Navigating Cultural Barriers: The Role of Socio-Technical Systems in Digital Transformation Readiness in SMEs

Abstract

Digitalization in the industrial sector has become necessary for both the public and private sectors worldwide to adapt to the rapidly evolving digital landscape. This initiative is articulated in strategic plans designed to foster positive learning environments while minimizing adverse impacts on organizations. Although digital maturity has become an organization's top priority, enterprises still lack digital transformation consciousness and means. The interaction between technological transformation and cultural change highlights the necessity of addressing the resistance during the transition. Utilizing the socio-technical system theory, this study investigates the impact of organizational culture on the readiness for digital transformation in SME enterprises in Malaysia. The study comprises responses from 176 employees across various sectors of SMEs in Malaysia. A quantitative data analysis was conducted by employing the PLS method. The study found that technology, processes, customers, and partners positively impact the organization's digital transformation readiness (DTR). However, it was found that cultural factors within an organization act as a barrier to progress on the DTR. The present study provides insights by identifying critical factors in the digitalization process to enhance operations and business value to achieve sustainable development and improve quality of life through the digital economy.