Influence of Strategic Capabilities on Performance of Commercial Banks in Kenya

Abstract

The purpose of the study was to examine the influence of strategic capabilities on the performance of commercial banks in Kenya. Specific objectives were to assess the influence of innovations capability, leadership capability and customer management capability on the performance of commercial banks in Kenya. The study adopted the dynamic capabilities theory. A descriptive research design was used and focused on 43 Kenyan commercial banks. The study targeted 260 management level personnel working in these commercial banks. The sample was 130 respondents. Primary data was obtained using questionnaires. To examine validity and reliability of data collection tools, pilot study was conducted. The researcher administered the questionnaire to the respondents by employing drop and pick later technique. Respondents participated in the study voluntarily. Moreover, descriptive statistics were adopted to analyse quantitative data. Descriptive statistics comprised of mean, frequency, standard deviation and percentages. The analysed data was given in form of tables, pie charts and bar charts for easy understanding. Qualitative data was analysed using the narrative analysis method. To determine strength of association between the independent and dependent variables, the study performed a correlation analysis. Multiple regressions were conducted to examine effect of strategic information systems on competitiveness of the banking sector. The first objective was to examine the effect of innovation capability on performance of commercial banks in Kenya. According to the study, innovation capability positively and significantly influences performance of commercial banks in Kenya (β= 0.190, P=0.013<0.05). Regarding process innovation, the study found that the banks have adopted new techniques for organizing procedures and routines for the conduct of work, have introduced new management systems, adopted new techniques for allocating duties and have automated its services. Regarding process innovation, banks have new improved methods, equipment and skills used to perform the service, they ensure that the employees understand the existing process, they use the social media platforms to interact with customers and they have technologies to ensure that employees can access services online. The second objective was to assess influence of leadership capability on commercial banks’ performance in Kenya. The findings indicated that leadership capability had positive significant influence on commercial banks’ performance in Kenya (β= 0.294, P=0.002<0.05). On strategic thinking, it has helped in improving problem solving by understanding the problem and its potential solutions, that through strategic thinking the banks are able to develop strategies that help in achieving set goals. Regarding leadership vision articulation, leaders in the bank communicate and specify strategic vision to the general workforce; and that leaders in the bank are involved in developing the firm vision. The third study’s objective was to assess the effect of customer management capability on commercial banks’ performance in Kenya. According to the study, customer management capability has significant positive effect on commercial banks’ performance in Kenya (β= 0.343, P=0.000<0.05). On key customer focus, the researcher established that banks: focuses on ensuring customer satisfaction by providing the best; highly values customer feedback to improve its services uses data to improve their understanding of customer behaviour; and develops the best solutions for customer needs. Regarding knowledge management, this study established that banks’ knowledge management: helps in building firm knowledge; supports increased collaboration between the firm and its customers; promotes efficient workforce; and promotes faster, better decision making. The study concluded that unit enhancement in innovation capacity would lead to an increase in commercial banks’ performance in Kenya. Moreover, the study concluded that unit improvement in leadership capability would enhance the commercial banks’ performance in Kenya. The study further concluded that a unit improvement in key customer focus, knowledge management, relationship marketing (customer management capability) would lead to enhancement of commercial banks’ performance. The study therefore, recommends commercial banks to enhance their innovative capabilities by adopting organization innovation, process innovation, and marketing innovation. The study recommends commercial banks to improve their leadership capability by improving strategic thinking, leadership vision articulation, and leadership competency development; this will help them improve their performance. Strategic thinking goes beyond time, location, and resources to provide innovative answers to the problems a company faces in its competitive environment. The study recommends commercial banks to improve knowledge management capability because by doing so, it enhances dynamic capacity of organizations which in turn enhances organizational performance and gives competitive advantages.