Digital transformation projects cost over $10 million – 37 percent still fail!

Digital transformation projects cost an average of US$10.9 million, with 37 percent of projects failing. That’s according to the Unlocking the Power of Digital Transformation report by VML Enterprise Solutions.

The research paints a rather damning image of digital transformation success rates, revealing that while initiatives are frequent and costly, they often fall short of expectations.

The findings are based on a survey of 4,000 business leaders across eight countries and highlight the need for a more strategic and holistic approach to transformation efforts.

What’s causing digital transformation failures?

One of the primary reasons for the high failure rate is the lack of a clear strategic vision and effective leadership. Almost two-thirds (64 percent) of digital transformation projects start without a clear roadmap, while 56 percent of respondents claim that senior leadership does not effectively support initiatives.

Such lack of direction can lead to wasted resources and misaligned objectives, underscoring the importance of strong, steady leadership in driving successful digital transformations.

What’s more, customers are often being overlooked in the digital transformation process, which is another common cause of failure. More than three-quarters (76 percent) of those polled of say that digital transformation projects aren’t aligned with customer needs, with many businesses being too internally focused.

Meanwhile, 69 percent of businesses say existing systems hinder transformation efforts, with 81 percent reporting that cloud technology has fundamentally changed their approach.

The human factor remains significant too. Despite 83 percent of respondents stating that digital transformation success depends as much on people as technology, 74 percent of failures stem from poor change management.

“This research exposes the historic but also the new challenges businesses face in their transformation journeys,” said Jeff Geheb, CEO of VML Enterprise Solutions. “The report reveals that successful digital transformation is as much about embracing change and adapting to evolving technologies as it is about strategic clarity.”

AI and data are redefining digital transformation

Artificial intelligence (AI) and data are redefining digital transformation, the report states. Over three-quarters (77 percent) of businesses have revised their transformation strategies due to AI, with AI expertise now the most sought-after capability among third party partners.

Digital transformation should also be based on strong data management, but 62 percent of respondents say data silos significantly hinder progress while a further 59 percent admit their data practices aren’t mature enough for advanced technologies.

“With 74 percent of leaders experiencing shifting objectives and 77 percent revisiting strategies due to AI, organizations must approach transformation with boldness, creativity and flexibility,” said Geheb. “By fostering innovation, taking creative risks and aligning efforts around customer needs, businesses can turn challenges into opportunities for sustainable growth.”

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