The relevance of a Chief Digital Officer (CDO) role has been raised and discussed for some time now. In 2016, Theo Priestley argued in a Forbes article “Say Goodbye To The Chief Digital Officer” that the CDO role will disappear by 2020. The reasons, he stated, for the demise was that the role could be served by many of the other C-Suite leaders within their own functions and the CEOs should strive for better cohesive alignment among the leaders in delivering the corporate customer-facing digital strategy. A CDO would potentially step into many functional leadership toes by advising/telling them what to do to realize digital in their domains. CIOs have also expressed concern about the CDO role impinging on their budgets, diluting authority and scope of their roles.
Price Waterhouse Coopers (PwC) recently presented their CDO hiring patterns across 2,500 public companies. PwC found that 54 (2.2%) of the companies surveyed had created a distinct, new CDO position in 2018, compared with 124 in 2017 and 160 in 2016. Thus, data indicates a gradual drop in distinct CDO role creation and hiring. According to PwC, leaders at many companies believe that a single individual in charge of digital transformation may not be the optimum approach, due to it being an intrinsic strategic priority across the whole business. The CDO role is no longer seen to lead a discrete function. However, due to cross-functional and technological nature of a digital transformation effort, digital leaders with technology and process skills are now being sought. PwC opines that in situations where there is no CDO role, companies need to think well before creating one if there is top talent and experience at hand. The need then is to align them towards the transformation.
Let’s examine the above from the basis of Digital Transformation in for-profit and not-for-profit organizations- what it is, why it is needed, and how to get there. The digital economy is here and now; the question is what is the optimum organizational approach to drive it forward. A digital customer utilizes the web, mobile devices, and social channels to consume content, engage with a brand, complete a transaction, or participate in a community. By going digital an organization changes the way it interacts with its customers, uses lots of data to make decisions, enhances or automates processes raising productivity, improves internal collaboration, and improves risk management. Thus transformation entails specific set of initiatives a business pursues to offer significantly improved value to its customers while raising internal effectiveness . This is accomplished with sustained innovation, process automation, by use of common distribution platforms and new technologies, using big data and analytics, and with a superior talent pool. Thus, the digital focus areas are: Innovation, Automation, Distribution platforms, Analytics, Talent Management. Let’s now examine a framework relating organization functions, building blocks, and capabilities to enable digital transformation from the perspective of a digital leadership role.
An organization will typically comprise of the Front Office, the Middle Office, and the Back Office. Some business functions associated with each, respectively, are: Sales and Marketing, Communications, Community Development, Investor Relations; Operations, Procurement, Technology; Finance, Service, Support, HR. These are some common examples used for this post.
To enable digital transformation, each of these business functions will require functional or cross-functional digital capabilities to enable the digital focus areas. Examples of such capabilities for the Front Office, Middle Office, and Back Office are: anywhere, anytime messaging platform to connect with customer (provide a health alert, pay a bill); automated procurement process; HR functions support. In the grid below the “XXX” implies specific capabilities necessary for a function to realize the digital focus.
The basic building blocks are enablers of the capabilities. For example, to implement a messaging “Distribution Platform”, a customer strategy (what and how), process analysis, data analytics, technology, talent, are needed. There may be other basic building blocks to suit specific organizations. These building blocks comprise of different skill sets. Delivering digital capabilities requires the assembly, development, delivery, and synchronization of the building blocks. It is clearly cross-functional and multi-skilled; that is why, succinct definition of a CDO role has been difficult. Maybe, that is also why, we see a drop in CDO appointments – organizations are trying to understand the requirements of the role for their business.
The Digital Transformation Capability Framework
| Digital Focus | Innovation | Automation | Distribution Platforms | Analytics | Talent Management | |||||
| Organization Area | Front Office | Middle Office | Back Office | |||||||
| Business Functions | Sales & Mktg | Communication | Community Dev | Operations | Procurement | Technology | Finance | Service | Support | HR |
| Digital Capabilities | XXX | XXX | XXX | XXX | XXX | XXX | XXX | XXX | XXX | XXX |
| Basic Building Blocks | Customer and Market facing strategy, Thought leadership, Innovation, Customer and User Experience, Product Development, Process analysis, Solutions Delivery, Data analytics, Planning and execution, Shared services, Talent acquisition, retention, growth, Change Management | |||||||||
What are pitfalls for organizations contemplating digital delivery by individual business leaders while maintaining strategic alignment with the CEO? It is likely that going digital by individual functions will lead to chaos unless this is managed tightly. Digital efforts within a function is rarely confined to the functions as all business processes are cross-functional and attempting to optimize one function will likely impact other functions. If each function were to do this, then there will likely be many conflicts. We are all aware of past examples of software deployments in one function creating a “all hell broke loose” in other functions. As a contrarian argument, if the proposal is for a PMO to manage these and if so, who manages the evaluation, prioritization, and delivery? IT, existing PMO, others?
Another pitfall is the lack of standardization when each function goes their own way. This results in redundancy and cost increases. There are examples in the Six Sigma applications, where after a certain period, say 3-5 years, six sigma initiatives are decentralized to individual functions. This has often led to slackening of processes and gradually regressing to the old and loss of high skills because these skills are not valued anymore. In organizations with Quality objectives, Six Sigma as a capability is supported appropriately. This argument is also akin to suggesting IT development and support be set-up by each function without central control; a reminder of how many “shadow IT” organization examples we have seen. Maybe a decade on, the digital role will have a similar place in organizations as Six Sigma does now.
Can this be done by the CIO and/or the CTO? Nothing is impossible but this is relatively difficult due to the skills sets and work load involved. A CIO, over and beyond their regular roles of technology strategy, solutions delivery, infrastructure support, security, and service support, will have to add the additional skills and workload shown in the framework for the “Basic Building Blocks”. While some/many of the building blocks may be resident within the CIO organization, others will have to be acquired. It is entirely conceivable, that they can design an organization to support it but that will need a leader, maybe with a separate title. The CTO, has the following basic function responsibilities: new technology scoping and evaluation, promising technology incubation, business enterprise architecture, technology life-cycle management, and innovation research. Again, the same reasoning holds for difficulties in adding the digital role to the CTO office.
In conclusion, the debate is not about the need for a digital leader but where to place the role. Due to the highly complex and inter-disciplinary nature of digital transformation, it is critical organizations thoroughly think through their customer needs, business strategy, and objectives to determine the CDO need and where to place it.