This chapter illuminates the challenges of small and medium-sized enterprises (SMEs) face when transforming to digital servitization. It is suggested that to embrace and overcome these challenges; the SME needs to undergo three transformational shifts: dematerialization, identity, and collaboration. The enabler for these shifts is SMEs' closeness to their customers and that they thus have a good understanding of their customers' (and customers' customers) needs. It is also the collaboration shift with the most substantial possibilities as SMEs are used to coordinate activities with other actors. The biggest challenge is to make the dematerialization shift - separate information from the physical world - as it usually requires a high level of technical competencies and financial strength. The identity shift might also be hard for SMEs, as organizational culture has been proven to be relatively resistant to change.