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

Purpose This study aims to examine whether and how a digital transformation strategy (DTS) can improve organisational performance (OP) when confronted with environmental hostility (EH) disruptions. Based on the resource-based view, dynamic capability theories and literature straddling digital transformation (DT) and organisational development, this study developed and tested a conceptual model consisting of key elements and relationships between DTS, business analytic capabilities (BAC), organisational agility (OA), data-driven decision-making (DDM), OP and EH. Design/methodology/approach The study is based on a quantitative cross-sectional design, using a survey sample of 309 respondents, working mainly in information technology (IT) and different industry sectors in North America. Structural equation modelling was used, and five hypotheses have been tested. Findings The results suggest that EH has a negative effect on OP, while DTS via business analytics capability and OA enable DDM to enhance the OP. The specific paths are uncovered – both digital capability and OA 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 EH. Originality/value The study contributes to the theoretical development of the dynamic capability framework from digital capability and OA perspectives. The practical implications will support IT managers in designing IT strategies and agile practices that embed BAC for DDM that increases OP.