Leveraging digital transformation strategy and data-driven decision making to improve organisational performance in a hostile environment

Purpose: This study examines whether and how a digital transformation strategy (DTS) can improve organisational performance (OP) when confronted with environmental hostility (EH) disruptions. Based on the Resource Base View, Dynamic Capability theories, and literature straddling digital transformation and organisational development, this study developed and tested a conceptual model consisting key elements and relationships between digital transformation strategy (DTS), business analytic capabilities (BAC), organisational agility (OA), data-driven decision making (DDM), organisational performance (OP) and environmental hostility (EH).

Design/methodology: The study is based on a quantitative cross-sectional design, using a survey sample of 309 respondents, working in mainly IT and different industry sectors in North America. Structural equation modelling was used and five hypotheses have been tested.

Findings: The results suggest that environment hostility has a negative effect on organisational performance, while DTS via business analytics capability and organisational agility enable Data Driven Decision (DDM) to enhance the organisational performance. The specific paths are uncovered - both digital capability and organisational agility drive dynamic capability development. DDM, in the form of decision automation by non-human entities and collective sense-making, leads to superior performance and reduces the impact of environmental hostility.

Originality/Value: The study contributes to the theoretical development of the dynamic capability framework from digital capability and organisational agility perspectives. The practical implications will support IT managers in designing IT strategies and agile practices that embed business analytic capabilities for data-driven decision making that increases organisational performance.