The medical device industry operates at the intersection of technological innovation, regulatory rigor, patient safety, and market competitiveness. In recent years, increasing product complexity, shortened innovation cycles, and heightened regulatory scrutiny have exposed the limitations of traditional silo-based organizational structures. Against this backdrop, digital transformation and systems engineering have emerged as critical enablers of effective cross-functional collaboration among engineering, clinical, regulatory, quality, manufacturing, and commercial functions. This research article explores how digital transformation initiatives, supported by systems engineering principles, facilitate integrated collaboration throughout the medical device development lifecycle. Drawing strictly on established academic and industry references, this study develops a comprehensive conceptual and analytical narrative explaining how digital platforms, data-driven decision-making, agile methodologies, artificial intelligence, and systems thinking collectively reshape collaborative practices. The article adopts a qualitative, theory-driven methodology to synthesize insights from prior empirical studies, industry reports, and conceptual frameworks. The findings suggest that digital transformation enhances transparency, communication, and coordination, while systems engineering provides structural coherence, risk mitigation, and regulatory alignment across functions. However, the study also identifies persistent challenges, including cultural resistance, skills gaps, governance complexities, and ethical considerations associated with advanced digital technologies. The discussion critically evaluates these findings, situating them within broader organizational and socio-technical contexts, and outlines implications for practitioners, policymakers, and researchers. By offering an in-depth theoretical elaboration, this article contributes to the literature on medical device innovation by articulating a holistic understanding of how digital transformation and systems engineering jointly enable sustainable cross-functional collaboration, ultimately improving product quality, safety, and innovation outcomes.