innovation ecosystem readiness, carry out digital transformation, and adopt digital marketing in order to improve their firm's DMC.