Is Your CIO Your CDO?

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One analyst reports that by 2015 25% of companies will have a Chief Digital Officer (CDO) who resides outside of the IT department and is responsible for driving the digitization of research and development, marketing, customer service and the creation of new products and services.

Before you create this new role and contact your favorite executive recruiters, take a step back and ask a few questions:

  • What is the scope of digital transformation for your company? Does it include customers? Products? Employees?
  • Does someone have responsibility for some or all of this work today, but it’s not getting done?
  • Where should this work exist within the organization?
  • What skills are needed in the leaders and team?

I don’t have a problem with placing an executive in charge of digital transformation, if that’s what a company needs to advance its goals. I don’t even mind if the executive selected is someone other than the CIO. Based on past experience, however, I foresee significant issues with placing the CDO outside of the IT department.

We’ve been here before. Back in the 90s, companies established heads of e-Commerce and created separate e-Commerce teams to handle the digitization of the buying and selling transactions.  Unfortunately, these separate teams resulted in confusion, redundancy and resentment as these teams re-created much of what the IT function had established over many years prior. Plenty of time and money were lost before the e-Commerce functions were rationalized back into the product, sales and IT functions where they belonged.

History is on the brink of repeating itself. Digital transformation is the next wave of e-Commerce. The first phase was about selling to customers. Digital transformation is deepening connections with customers. We didn’t need a separate reporting structure then and we don’t need one now.

I think of the collection of market-facing, customer-oriented technology issues as simply another business domain, like supply chain, finance or human capital management.  Yes, it’s a new and rapidly changing marketplace, but it’s also one centered squarely on advances in information technology.

I see a few organizational approaches that could work within the existing enterprise superstructure, leveraging the existing digital conversations.  These alternatives depend on the skills resident in current IT leaders.

  1. Rename the CIO role as Chief Digital Officer to emphasize the market facing focus for IT in your organization.  Keep the back office technology structures in tact.
  2. Group the market-facing teams into a single unit under a CDO, in IT reporting to the CIO.  Many IT functions have a leadership role responsible for app solutions (eg, VP - Application Development).  This could be split into two - one market-facing under the CDO and one under a leader for back office solutions.
  3. Organize all business solutions under the CDO and all back office and infrastructure under the CTO.
  4. Orient market-facing technology responsibility with an existing CTO, who has strategic planning and management skills.

To bring in fresh, outside-in perspectives, consider strategic assignments from marketing, sales, customer service and product functions or a few external hires into a team based on one of the models above.

If you list all of the responsibilities for a new CDO role, I think you will see that much of it already exists somewhere in your organization.  Don’t confuse the need for new skills and renewed focus with the need for an entirely new, and separate, technology organization.  Executives might go fast without the IT organization, but they won’t get very far.

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  • @Chris, #Kudos for starting a very important discussion. We are both consultants, so you know the answer to your title here is, “It depends..” on a lot of cultural and business variables.

    “Digital transformation” is far more than a buzzword. I have advised global brands on using digital social technologies to increase trust with key stakeholders since 2006. Because digital social cuts the cost of relationship, it’s transformational. When you consider that humans are profoundly social, digitalizing that is revolutionary.

    In my experience, your questions are very useful. I have served as chief marketer 3 times in my career, so I have a bit of perspective of how organization functions work. I think the CDO will be critical for some companies, but the focus, as I think you imply, is on digital transformation itself. What’s the most efficient and effective way to transform? Some orgs will need CDOs, others may co-opt CMOs, CIOs or COOs to head digital transformation.

    I’ll argue that CDOs will be useful for most F500 organizations because the external environment is dynamic to an unprecedented degree. Not business as usual. CIOs, CMOs, COOs and CEOs have their hands full, and profound digital transformation is not a part-time job.

    I’ll fall on the sword and recognize that consultants, myself included, have talked about “transformation” for years. This is different. Humans are profoundly social, in business and personal contexts. I have seen the power of sociality in B2B and B2C client work, studying online conversations and how trust and business happens due to digital transactions, conversations. Digitalizing sociality is 10x anything we’ve ever seen.

    Practically speaking, organizations need to do several things to become relevant in this new environment: 1) Identify and rank stakeholders (investors, employees, customers, regulators..); 2) From a personal level, what motivates SHs, and how can our org affect those motivations; 3) In what digital social venues are SHs discussing issues that involve what our business does; 4) Based on their motivations, how can we interact with them—and all the observers of our interactions—to support what they want to accomplish? 5) How do we do this efficiently so that we support hard business results for us?

    You have probably seen McKinsey’s excellent The Social Economy study. They boiled the ocean and found that roughly 2/3 of the social economy is collaboration. That means interacting with SHs to help them achieve their outcomes and increase the value of our reputation, brand and business. A recent IBM study showed that in 15 G7 and emerging markets, customers were gravitating toward fewer trusted brands, so B2C is becoming more like B2B. Please ask if you want me to share the links here.

    My point is that organizations need to become way more personal; they need to show SHs that they care. That is easy for me or anyone to say. Getting the back end processes to support that is far from trivial.

    That’s why a CDO will be required short- to medium-term. The degree of change is deep and broad, and existing execs are A) too busy running their own functions or B) don’t have the digital chops to transform the org or C) don’t have the political skills to galvanize other functions (i.e. CIO, CMO, COO, CLO..) around the transformation.

    In closing, the key that I think you imply is that transformation is required. So the question is how do we do it most efficiently and effectively? Digital transformation in 2013 is a far more profound proposition that ecommerce was in 1998, when I was a principal at PwC MCS.

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