As summer draws to a close, budget season is approaching. "Transformation" has become a top priority on most CFOs' 2025 agendas, but it can come with a hefty price tag.

Transformation encompasses various types of initiatives, from modernizing legacy technology to deploying artificial intelligence to leveraging data to improve customer experience and engagement. What these initiatives have in common is that they don't happen on their own.

The balance for the large-scale investments required by transformation initiatives lies in the substantial potential return on investment when planned and executed properly. More importantly, transformation is not optional—we may be at a tipping point where companies that don't transform now will struggle to succeed. In fact, we may have already entered a cycle of continuous transformation where a "steady state" no longer exists.

But the real question this budget season is how to allocate the "activation energy" of the transformation budget, and how much to invest where. The natural tendency of most large enterprises is to overinvest in certain areas while underinvesting (or completely ignoring) others.

Too many companies pay external firms millions of dollars to develop high-level strategies that are mostly obvious. It feels like paying someone to tell you to eat when you're hungry. Worse, these recommendations often can't be implemented because there's no actionable roadmap, and many are based on ineffective or incorrect assumptions.

Every transformation should have a robust and detailed business case with defensible and realistic numbers for all elements, considering total cost of ownership. Does my technology modernization project require me to run legacy platforms and replacement systems in parallel? Will the new AI strategy cause cloud budgets to increase tenfold?

Many companies skip this foundational work and rush to fill the gap by hiring more consultants, creating programs that lack focus, are too large, and grow too quickly. These programs can collapse under their own weight, and the only winners are consulting firms.

Companies can also err by not considering external funding sources for transformation initiatives, especially when budgets are tight. There are service providers in the market with strong balance sheets that can underwrite (or in some cases directly pay) to offset the costs of early transformation investments. While this isn't truly "overinvestment," ignoring this option is equivalent to leaving money on the table. This kind of financial engineering has existed since the 1990s and is now popular again—why not see if it works?

On the other hand, companies often underinvest early in developing a robust organizational change management strategy. Such investment is critical for helping the organization understand how key stakeholders may be affected and for developing plans to ensure alignment and effective communication. Over 90% of IT projects exceeding $10 million fail to reach their potential, and lack of alignment is a root cause.

Companies also need to be ready to invest fully in the best talent before sticking the transformation shovel into the ground—not the kind of talent that's good at making PowerPoints, but the kind that rolls up its sleeves, gets hands-on, and masters the details. Remember, building a building requires more than architects, and transforming a company requires more than strategists.

Finally, failing to bring in the right advisory and specialist support early in the process can be another mistake, especially when third parties promise quick fixes. There are no quick fixes. Unfortunately, transformation is usually a hard-fought battle that requires a great deal of meticulous work done by people with real experience and domain expertise.