Investigating the relationship between digital business strategy and business performance in a financial services organisation

Abstract

The evolution of digital technologies (e.g., social, mobile, analytics, cloud and Internet of Things [IoT]) is disrupting companies and their ecosystems. In response, companies are leveraging digital resources to formulate and implement business strategies underpinned by digitality. In this study, the relationship between digital business strategy and business performance was examined. As strategy refers to the plan of action developed to achieve an objective or goal, company capabilities are essential ingredients. As such, managerial capabilities and operational capabilities were identified as the main dimensions of digital business strategy. The research used structural equation modelling to establish the relationship between digital business strategy and business performance in a financial services organisation in South Africa. The results predict a positive effect of managerial capabilities on business performance. The insights also show a positive effect of operational capabilities moderated by dynamic capabilities on business performance. However, the model predicts a neutral effect on business performance in relation to operational capabilities and managerial capabilities moderated by dynamic capabilities. Although extant literature examined the role of digital business strategy in creating and capturing value, existing approaches are mostly abstract, and the research setting is often in developed countries. Thus, this study contributes to the evolving literature discussion in digital business strategy from a developing country perspective.