8 Change Management Failures to Learn From (2024)
- Published:
- Updated: July 24, 2024
It’s easy to look back at a failed change management project and see why it happened. The hard part is identifying failure before it happens and understanding how to use those lessons to improve future change implementations.
What Is the Failure Rate for Change Projects?
An often-quoted statistic is 70% of all change projects fail.
However, this is a 30-year-old statistic from a 1993 book called Reengineering the Corporation. It states, “Our unscientific estimate is that as many as 50% to 70% of the organizations that undertake a reengineering effort do not achieve the dramatic results they intended.”
A 2009 McKinsey research paper provided a more detailed breakdown of change success and failure rates, finding:
- 4.88% are extremely successful.
- 30.51% are very successful.
- 48.96% are somewhat successful.
- 5.87% are not successful at all.
This provides a more nuanced take on change failure rates, with McKinsey evidence suggesting that total change failures occur less than 6% of the time.
8 Infamous Change Management Failures to Learn From
Let’s examine a few infamous examples of change management failures to learn from. Challenge yourself to examine these strategic failures and use the lessons to avoid similar setbacks.
1. Mission Produce’s failed ERP transformation
The Change
In late 2021, Mission Produce launched a new internal ERP system to manage its purchasing, inventory, and financial operations. The ERP transformation’s goal was to support its international growth plan through better operational visibility, automated financial reporting, and integrating data sources.
At launch, Mission Produce quickly realized its ERP change project had gone sideways. The company no longer had visibility into core operation metrics, like the number of avocados in its inventory, their level of quality (i.e., whether they were ripe or had gone bad), whether orders had been shipped, and whether invoices had been paid.
Why It Failed
While Mission Produce’s CEO told investors that they had spent hundreds of hours planning and preparing for the ERP migration and implementation, he admitted that “the extent and magnitude [of the ERP change] was greater than we anticipated.”
Mission Product’s change initiative failed because it was naïve to how foundational its ERP is to its business operations. The company failed to properly prepare for the ERP implementation from multiple perspectives, including a failure to adequately set up and configure, not beta test it in a sandbox environment or with a beta launch, and a lack of ERP end-user training to enable employees to use the ERP correctly.
The Impact
The ERP change failure forced the company to revert to manual processes on the fly to keep up with its distribution and operations and fulfill all customer orders. Eventually, Mission Produce hired a third-party ERP consulting group to help get its ERP transformation back on track, but only after it cost the company nearly $4M in over-budget costs and delayed the ERP launch by 9 months.
2. Revlon’s failed attempt at ERP consolidation post-acquisition
The Change
In 2016, cosmetics enterprise Revlon acquired competitor Elizabeth Arden. This presented challenges for Revlon as it merged business units and integrated processes across the two entities. At the time, both companies had successfully implemented an ERP (Elizabeth Arden with Oracle Fusion, Revlon with Microsoft Dynamics AX), but realized they needed to consolidate their ERP systems going forward and implemented an entirely new ERP system, SAP S4/HANA.
Why It Failed
Revlon soon realized the ERP consolidation change project was doomed to fail. Revlon leadership cited poor ERP design, process mapping, integration, and IT maintenance as core reasons the implementation failed.
The Impact
The change failure was so disruptive that it shut down a core Revlon manufacturing facility in North Carolina, resulting in millions of dollars in lost sales. This had a downstream impact, causing the company to incur shipping fees and damaging its customer service reputation. It also resulted in its stockholders sueing the company due to the negative impact the failure had on Revlon’s stock price.
3. OpenAI’s board attempts to remove CEO Sam Altman
The Change
In 2023, OpenAI explored the tech scene with the launch of ChatGPT. Quickly becoming the fastest adopted application in history, its board members began to feel pressure from those in the tech community who feared AI. Its board members discussed these fears with its CEO, Sam Altman, who defied the board’s wishes and continued to push AI innovation and development, which many outside the company viewed as dangerous.
In November 2023, OpenAI’s board of directors removed Altman effective immediately. At a public event, Altman was informed via Google Meet just 10 minutes before the board voted to remove him.
Why It Failed
The company was pressured from outside to make swift decisions without consulting its workforce or leaders. It allowed outsiders to influence their decisions without knowing the nuance or opinions of those who worked alongside Altman.
OpenAI’s key developers, employees, and investors revolted. Its chairman, research director, and key AI researchers resigned within hours of the announcement. In the following days, 745 of the 770 OpenAI employees signed a letter threatening to resign if Altman wasn’t reinstated.
Within weeks, Altman was re-instated.
The Impact
The removal left OpenAI in chaos in these few weeks. Investors threatened to leave and Microsoft offered to hire any OpenAI employee who resigned. It also led to delays in OpenAI releasing new product updates and features, like its plug-in marketplace, caused a 3% drop in Microsoft’s stock price, and resulted in legal action from Microsoft.
Ultimately, those on the board of directors who pushed for the sudden removal of Altman were removed from the board, being replaced with AI leaders who didn’t have the same views on AI safety as them. Time will tell if the holistic impact this change failure will have on society.
4. LeasePlan’s SAP “Core Leasing System” failure
The Change
In 2016, Australian-based vehicle management company Leaseplan partnered with HCL Technologies to develop a new core leasing system (CLS) built using SAP ERP modules. The new system was to transform its operations and was a core transformation change and IT project. By 2018, it was expected to start rolling out across its workforce.
Why It Failed
In early 2018, auditors began sounding alarms to LeasePlan about its user access and change management, recommending the company improve its IT governance, user role controls, and IT user training as the new system was set to roll out to even more countries and users.
