The Role of IT and Organizational Capabilities on Digital Business Value

Abstract

The opportunities and threats that digital technologies like SMACIT (Social, Mobile, Analytics, Cloud and Internet of Things) bring to organizations are increasingly being explored by the academia and industry. Organizations face the challenge not only to use new technologies but to gain competitive advantage from such embracement in order to stay relevant in the market. This study aims to provide practical insights on how Small and Medium Enterprises (SMEs) can prepare to embrace Digital Technologies. For this, it proposes that a combination of both IT and Organizational capabilities can be the foundation for achieving Business Value with Digital Technologies or “Digital Business Value”. IT capabilities are evaluated by the IT capability maturity framework (IT-CMF) and Organizational Intelligence Quotient (Mendelson and Pillai, 1999) is used to evaluate organizational capabilities. Digital Business Value is defined as the achievement of business objectives using Digital Technologies (Riera & Iijima, 2017). The target population was one hundred Japanese SMEs which were awarded by The Ministry of Economy, Trade and Industry due to their effective utilization of IT supporting business performance in the list of “Competitive IT Strategy SME Selection 100” over the years 2015, 2016 and 2017. Data collection was done with questionnaires sent to all the awarded organizations and collected 34 responses. A quantitative approach was used and the data analysis was done with correlation and regression analysis. Empirical evidence demonstrated that IT and Organizational capabilities are linked to Digital Business Value. A subset of IT capabilities like Risk Management, Business Planning among others was indeed related to Digital Business Value. In addition, Internal Knowledge Dissemination and Continuous Innovation dimensions from Organizational IQ showed relationship with Digital Business Value. This study unveiled that the combination of IT and Organizational capabilities leverage the value from Digital technologies. The outcomes from this study may be of reference to SMEs that look to embrace Digital Technologies as it shows which particular capabilities may be of interest for developing. This study extends the Digital Transformation literature in particular how dynamic capabilities work together in order to enable Digital Business Value