Scholars, practitioners, and researchers from a wide range of fields are currently engaged in ongoing discussions and debates regarding the effects of digital transformation. Adopting digital transformation in the context of micro, small and medium-sized businesses (MSMBs), can be challenging for a few reasons, including staff readiness and knowledge levels, resource constraints, and more. These intricate landscapes necessitate innovative approaches while embracing technology to promote sustainability and advancements. Considering this, some governments including the Malaysian government have launched initiatives to support MSMBs in adopting digital transformation to stay competitive in a contemporary, technologically advanced economy. Therefore, the purpose of this study is to assess the level of digital transformation adoption in MSMBs by considering the employees’ level of readiness and literacy. Employing a survey-method approach, 72 responses were collected from owners and managers of MSMBs from 3 states: Kelantan, Terengganu, and Pahang. Findings show that MSMBs have adopted digital technology to a moderate level. To fully embrace technology, they also strive to equip their employees with the necessary digital skills and knowledge. In conclusion, employees’ readiness and digital literacy skills are critical factors in determining the success of digital transformation initiatives. A business’ ability to effectively thrive and prosper in a digital environment can be substantially improved by investing in training and creating an optimal setting for digital skills and knowledge development of employees.