Evolution of the CDO: is time almost up for the C-suite's digital kingpin?

The Chief Digital Officer (CDO) was brought into organisations to drive their crucial journeys towards cloud and digital proficiency. With many companies now having effective strategies in place, is it time for the CDO to step aside?

In the not too distant past, the role of the IT department within the enterprise was a relatively simple one. Essentially, it was all about ensuring efficiency through investment in new systems, automating processes, and facilitating access to a range of IT solutions and infrastructure. Viewed primarily as a cost-centre, IT bent to the will of the boardroom in every aspect, striving to deliver improved margins and arming service managers with everything they needed to succeed. It's not an understatement to suggest that, with the influx of digital transformation imperatives, this has changed dramatically in quite a small space of time.

The move towards digital has fundamentally changed how traditional organisations operate, shifting the goalposts of certain markets where digital start-ups have dramatically broken existing business models. IT in the modern era should now be seen as a driver of growth and revenue, as it creates value for customers in ways that weren't previously possible. In contemporary times, firms without a profound and comprehensive digital approach will simply find themselves unable to compete with those that do implement innovative digital initiatives, and this is becoming increasingly top-of-mind for companies of all sizes.

Ultimately, this raft of change has had a huge impact on the c-suite. Often, we think about how digital transformation might affect CIOs, but another tool that organisations have employed in the midst of the digital revolution is the Chief Digital Officer or CDO. These executives have been generally been charged with the monumental task of igniting the flame of digital transformation and ensuring that it spreads beyond the IT department to all aspects of an organisation.

By most measures, these ‘change agents' have done a decent job up until this point too. According to recent research from Harvey Nash and KPMG, companies classed as ‘digital leaders' are more likely to have appointed an acting or dedicated CDO, while organisations with a CDO are better placed to take advantage of digital technologies in many regards. This is an indication that appointing a CDO can be somewhat crucial to the success of digital transformation.

However, as many organisations successfully implement their transformation strategies, will this shift CDOs out of the equation? The role was always really supposed to be temporary, which was even recognised at the height of its popularity. The hope is essentially that when organisations succeed in becoming ‘digitally savvy', with ongoing and widespread strategies in place, there will no longer be any need for a CDO, as they are really only there to enact that change in the first place.

So when digital business becomes normal, why would you need a digital officer, and if you do, what factors should employers consider when it comes to appointing a CDO? In considering this, it's important to assess how has the role changed over time since it was first popularised, and what skills a CDO generally possesses.

The rise of the CDO

The CDO has risen to prominence within the last decade, becoming popular in conjunction the consumerisation of IT and when ‘digital transformation', both practically and conceptually, was just hitting the forefront of executive's minds. While there were an estimated 12 individuals employed as a CDO in 2008 according to the CDO Club, this number increased dramatically to 225 in 2012, and then 1000 in 2014.

The primary reason for organisations employing CDOs, as Deloitte points out, was the realisation that digital was able to act as a considerable driver for the company's bottom line, both in terms of potential cost savings and revenue uplift, positioning IT as a profit centre rather than a cost centre. As a result, convergence started to occur between digital strategy and corporate strategy. Digital then, was starting to morph from merely a potential marketing tool to the foundation of entirely new business models and revenue-critical revenue streams.

The CDO was positioned as a catalyst for this change, facilitating and actively driving transformation within the business. As IT entered the ‘post-industrialisation' era, it provided continual opportunities for business growth, innovation, and differentiation. Customer experience started to become centred around intelligently managed information systems, leading to skyrocketing customer expectation based on the kind of informed, contextual interactions that are facilitated by digital innovation.

It, therefore, made sense to have an executive lead organisations into the emerging realm of digitised business. When the position was peaking around 5 years ago - and to a large extent in 2019 - there was a range of talent that was picking up the role, depending on the imperatives of the business.

Mike Brinker, Global Digital Leader at Deloitte said in a 2015 report that three types of CDOs seemed to be apparent. Making up the bulk of hires were ‘Ex-agency' CDOs, who focused on digital marketing and customer engagement. The second was digital transformation strategists, who focused on ‘reinventing organisations' (mostly working in disruption-prone industries like media and high-tech), and third were straight technologists.

This created a multitude of different approaches when it came to the actual responsibilities of CDOs. However, there are still a number of traits that are common amongst them.

The role of CDOs today

While the role of current-day CDOs still vary depending on the industry and how organisations would define ‘digital'. Generally speaking, they hold the responsibility for determining how technology might be used to benefit the business. They are responsible for guiding the convergence between the digital and physical worlds in innovative ways, driving growth and strategic renewal by transforming analogue businesses into digital ones. CDOs specifically focus on creating value through the smart use of digital tools, platforms, technologies, services, and processes.

As Advisory Cloud states, CDOs typically operate in the intersection of technology application, customer experience, and corporate strategy. They could either be perceived as a futurist—predicting trend and driving the company toward taking advantage of them—or they could be viewed as a mediator, bringing an organisation together under the digital ethos.

In fact, the role seems to have morphed into a hybrid of the professionals that originally inhabited it, embodying the skills of a technologist, marketer, and transformative innovator all at the same time. Chief Digital Officer at SAP Bertram Schulte mirrors this sentiment in a blog post, describing the dynamic role that he has within his organisation.