The Impact
LeasePlan eventually abandoned its new CLS platform, wasting $100M in overall project costs, lost productivity, consultant fees, and IT fees. LeasePlan admitted that its new CLS was not fit for the new digital world it was expected to operate in and that the SAP system it was built on was already outdated.
5. Borders parnters with Amazon to enter the e-commerce market
The Change
Once the second-largest bookstore chain in the United States, Borders Group Inc. (Borders) made a strategic error that led to the company’s eventual bankruptcy—partnering with Amazon to compete with online retailers.
In 2001, Borders outsourced all online book, music, DVD, and video sales to its competitor, Amazon. While the partnership was meant to bring in additional sales, purchases in the physical stores suffered.
Why It Failed
Regarding a crucial aspect of your business model, “keep your friends close and your enemies closer” is not a strong strategy. Borders made the mistake of taking a shortcut, contributing to the company’s eventual bankruptcy.
Significant changes like Borders’ partnership with Amazon require detailed planning and risk assessment. It’s crucial to form a strategic initiative for change. If Borders had considered the long-term effects of this strategy, they may have predicted this outcome.
The Impact
Customers used Borders stores to window shop and then made their purchases through Amazon. By 2006, Borders no longer turned a profit. Five years later, Borders declared bankruptcy and liquidated their assets.
6. ConvertKit's rebrand campaign
Although this email marketing software company spent two years planning its rebrand, a flaw in its research cost ConvertKit over $500,000.
The Change
ConvertKit announces a rebrand to the name “Seva.”
ConvertKit chose Seva as its new name, based on the Sanskrit word for “selfless service.” While the company believed it represented how much it cares about customers, business leaders failed to dig into the nuances of the word’s association with the Sikh religion.
ConvertKit later learned that Seva is a holy concept — a way to worship through giving without the expectation of anything in return. To use Seva as the name of a for-profit business would be hurtful and contrary to the true meaning of the word. In the end, ConvertKit canceled the name change.
Why It Failed
Always consider the people side of change. ConvertKit made the mistake of focusing solely on the business side of a rebrand. By ignoring the cultural impact of using a religious word as a business name, the company failed its customers and spent half a million dollars on a rebrand, but it ended up reversing.
Always consider who will be most affected by a change. Often, those people are within your company, but not always. Look at the change from multiple angles before committing.
7. Kodak's push for print
Film and camera company Kodak dominated the industry for decades but slipped out of relevance by failing to transform its business.
The Strategy
Ignoring the need for change.
Kodak made billions selling analog cameras and film cartridges but did not take the rise of digital photography seriously. Although the company created a digital camera in the 1990s, Kodak still focused on printing photos as the company’s main revenue driver.
As smartphones transformed how people share photos — through social media versus physical prints — Kodak stubbornly stuck to the outdated strategy of pushing for print. As a result, a company that reached $10 billion in sales in 1981 filed for bankruptcy in 2012.
Why It Failed
When you recognize a disruption of your business, choose to change, or risk the consequences. Remedial changes — addressing an unexpected issue — are reactionary.
Choosing not to react is a losing strategy. Kodak refused to adapt to the digital transformation happening in the photography business. When you recognize a shift in your industry, use a change proposal template to analyze your options and intended outcome and determine how external factors might affect your transformation.
✓ Thank you, the template will be sent to your email
8. Tarsus Distribution
South African IT distributor Tarsus Distribution, attempted to minimize manual data entry with robotic process automation (RPA). Unfortunately, their communication strategy led to internal resistance.
The Change
Implementing software robots to take over manual data entry tasks.
Tarsus Distribution leveraged RPA to deploy software robots to handle manual data entry work. Although the goal was to lessen employee workload and not replace staff members, the communication strategy came across as robots taking over.
When Tarsus Distribution implemented software robots before gaining internal support, employees expressed fear about and resistance to the move. Without employee buy-in, the RPA solution could not reach its full potential.
Why It Failed
The way you communicate your change is as important as the change itself. As the change initiator, you know why it has to happen; it’s your responsibility to convey the reasoning to the people affected.
Before announcing a change, make sure you’re following change management communication best practices. In this case, Tarsus Distribution failed to address the “What’s in it for me?” and “What does it mean to me?” questions, which led to unnecessary confusion. Focus on explaining the why behind your change. Gain internal support from key leaders, such as supervisors and department heads. And give your employees the details they need to support the change.
Many change initiatives are driven by technology changes, from consolidation projects, migrations, or new implementations entirely. These applications enable companies to automate processes, improve efficiency, and drive business outcomes.
However, without user adoption of these technologies, organizations will fail to find transformation change success and will not reach their full ROI potential.
With Whatfix, enable your end-users with role-based in-app guidance and support in the flow of work to drive skill acquisition, knowledge retention, and maximizing productivity by fully utilizing software to its potential. With Whatfix, IT teams can:
- Provide hands-on user training with replicate IT sandbox environments for any web application with Whatfix Mirror.
- Create in-app guided onboarding experiences with Tours and Task Lists.
- Enable users in the flow of work with Flows and Smart Tips on complex workflows, infrequently done tasks, and areas of user friction.
- Provide users with on-demand support via Self Help, enabling them to find answers to technical questions without leaving applications.
- Monitor in-app content consumption and engagement with Guidance Analytics.
- Track any custom user event with Whatfix Product Analytics.
- Collect feedback from users with in-app Surveys.
Ready to get started? Request a Whatfix demo today!
Navigating through organizational change is a multi-step process. Whatfix helps you scale enterprise-wide changes, improve user engagement, and drive user adoption.
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