This thesis aims to investigate the process of digital transformation in small and medium enterprises (SMEs) in New Zealand. Through an in-depth analysis of literature, reports, and news articles, it has been highlighted that there is a digital lag in New Zealand despite its apparent benefits as there is limited digital adoption by businesses. This study aims to investigate the challenges contributing to this phenomenon and concurrently aims to understand the motivations behind the businesses that chose to adopt digital transformation. It not only attempts to explore this phenomenon through the perspective of owners/managers but also through the viewpoint of the employees; as employees’ perspective on digital transformation has received limited attention in the literature. The researcher has adopted the qualitative research method using the interpretivism paradigm to answer the research questions of this thesis. Later, the data was gathered using case study method in which the researcher conducted semi-structured interviews with the participants and analysed using the thematic analysis approach. Through this study, it was found that competition, efficiency, and real-time scenarios are the major reasons for adopting digital transformation, whereas financial factors and human factors were the main challenges faced by these businesses. This research uncovers the expectations of the participants from the government that will enable these businesses to adopt digital transformation and accelerate the process. Additionally, this study concludes with the discussions of the findings along with its theoretical contributions and explores the practical and policy implications of this study.