Now that summer is almost over, budget season is coming. “Transformation” is at the top of most CFO agendas for 2025, but it can carry a big price tag. 

Transformation can encompass many types of initiatives, from modernizing legacy technology, to deploying artificial intelligence, to leveraging data to improve customer experience and engagement. What these initiatives all have in common is they don’t just happen by themselves.

The counterweight to the sizeable investment transformation initiatives require is the meaningful potential return on investment they can deliver when they’re planned and executed correctly. What’s more, transformation isn’t optional — we may be at a tipping point where companies that don’t transform now will not succeed. In fact, we may be in a cycle of continuous transformation where there is no such thing as “steady state” anymore.

But the real question for this budget season is how much and where to allocate the “activation energy” of the transformation budget, and the natural tendency of most large enterprises is to over-invest in certain areas and under-invest (or completely ignore) others.

Too many companies pay external firms millions of dollars to develop high-level strategies that are mostly obvious. This can feel like paying someone to tell you that you need to eat when you’re hungry. What’s worse, the advice is often impossible to implement because there’s no actionable roadmap and many of the recommendations are based on invalid or incorrect assumptions. 

Every transformation should have a robust and detailed business case that has defensible and realistic numbers for all elements of the transformation and considers the total cost of ownership. Will my technology modernization program require me to run legacy platforms and systems in parallel with their replacements? Will the new AI strategy result in a tenfold increase in the cloud budget? 

Instead of doing this foundational work, many enterprises rush to fill the void by engaging more consultants to develop overweight programs that lack focus and get too big too quickly. The programs can collapse under their own weight and the only winners are the consulting firms.

Companies can also err by failing to consider outside sources of funding for their planned transformations, especially where tight budgets are involved. There are service providers out there with strong balance sheets that can underwrite (or in some cases simply pay) to offset the cost of upfront investments in transformation. While not really an “over-investment,” neglecting to investigate this option equates to leaving money on the table. This kind of financial engineering has been around since the 1990s and is now back in fashion, so why not see if it might be a viable option?

On the flip side, companies tend to under-invest in the development of a robust organizational change management strategy at the outset. Such an investment is vital in helping organizations to understand how key stakeholders might be impacted and create a plan to ensure alignment and effective communication. More than 90% of IT projects over $10 million fail to achieve their potential, with lack of alignment as a root cause.

Companies also need to be prepared to invest adequately in the best talent — not the PowerPoint kind, but the roll-up-your-sleeves, nuts-and-bolts kind — before putting their transformation shovel in the ground. Remember, it takes more than an architect to erect a building and more than a strategist to transform a business.

Finally, not engaging the right advisory and professional support early in the process can be another mistake, especially when a third party promises you a quick fix. There are no quick fixes. Unfortunately, transformation is usually a hard slog that requires a lot of detailed work done by people with real experience and subject matter expertise.