There is a growing interest in digital innovation and transformation among the researchers and practitioners. It has been recognised that being “digital” is not all about digital data and information technologies. The notion of “digital capability” has been increasingly embraced, but definitions of this concept have remained vague and elusive. A salient research question remains: what is digital capability? This question is explored in this paper from theoretical and practical perspectives in the form of a conceptual construct: the Digital Capability Framework (D-CaF). The framework distinguishes six levels and seven dimensions of digital capability. It is intended to provide a foundation to plan and execute digital capability driven innovation and transformation initiatives. Further, it helps identify and prioritise the research areas of high impact for further studies.