"At SAP, I am responsible for running SAP's digital business and helping provide customer's one seamless, digital commercial experience. This includes making my numbers, providing customer feedback, and establishing a rhythm of business is the center of attention," Schulte says.  

"That means some days I focus more on the marketing/sales side of the business, while other days finance and business operations have my attention, and other times I focus on how our product integrates with commercial models. But frequently, it's a mix of everything."

Overall, Schulte describes the CDO as a "king or queen without land", arguing the position serves as a temporary means for organisations to embrace a fundamental change that goes across the whole value chain and includes every corporate function. Indeed, he says if it's done correctly, and in a manner that perfectly suits the needs of the business, it should disappear entirely. 

Are CDOs really on their way out?

While currently there are still a healthy amount of CDOs currently employed at global firms, research from PwC's consulting group Strategy& suggests the position may have already peaked. In a global study of CDOs at 2,500 of the largest publicly listed companies of 2018, the firm found that the rate of newly created CDO positions has slowed sharply since the study was last carried out in 2016. The research found that only 54 companies (2.2%) had a distinct, new CDO position in 2018, compared to the 124 companies that created positions in 2017, and 160 in 2016. Recognising these findings, the firm has declared 2016 as the ‘high-water mark in CDO hiring'.

The reason behind this, according to Strategy&, is what you might expect. They say that companies are now reluctant to put a single person in charge of digital transformation, as its more of an intrinsic, company-wide priority. For the same reason, companies with a current CDO position have changed their expectations of the role, expecting the CDO to work increasingly across ‘functional silos'.

Sumo Logic VP/GM of EMEA James Campanini echoes this though, telling IDG Connect that the word ‘digital' doesn't make any sense in a standalone context anymore.

"The Chief Digital Officer role is getting removed in the vast majority of companies - the same way that in the past companies went from having specialists associated with running separate power generators solely for that business and they moved onto the National Grid," Campanini says. "Today, power is ubiquitous for most companies so there is no specific role required—digital has taken the same path."

Campanini says that with increased uptake of digital transformation and cloud, previously separated data and channels are converging. This allows the organisation to make real-time business decisions as more of a holistic, cohesive unit. 

"Chief digital officers have played their role—they have taken all this innovation around digital and data-driven operations as being key differentiators and made it business as usual. Being digital and data-driven is the new normal," he continues.

As part of the increasing maturity of digital transformation initiatives, organisations are also expecting different outputs from their CDOs. Generally, they need them to focus more on changing legacy systems and implementing new technologies, meaning they are shifting away from thinking about the CDO as purely digital marketing and more as a technologist. This is driving demand for CDOs with more of a technological background than previously, with one-third of the individuals who originally took up a CDO position being replaced as a result.

The report says that market-facing CDOs dropped to 18% from two years ago, when it was 39%. Meanwhile, 41% of organisations are opting to attract CDOs with a solid technology background and 28% of CDOs come from a strategy, business development or consulting background, up from 21% in 2016.

While Strategy& says the overall amount of CDOs have increased from 19% of organisations in 2016 to 21% in 2019, this nevertheless represents a rather sharp decrease in growth for the position. The consulting firm says this indicates that digital transformation has entered a new phase at many organisations, with discussions having been successfully elevated to the boardroom. It says 54% of CDOs have achieved board-level status, increasing from 40% in 2016.

This slowdown may be affecting things a little differently in certain regions though, with Europe leading in overall companies with CDOs (39% in 2018). When accounting for the whole of EMEA, this falls a percentage point to 38%, with North America coming in third at 23%. Australia is leading the charge when looking at CDO positions by country though, with 39% of companies surveyed having the position (down from 40% in 2016). This is then followed by Malaysia (30%), India (29%), and Thailand (17%).

Should organisations hire a CDO now?

In IDC's ‘CDO scorecard' report, they say that while 68% of 1,000 surveyed enterprises in EMEA have a CDO, only 25% of these CDOs are actually leading an enterprise-wide digital transformation in their companies. They say this points to the disruptive ‘change agent' nature of CDOs, which causes internal friction and high turnover rate, especially where the readiness of firms for digital transformation isn't particularly mature. This has led to a degree of ‘transience' within the role, with CDOs moving from organisation to organisation fairly often.

This underlines that the digital maturity of an organisation plays a big role in the potential effectiveness of a CDO. As Rowan Gibson points out for the Leadership Network, arguing that digital shouldn't be something that's ‘bolted-onto' an organisation. Rather, organisations who take on a CDO need to embrace a higher degree of digital awareness and maturity to be able to understand where a CDO fits it. Otherwise, a CDO may end up stranded between the CIO and the CMO, who try to impose their own differing agendas upon the CDO. This makes for somewhat of a mess when it comes to implementing digital strategy, with the CDO being mediated and hamstrung by multiple executive forces.

Conversely, if the maturity of an organisation is too high, it might render the need for a CDO unnecessary. As Gartner told Which-50, "Mostly, the digital officer is a change-driving role. It has no permanence because there is no enduring asset to command… we already see many examples of companies that hired a CDO but no longer have one, because the big change of thinking and action within the C-suite has been done."

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