We seek to enrich the literature by investigating the digitalization journey of a high-tech, manufacturing small and medium-sized enterprise (SME) to shed light on the topic. We undertook an interpretive longitudinal study between 2009 and 2020, capturing the transformation journey of an award-winning high-tech SME that is designing and manufacturing high-end home entertainment systems including digital streaming products, music players, and speakers. This study offers important contributions to theory and practice. We conceptualize and define the link between technological obsolescence and the digital transformation process. We offer a conceptual framework to explain the interplay of the adaptive capabilities namely empirical sensitivities and habitus in the context of digital transformation in SMEs. In addition, our study has important implications for practice. SME managers should pay attention to developing non-cognitive dynamic capabilities to effectively respond to digitalization trends by orienting their employees toward careful management of technology obsolescence in a manner unique to the firm’s history and experiences.