**Abstract**

Incumbents have a challenge to sustain their business due to new attractive business model offered by new entrants. Incumbent firms are required to transform their existing business to a new paradigm of business which is digital business through developing new capability in business model. In developing innovation in the business model, there is a challenge for incumbents due to existing legacy business and routine process. The fastest way in developing new capabilities through collaboration is called co-creation strategy. In driving co-creation strong culture and visioning of digital leader is required. The study of the digital leadership role in developing business model innovation and co-creation strategy was limited; hence this study has an objective to assess the role of digital leadership, whether it will direct or indirect through co-creation strategy in developing business model innovation. The study was conducted on 88 senior leader respondents. The statistical data analysis used SmartPLS application. The result explained that digital leadership impacts indirectly through co-creation strategy on developing business model innovation. Co-creation strategy plays a mediating role in the relationship between business model innovation and digital leadership.

**Keywords:** digital transformation, digital leadership, co-creation strategy, business model innovation
