This study analyzes the interactions between digital innovations, organizational agility, operational efficiency, and business sustainability in higher educational institutions. The study adopts a quantitative methodology and tests the hypotheses with the help of structural equation modeling. The results suggest that digital innovations increase organizational agility in a significant manner (β = 0.604, p < 0.001), which positively affects the operational efficiency of an organization (β = 0.815, p < 0.001) and the business sustainability (β = 0.457, p < 0.001). Mediation analyses suggest that organizational agility acts as a key pathway through which operational efficiency and business sustainability are affected by digital innovation. These outcomes align with related findings in the literature, which highlight the positive impact of digital transformation on organizational agility. They underscore the importance of higher education institutions adopting suitable digital technologies in conjunction with fostering an agile organizational culture. This paper provides insights into the relationship between digital innovations and the performance and sustainability of higher education institutions, highlighting the role of organizational agility. Understanding this connection is crucial for leaders and policymakers, enabling them to adapt more effectively to rapid environmental changes. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2025.