Digital transformation risks: economic, organizational, and technical, plus lessons from real failures: HP, GE, Ford, Revlon. How to deliver a project successfully.
Digital transformation risks fall into three groups - economic, organizational, and technical - and failures almost always happen for the same reasons: there are no goals or change management strategy, employees resist, and legacy systems are underestimated. Worldwide, no more than 35% of companies achieve their transformation goals. In this article, we cover risk classification, signs of a troubled project, and six major failures (
, HP,
,
, GE, Ford) with lessons you can apply in your own company. 7.8.2025 Digital transformation often fails because of a lack of strategy, support, and training. This article covers the causes of failure, real-world cases, and paths to successful change. Reading time: 11 min. Worldwide, no more than 35% of companies achieve their digital transformation goals. At the same time, the average cost of a change project is $27.5 million, and by 2030 the global digital transformation market will reach $3,810 billion.
Failed transformation projects often go over budget, miss their main goals, or drag on endlessly. The cause is not only poor planning and resistance to change. In this article, we look at the main reasons digital transformation projects fail and discuss how to avoid them.
In the academic article "Risks of Enterprise Digital Transformation"
Lopatova (Institute of Economics of the National Academy of Sciences of Belarus) divides an organization's internal risks into three groups: 1. Economic - difficulty defining the transformation goal, challenges in assessing economic value, and poor investment prioritization.
2. Organizational - lack of support from leadership or the owner, a mismatch between the chosen model and the target audience's needs, employee resistance.
3. Technical - outdated equipment and software, insufficient automation of internal processes, and system incompatibility.
To assess risk before launch, build a long-term forecast: what benefit the transformation will bring, what investment it will require, and which of the listed factors are already present in the company.
The more items you recognize, the sooner you should address them, before choosing technology.
Each group below is examined through real failures.
To plan change management, it is important to understand why obstacles arise and how to deal with them. In most cases, transformation initiative failures come down to a lack of readiness or the absence of a coherent path forward.
Company leaders still often treat IT modernization as a vanity project that will make the company look visionary, futuristic, and positive. They begin adopting new technologies without goals, guiding principles, or metrics to measure success. Such projects drag on, exceed budgets, and collapse under scrutiny.
Different parts of an organization may have conflicting transformation goals. For example, the engineering team may want to solve complex problems that lead to promotions; marketing may want to increase traffic regardless of whether it converts into customers; sales focuses on closing deals and rarely communicates with the rest of the organization. Without a shared vision, it is hard to secure funding and implement transformation initiatives.
A change management strategy helps manage technology implementation from planning through post-change evaluation. It covers the entire project and is needed for smooth execution. Do not rush transformation. You may miss important steps required to move to IT modernization. The process will slow down because of a lack of resources.
In 36% of organizations, a risk-averse culture dominates and slows progress in digital transformation.
Employees resist change for several reasons: insufficient readiness for change caused by new technologies - 54% feel unprepared; a lack of understanding of the nature and significance of the change - 20% of IT leaders say the change guidance is unclear; and a lack of leadership support - 69% of company leaders say they need to explain new technologies more clearly to their boards.
These factors create anxiety and detachment. As a result, employees become fatigued by change and resist it.
For a project to work across the entire organization, it needs executive approval, funding, and support.
36% of organizations find it difficult to abandon outdated technologies and processes. However, legacy systems are often incompatible with new technologies, or integrating them requires complex workarounds. Over time, maintaining legacy systems becomes increasingly difficult and costly: the pool of experts shrinks, and repair hardware is discontinued. This slows transformation and increases the likelihood of future failures.
Another problem is neglecting to test new systems or processes before rollout. Poor technology management disrupts established workflows and increases troubleshooting costs. If untested systems reach customers, failures will damage the company's reputation.
A digital transformation strategy should match a company’s operational needs, not be a copycat reaction to competitors. Rushing, lack of self-assessment, and poor prioritization lead to misallocated resources and strategic mistakes. If you impulsively copy competitors’ experience, you may make decisions that do not fit your business model or are no longer relevant to customers. As a result, you will lose money and disrupt established processes.
At 57% of companies, transformation initiatives aim to increase upselling and cross-selling, and at 51% to convert leads into customers. Digital transformation focused on customer experience can raise customer satisfaction by 20-30% and deliver economic benefits of 20-50%. If you do not study your customers' expectations and needs, you will build solutions they do not need.
When customer satisfaction is low, transformation efforts do not achieve their primary goals.
