Redefining impactful business management: digital transformational leadership and transforming capability as drivers of innovation in the digital era

In the digital era, innovation depends not only on technology adoption but also on leadership that renews business models and creates commercial value. While leadership is widely recognized as a driver of innovation, the most effective leadership style for digital transformation remains under explored. This study examines digital transformational leadership (DTL) in Indonesia’s private hospital sector, where digital transformation is reshaping service delivery and competitiveness. DTL is conceptualized through seven archetypes that enable leaders to leverage digital opportunities, foster innovation-oriented cultures, and build external networks. The study investigates how DTL enhances digital transforming capability (DTC), defined as an organization’s ability to navigate digital ecosystems, redesign structures, and increase digital maturity, thereby enabling adaptive business models and improving both technical innovation performance (TIP) and commercial innovation performance (CIP). Using a quantitative approach, data were collected through a structured survey of 157 private hospitals in Indonesia and analyzed using structural equation modeling. The results reveal significant positive relationships among all constructs, demonstrating that stronger DTC leads to higher innovation performance. This study contributes to organizational and strategic management literature by explaining how leadership-driven digital transformation strengthens organizational capabilities and promotes multidimensional innovation performance in the digital era.