Abstract
Nepalese small and medium businesses have been significantly impacted by the onset of digital transformation. The major changes are witnessed in terms of leadership challenges, employee skills development, and strategies amidst ongoing digital transformation. Very little research has been carried out in Nepal to comprehend the fundamentals of successfully managing transformation within this context. The present study explores leadership challenges and strategies required to help employees adapt and manage digital transformation. This thesis aims to achieve three major objectives associated with evaluating impacts, investigating leadership influence in the identification and development of employee skills, and strategies to overcome transformation challenges. Qualitative research methodology with semi-structured interviews is used for data collection. Thematic analysis is utilized for analysing data collected from twelve participants including leaders and employees from three case companies. A key finding was that transformational leadership attributes are found to be essential to influence employees to build necessary skills such as technical skills, digital literacy, continuous learning, communication, creativity, flexibility, and adaptability. Employee motivation, training, and development, employee engagement and participation, ongoing feedback, and understanding of employee sentiments are some of the fundamental leadership strategies to reduce employees' resistance towards change and to positively influence them towards embracing digital change successfully.