Digital transformation depends on people: without training and team support, technology will not deliver results. 36% of executives say their employees lack the skills needed to support the transformation. Without sufficient technical knowledge, projects lose direction and purpose. Digital transformation is an organization-wide initiative. For change to work, all teams and departments must communicate openly and collaborate.
Run comprehensive upskilling programs to develop employees' technical and soft skills.
The world of digital transformation is dynamic and requires a flexible organizational approach. As the digital landscape evolves, it is important to be able to adjust strategies and allocate resources effectively. A transformation concept must be scalable and work well as the customer base grows and production increases.
Data is both a valuable asset and a challenge. It guides digital transformation and provides a source of ideas, anomalies, and opportunities for improvement. But without a coherent strategy, data is useless. An effective data strategy covers collection, storage, analysis, and governance. Regular monitoring and assessment of the impact of digital initiatives help keep progress under control.
24% of IT leaders consider cyberthreats the main challenge in the transformation process. New digital solutions are a potential source of cyberthreats. Neglecting security can damage both finances and the brand. As the digital sphere expands, so does its regulation. Rules and guidelines protect participants, encourage ethical behavior, and ensure data privacy. Failure to comply can lead to legal penalties and large fines.
Let's look at clear signs that a digital overhaul is at risk of failure.
Low Application Adoption and User Engagement.
If employees do not use digital tools, the implementation strategy is ineffective.
Transformation cannot be completed without full technology adoption.
Resistance to change is natural, but it must be addressed quickly.
Develop change management measures in advance to shift employee sentiment and turn resistance into enthusiasm.
If employees are not shown the value of new but hard-to-learn technologies, they will look for alternative solutions.
Downloading unauthorized software is a security risk for the organization.
When change management is poor, employees burn out and do not respond to feedback requests.
Address negative feedback quickly so feedback loops support continuous improvement.
Excessive customization requests.
If employees often try to avoid complying with new processes, change management is failing.
The following signs indicate a successful transformation:
Aligning technology with workflows.
A digital transformation project is meant to solve a problem.
If the new software helps team members work better, you are on the right track.
Consistent communication of changes and training.
Every member of the transformation team should understand the project's goals and objectives and communicate them consistently to all stakeholders. This way, employees will have a unified transformation experience.
Agile feedback loops between business and IT.
Digital transformation is about finding the right balance between business needs, IT capabilities, and organizational resources.
When business and IT leaders shape the transformation strategy together, changes are implemented more smoothly.
One of the ultimate goals of digital transformation is to improve operations. As a result, customers receive better service, come back more often, and generate more profit for the company.
If you can connect improvements in customer engagement to transformation efforts, things are going well.
Even large innovative companies can make mistakes during digital transformation. Let's look at well-known transformation failures and how they could have been avoided.
, a multinational confectionery brand, began modernizing its legacy information systems in 1996. The selected solutions were SAP R/3 ERP, Oracle Seibel CRM, and the Manugistics supply chain management system.
With a budget of $112 million, the new systems were originally planned for rollout over 48 months. However, in an effort to prevent potential Y2K-related disruptions, Hershey's management cut the timeline to 30 months.
In an effort to speed up the process, they cut critical testing.
The situation was made worse by the fact that the final rollout was scheduled for July 1999, which coincided with one of Hershey's peak business periods. As a result, system problems with the newly implemented ERP led to order fulfillment failures.
The company lost more than $100 million, even though it had the necessary inventory.
Quarterly revenue fell by 19%, and the company's share price dropped by 8%.
Do not rush the transformation.
Plan schedules carefully to avoid conflicts with peak business periods.
Do not skip or shorten testing stages.
They help identify and resolve potential system failures to avoid operational disasters.
Start transformation with clear goals so it does not lose direction.
Changes should always be aimed at solving specific organizational challenges. Ensure leadership is actively involved in the change, understands the project's complexity, and recognizes its requirements.
In 2003, HP, one of the leading PC manufacturers, decided to streamline its IT systems by turning them into a single unified ERP system.
Management believed that solving the IT issues after migration would take only three weeks.
This turned out to be a miscalculation: the new ERP system integrated poorly with HP’s legacy systems. As a result, 20% of server orders remained unfulfilled.
Shipments piled up and employees could do nothing: the system had no manual backup processes, so orders could not bypass the ERP. As a result, the company lost $160 million.
Manual controls or alternative systems can help reduce the impact of IT outages. Make sure new systems are compatible with existing ones or can be configured to synchronize.
Invest in comprehensive change management methods.
Anticipate possible issues and develop response strategies.
