Digital Transformation's Impact On Organizational Performance: Exploring The Role Of Digital Innovation And Customer Experience

Abstract

Fuelled by the relentless disruption of emerging digital technologies, businesses are pressured to adapt through digital transformation. However, research on digital transformation in the context of developing economies like Indonesia remains scarce, creating a gap in the knowledge. This study aims to bridge this gap by leveraging dynamic capabilities theory. It delves into how digital transformation in Indonesia's service sector unfolds to influence organizational performance, specifically exploring the potential roles of digital innovation and customer experience in this process. Analyzing survey data from a substantial sample of 122 service sectors and utilizing Partial Least Squares Structural Equation Modeling (PLS-SEM) for analysis, the study yields crucial findings. Empirical data collected from IT directors, managers, transformation officers, and employees with over a decade of work experience through a questionnaire reveals a clear link between digital transformation and improved organizational performance. Interestingly, the study also identifies digital innovation as a mediating factor, strengthening the positive effect of digital transformation on organizational performance. Furthermore, the research reaffirms the independent contribution of digital innovation to improved organizational performance.