With the steady increase in connectivity and the development of new dynamic, interconnected, and distributed technologies, management teams are seeing opportunities to digitally transform organizational processes. Following a case of Internet of Things (IoT) implementation, the aim of this paper is to explore the transformational potential of IoT and the mechanisms and processes that support or constrain IoT-enabled digital transformation in practice. Through a qualitative case study of an IoT implementation project over a period of two years, we show that IoT can create an opportunity for digital transformation by fundamentally changing organizational and individual perception of work identity and work practices. Furthermore, we show that successful IoT adoption requires proactive leadership that identifies and accounts for both technological capabilities and different stakeholder perspectives. To make use of IoT's capabilities and simultaneously mitigate the risk of privacy infringements one must leverage the role of the observer and the observed.