Enterprise level companies know that their future depends on their ability to keep up with the challenges and opportunities presented by digital technology. They know they must maximize ROI on digital investments and do all they can to ensure digital strategies are deployed efficiently and effectively— yet, all too often, it’s unclear who is ultimately responsible for overseeing these functions.
Tim Bourgeois is the founder and executive editor of ChiefDigitalOfficer.net, a global community of senior digital professionals whose responsibilities intersect strategy, marketing, technology, and innovation. He firmly believes that successful digital transformation requires companies to rethink their leadership structure and add a chief digital officer, or an equivalent.
One of the reasons digital transformation is difficult to achieve without leadership changes is that it’s truly cross-functional. Bourgeois says, “It applies to the revenue-generating, customer-serving, and administrative aspects of the corporation. It doesn't fit neatly into IT, marketing, finance, or customer service, so it's difficult to manage, given the traditional organizational structure of most sizable corporations.”
Some leaders feel that while digital leadership is needed, it’s unnecessary to elevate the position to the c-suite. To this, Bourgeois says “To be sure, the last thing a CEO wants is another highly paid, type-A executive to manage. But hiring a CDO is an efficient way to appease many masters— shareholders, the board of directors, and an employee population that might be questioning its company's lack of a response to digital transformation.”
Why not let CIOs or CMOs take the lead on digital transformation? Bourgeois says, “‘Transformation’ is a subjective term, and so it depends on what we're talking about. For CIOs, is moving half of an IT operation to the cloud considered ‘transformation’? Perhaps, and that's something a CIO is well-suited to manage. Just as a CMO is well-suited to re-balance the advertising budget from 10% digital to 40% over a few years, and that could also be viewed as transformation. But, if we're talking about digital transformation in terms of ensuring that your industry isn't ‘uber-ized’ and that your company remains relevant in a decade, you need a CDO."
One common challenge associated with digital transformation is helping IT and line-of-business leaders understand the need to step out of their boxes, break down data silos, and create IT-business alignment. Bourgeois says, “The best CDOs guide organizations through transformations by presenting ideas and delivering solutions that appeal to everyone's needs: CEOs, CFOs, CIOs, and CMOs. This means they do their homework, solicit input, and then sell their concepts before, during, and after implementation. When this kind of an approach is used, alignment follows.”
Who should the CDO report to? This is a matter of some debate. While some organizations put the CDO under the CIO, others feel it's important for the CDO to report directly to the CEO. Those who favor such a direct reporting relationship argue that it maximizes organizational support for digital transformation efforts and ensures that CIOs and CDOs build a collaborative partnership.
If you are thinking about hiring a CDO, you’re in good company. According to Bourgeois, “Through the end of 2016, we counted 125 chief digital officers around the world at companies with more than $1B in annual sales. Half of these CDOs are at companies with more than $10B in annual sales. In the aggregate, they are attached to more than $3 trillion in revenues. And these are individuals who hold the CDO title and report to CEOs, and not including services firms or advertising agencies. Our tracking indicates 35 CDOs (at non-services corporations with more than $1B in sales) were added in 2016, 29 in 2015, and 22 in 2014. And we're talking about household brands— in 2016 alone, the likes of Audi, CBS, Emirates, IBM, Nike, Peugeot, and Samsung added CDOs to their executive suites.”