Communicate actively with stakeholders, especially customers, to manage expectations and report any potential disruptions.
Before starting important projects, make sure digital solutions are reliable and adaptable.
In 2013, the company
, a beverage manufacturer, began implementing an ERP system.
It wanted to speed up procurement, improve accounting methods, and optimize supply chain operations.
Despite investing $100 million over three years, the project made little progress. In the end, the company ended its relationship with the implementation partner and went to court.
MillerCoors' main mistake was placing too much responsibility on the intermediary without clarifying expectations and requirements.
The partner's lack of experience in the beverage sector, along with the absence of internal oversight and leadership, led to wasted time and money.
Before implementing major technology, thoroughly research business needs and available solutions.
Choose partners with experience in your industry.
This will make the rollout smoother.
Provide internal expertise and leadership.
Assemble an internal team or consultants to oversee and guide external partners and promptly report any issues.
Create mechanisms to identify and resolve issues at an early stage.
This prevents them from turning into more serious problems.
Communicate openly and regularly with the implementation partner.
This will let you step in in time if needed.
In February 2018, the cosmetics giant
However, the transition was derailed by poor planning.
This led to major disruptions on the production line and made it harder to fulfill customer orders promptly.
This kind of unstructured ERP implementation was not an isolated case: it was rolled out prematurely across all facilities in 22 countries.
The company suffered a $64 million loss because of unfilled orders.
Operational disruptions reduced investor confidence, and Revlon's share price fell by 6.9%.
This operational failure led to a lawsuit: investors sought compensation for the financial losses they suffered because of the company’s poor performance.
Thoroughly test any new CRM, ERP, or IT system before a full-scale rollout to avoid unexpected complications.
Prepare backup solutions that can be activated quickly if primary systems fail.
Define the change management strategy clearly.
It will ensure a smooth transition and serve as a guide for integrating new tools and solutions.
Consider phased rollout instead of broad deployment.
This allows for more precise scaling of issue resolution and captures lessons for the next stages.
Keep all stakeholders, especially investors, informed about major system changes, potential risks, and mitigation strategies.
In 2011, GE embarked on an ambitious digital journey, aiming to become one of the ten largest software companies by the end of the decade.
It based its strategy on investments in
The Internet of Things, with a primary focus on developing its own Predix platform. By early 2017, GE was facing unfinished tasks and technical problems.
A year later, the company recorded $22 billion in write-downs and spun off its digital assets into an independent organization.
Ambition drives growth, but it must be backed by a clear, actionable strategy.
Set clear milestones and assess progress regularly.
Before introducing technology products, carefully study their nuances and potential pitfalls.
Continuously track market response and adjust strategies based on feedback and changing market dynamics.
Regularly review investments to identify inefficient areas.
Always be ready to adapt.
Flexibility makes it possible to adjust strategy quickly and ensures relevance and resilience in a rapidly changing digital world.
At the start of the 21st century, Ford launched Project Everest to modernize its procurement and supply system.
The implementation timeline was five years, with a budget of $200 million.
However, as implementation progressed, flaws in the project's design and execution became apparent.
The company froze Everest and incurred $400 million in losses.
Continuously monitor and assess project progress.
This makes it possible to identify and fix problems early.
Take stakeholder feedback into account.
Their ideas will help identify practical issues and drive improvements.
Make adjustments based on emerging issues or changing needs.
Regularly review costs and forecast unexpected expenses.
This will ensure that all stakeholders understand and share the project vision.
Digital transformation is systematic work to improve business processes. To avoid failure, start with clear goals, build a change management strategy, and involve employees. Choose realistic timelines, test thoroughly, support cross-functional collaboration, and continuously track results so technology strengthens the business.
Most of the failures in this article have one thing in common: the project was too large to manage.
KT.Team takes the opposite approach: a small, strong team, short verifiable stages, and accountability for business results rather than for "system implementation".
If you want to assess your project's risks before you start, begin with the page for digital transformation consulting.
Read more on the topic: digital transformation strategy - how to set goals that help you avoid failure, digital transformation management - stages and owners, digital transformation cases from CIS companies - what successful projects look like.
FAQ
Organizational: without leadership support and employee involvement, neither budget nor technology will save the project. The GE and Ford cases show that even hundreds of millions of dollars cannot make up for management mistakes.
Early signs: employees do not use the new tools, testing is cut to meet deadlines, changes are described inconsistently, and the project has no contingency plan if something goes wrong.
Define a measurable goal, assess the three risk groups (economic, organizational, technical), choose realistic timelines, and break the project into short stages with verifiable results.
