The Effect of Organizational Innovation and Information Technology on Firm Performance: A Case Study of Safaricom Limited

Project Submitted to the Chandaria School of Business in Partial Fulfilment for the Degree of Executive Masters in Organization Development (EMOD)The general objective of this study was to determine effects of innovation on organizational performance. The specific objectives were: To establish whether organizational innovation has improves firm’s performance; to assess how innovative activities affect productivity in firms and finally to determine whether firm performance is improved through information technology and worker skills. The population of the study was one hundred and twenty respondents drawn from Safaricom employees, customers, and agents within Nairobi. The sample frame was adopted from Safaricom Human Resources. Purposing sampling technique was used to ensure that only respondents with relevant information needed for the study were sampled. As noted, the study adopted simple random sampling for both employees, customers, and agents. Data was collected using questionnaires, edited and entered into the Statistical Package for Social Sciences (SPSS) software version 21 to enable carry out descriptive analysis. A total of one hundred and twenty (120) questionnaires were dispatched and all one hundred and twenty (120) responses were received, giving a response rate of 100%. Descriptive statistics used included frequency distribution tabulation. This study used descriptive statistical indexes such as frequencies, percentages, and mean. For inferential statistics, correlation analysis was done to enable easy data interpretation, and to make sense of the data. The analyzed data was presented in form of tables, and figures according to the research questions. The first specific objective looked at organizational innovation and organizational performance. 68% of the respondents indicated Safaricom modem to have highly contributed to organizational performance of Safaricom. 69.2% believed that M-Pesa strongly contributed to organizational performance. 46.7% highlighted that Safaricom wouldn’t perform well without M-Pesa. Most respondents cited M-Pesa, M-Shwari, and M-Banking as the most profitable innovations with a mean of 4.52 that have caused Safaricom to perform better. Other factors as global trends, competition, and customer care received the least mention as having effects on innovation and organizational performance. The second specific objective looked at innovation activities and organizational performance. The study found that sound management and board strategies, product and service diversification, employee innovation autonomy, and innovative marketing strategies were identified as having the most effect on organizational performance. 60% of the respondents felt that innovation had resulted in organizational performance. 32% believed that product development the organization to profitable innovations. However, only 16.7% strongly indicated that Safaricom foundation had contributed to organizational performance. Other areas like product differentiation, employee dynamic capabilities least contributed to organizational performance. The third specific objective improved performance due to improved I.T and worker skills. The study found that data bundle technologies, 3G technologies, M-Pesa and M-Shwari innovations, and Information technologies like the integrated human resources management system. 68.3% felt that I.T technologies had enhanced firm performance. 48.3% believed that Safaricom IHRS had improved employee performance while 63% indicated that IHRS had enhanced talent for Safaricom in the telecommunication industry. Employee credible benefits, and telecommunication competition in technologies were least identified to possess innovative effect that contribute to organizational performance. In examining correlations between the independent variables and organizational performance, organizational innovations had the highest correlation of 0.698, followed by innovative activities at 0.511, and lastly by I.T and worker skills at 0.261. The study concluded that there exists a strong positive correlation, and significant relationship between sound management and board strategies, product and service diversification, employee innovation autonomy, innovative marketing strategies and Safaricom’s performance. Other factors like quality of the innovations, steps of the innovations and employees and customer involvement contribute significantly to an organizational performance at Safaricom Ltd. The study recommends that Safaricom enhance organizational innovations to develop a sustainable completive advantage over other players in the market. On a strategic level, the study recommends that Management at Safaricom further corporate innovations by ensuring that strategic plans, steps of innovations, and the stimuli that triggers profitable innovations are well documented, and executed. Product differentiations for M-Pesa, and M-Shwari should be enhanced to ensure that competitors aren’t able to imitate their products and services. Customer care must also be placed on the fore front to ensure customer satisfaction, which will translate into loyalty and enhanced organizational performance. Finally, the study recommended that further research should be conducted to determine how and why innovations like M-Pesa, and M-Shwari enhanced Safaricom’s performance