CIOs will have AI and security investments at the forefront of their 2025 budgets. After checking these two boxes, what else should be high in every innovative CIO’s budget priorities?

Obviously, this depends on business objectives, such as where the business needs to accelerate its digital transformation, which areas of technical debt require greater attention, and what elevated risks require higher priority. It also depends on whether the business focuses on short-term, longer-term, or a balanced approach to innovation investments.

Caveats aside, I elected to share the following focus areas. I suggest paying the most attention to the categories and rationale of my recommended investments rather than the example approaches I share. Every business should explore approaches relevant to their organizations, which can yield force-multiplying results.  

Start with the list I shared a few months ago on how smart CIOs hedge their 2025 transformation investment plan. This list included developing digital transformation leaders, hedging AI investments with non-negotiable risk reductions, and prioritizing force multipliers in app modernizations. Gen AI and security were at the top of my 2024 digital transformation priorities. My list from 2022 of seven investments CIOs should prioritize still has several relevant recommendations, including increasing data security, improving reliability with AIOps, and enriching customer data.

But when I think about 2025, I have just one overarching recommendation beyond security and AI/data.

Invest in your people

I have three grave concerns about why investing in people and leadership skills will be more important in 2025 than any other investment area.

1. Deloitte’s State of Generative AI in the Enterprise Q3 Report asked over 2,000 respondents to rate their organization’s level of preparedness with respect to broadly adopting generative AI tools/applications. Respondents stated they were “highly prepared” in technology infrastructure (45%) and data (41%), while talent was at the bottom of the list (20%) and even lower than risk and governance (23%).

There are a few ways to interpret the lower talent ratings. Perhaps respondents acknowledge they are behind in driving change management, or maybe the organization’s talent in innovation roles does not have sufficient expertise to develop AI differentiating capabilities. Another concern is whether employees are ready to embrace AI-driven opportunities, or are the fears around job loss and evolutions driving anxieties?

Investing in people is at the top of my list because embracing “human in the middle,” AI augmenting humans, or Industry 5.0 without investing in people is a proclamation without substance.   

2. I have a second and even higher level of concern. DEI initiatives have been under attack, and some enterprises have been scaling back DEI investments despite benefits to all employees. In one report, 90% of employees say they’ve personally benefited from workplace DEI initiatives. McKinsey’s Diversity Matters Even More shares, “Our 2015 report found top-quartile companies had a 15% greater likelihood of financial outperformance versus their bottom-quartile peers. This year (reported December 2023), that figure hits 39%.”

CIOs shouldn’t rely on corporate DEI initiatives – they should build on them – in whatever state of funding and priority they end up in 2025. CIOs can take the initiative by evangelizing diverse hiring practices, creating development incentives, and sponsoring learning programs. CIOs can require diversity in agile teams to drive understanding, empathy, and innovation.

3. My third concern is whether the attacks on hybrid work policies in 2024 will become an elected President’s onslaught in 2025, especially as edicts to return to the office will likely benefit commercial real estate businesses. While there’s been a slight uptick in companies supporting hybrid work policies, there has also been a backlash with more companies requiring employees to return to work 80-100% in the office, led by companies like Disney and Amazon.

CIOs should first review what’s important for their departments and what’s worked well for other innovation teams. In the State of DevOps Report 2023, which surveyed over 200,000 technology professionals, 75% of respondents spend less than 70% of their time in the office, and only 9% are in the office more than 95% of the time. CIOs should then partner with CHROs, review what’s best for other parts of their organization, and update an employee-first policy regarding remote and hybrid work. 

Prioritizing transformational leadership

The 2024 DORA Accelerate State of DevOps Report didn’t cover hybrid work, but it did have something to say about transformational leadership. If transformational leadership increases by 25%, burnout decreases by nearly 10%, while organization performance, job satisfaction, productivity, and team performance all increase between 8.7% and 10.3%.

CIOs should explore how to invest in people, leadership, and transformational practices that work best for their organization. I’ve been writing and speaking about digital transformation leadership for over a decade, and I believe it couldn’t be more important now in the AI era, because of upcoming political changes, and the ongoing challenges of being competitive.

To that end, I recently beta launched the StarCIO Digital Trailblazer Community. Digital Trailblazing Experts are community drivers and provide advisory programs to members in many transformation practices, including change management, recruiting, product design thinking, agile planning, and more. Many of the Experts are regular speakers during my weekly Coffee With Digital Trailblazers, which meets on Fridays at 11am ET.

I’d encourage you to explore the community and contact me with your questions.