AI-Driven Digital Transformation in Business Models: Redefining Business Strategies and Market Dynamics with Artificial Intelligence

Abstract

The Fourth Industrial Revolution has elevated Artificial Intelligence (AI) from a technological novelty to a strategic imperative, driving digital transformation across industries. While AI’s potential is widely acknowledged, empirical research on its structural impact on business models and strategic outcomes remains limited. This study addresses the existing gap by identifying and empirically validating the underlying dimensions of AI-enabled digital transformation, and by examining their impact on business model innovation and strategic agility. Using a cross-sectional survey of 220 firms in finance, retail, healthcare, and manufacturing, exploratory factor analysis (EFA) revealed four key constructs: Operational Intelligence, Customer-Centric Innovation, Strategic Automation, and Ecosystem Integration, which collectively explain 71.4% of the variance in AI-driven transformation. Descriptive and inferential analyses show strong internal consistency and moderate-to-high levels of AI integration across sectors. The findings support a causal pathway in which AI adoption enables business model innovation, which in turn enhances strategic agility and competitive positioning. The present investigation presents a data-driven, multidimensional framework that enhances both scholarly insight and practical management amid the rise of artificial intelligence. It highlights the imperative for organisations to transition from isolated AI pilot projects to comprehensive, ecosystem-wide transformation strategies in order to fully realise AI’s strategic potential.