Multi-Dimensional Analysis of Digital Leadership and Organizational Transformation in Small and Medium Enterprises

Abstract

Digital transformation is one of the enablers that the 21st-century small and medium enterprises (SMEs) cannot afford to overlook in a bid to remain competitive and efficient in this fast-moving and changing business world. But a few problems are encountered by many SMEs during the transformation process, such as digital readiness, leadership and adaptability of the organisation structure. This study aims to observe how digital leadership can influence organizational change in SMEs through digital transformation capability and digital transformation ability. In this study, the sample of SMEs was taken from the data set gathered from Mendeley Data, which has responses from employee and managerial staff of logistics and trade organisations. The approach that this study has taken is quantitative, in which PLS-SEM is used for testing structural relationships and hypothesis. The reliability and validity analysis revealed that all the constructs' Cronbach's Alpha value was great (> 0.88), and the value of composite reliability was great as well (> 0.91). The results of the structural model showed that there was a significant relationship between the variable of digital leadership and the organizational transformation variable, with the value of β=0.684 (p<0.001), and the digital transformation capability variable with the value of β=0.712 (p<0.001). Moreover, the mediation model revealed that not only the relationship between digital transformation capability and digital transformation ability, but also the relationship between digital transformation ability and organizational transformation was positive, which had an impact on SME performance. The model was found to be good, as the R² value of organizational transformation and SME performance was more than 0.59. The results indicate the relevance of digital projects' leadership to improve the innovation orientation, the agility of the organisation and sustainable business growth. The multi-dimensional framework proposed can be beneficial for small and medium-sized enterprises (SMEs) to understand the digital transformation and manage it to achieve successful results and to stay competitive in the long run.