What Have we Learned from Speaking to 100 Chief Digital Officers
We have just published “Chief Digital Officer: The Digital Transformer Guide”. This is a result of a research study concerning the role and the performance of Chief Digital Officers (CDOs) worldwide. The reason for conducting this study was to understand why digital transformation is such a difficult task for organizations, even once they have introduced the CDO position into their structures. It did not seem to significantly influence the reality of these organizations and we wanted to see why. The research answered many of our questions and gave us a great peek into digital transformation needs and tools. Let’s dive in.
YOU CAN FIND THE FULL REPORT HERE.
The CDO position is a fairly new occurrence in the structures of various organizations. Before it has been introduced, the majority of organizations made do with the Chief Information Officers (CIOs) or Chief Strategy Officers (CSOs). The problem with these positions was that it did not directly tackle the transformational aspect of digitalization, including its important human component. The CIO was traditionally positioned more on the IT or tech side, whereas the CSO has been often tasked with the “future of their industry” game, which does not always leave a lot of time for change management and culture shifts.
This is how the CDO position came to exist — organizations of all kinds had a hard time becoming digitalized. The C-suite slowly noticed that the IT focus or the future-oriented Business Development strategies were not enough to change the course of their companies. There needed to be another function that would marry the two and — in addition — promote these changes among (often reluctant) employees.
So what is the actual job of a CDO? It’s definitely not only to lobby among the employees for more interest in digitalization and innovation. In fact, the answer is a bit complicated because it depends A LOT. In our research, we have divided CDOs into five distinct categories based on their profiles and the roles they play inside of their organizations:
The character of the CDO position for each individual organization depends on a couple of factors:
- Where is the organization placed in terms of its digital transformation — does it only just start its transformation or has it been ongoing for a while and there have already been steps taken to ensure its digital maturity?
- What is the profile and the background of an appointed CDO? Where do they feel comfortable and what is exciting to them?
- What mandate is a CDO given by their management and how is this authority and responsibility structured inside of the company?
Let’s go through these factors one step at a time.
Digital Maturity
Companies go through digital transformation at a different pace and in different ways, depending on their industry, size, human capital, management style and more. What is true to all of these companies is that digital transformation — since it’s dependent on so many factors inside the organization — is a process that can’t be achieved in a couple of weeks/months, even with the boldest of moves.
In our research, we have distinguished between four digital maturity types:
1. Digital Rookie — a company that is new to its digital transformation. Typically, it does not have a transformation strategy in place and is still figuring out how to approach innovation and digitalization. Only 2% of digital rookies we have studied in our research have appointed CDOs. This is because they are really only at the beginning of their journey and still figure out their first steps.
2. Digitally Indecisive — companies that have realized their need for digital transformation but are still unsure of how to develop and foster it. These are the companies that have already started their digital transformation journey, but are not yet clear about their strategy and direction. About 25% of the interviewed CDOs in our report came from digitally indecisive organizations.
3. Digital Striver — those that are already making steady progress. Such companies have the strategy and the direction in place and are now implementing their planned activities. About 55% of the CDOs we studied for the research worked at Digitally Striving companies.
4. Digital Native — the digitally mature organizations that see digital transformation as the core of their business, with relevant strategies, programs and cultures in place. About 19% of the surveyed CDOs came from Digitally Native companies.
CDO Background
The second important factor deciding the type of the digital leadership that the company will eventually go for depends on the background of the CDO appointed for the position.
In the research, we did not ask the participating CDOs about their background. However, by describing themselves as one of the categories (i.e. Agent of Change, Business Disrupter, Customer Advocate, Technologist, Universalist), they pointed to their skillset and strengths.
As it turns out, the majority of the CDOs do not have a strong technological background. Many have a very versatile profile. This goes hand-in-hand with our research that concluded that digital transformation by no means equals technology. As a CDO, you are often tasked with facilitating different interests and “translating” between various needs, often with the focus on the human factor inside the organization. This means that your profile must be much more diverse than being just knowledgeable about technology.
Authority and Responsibility
There is a huge discrepancy between how important the CDO role is inside the organization and how much power these professionals actually have. The sort of authority that is granted to them can say a lot about their ability to influence things and the sort of tasks they take upon themselves in the first place.
Let me give you an example. From the survey and associated research, it can be inferred that CDOs do not have enough authority and independence to create impactful activities whenever they are not allocated their own budget. This means that the funding of the CDO activities plays a crucial role in the success of these activities.
While a CDOs funding may have a profound impact on their ability to fulfill a successful digital transformation, positioning within the company appears to be even more impactful. A significant majority (70%) of CDOs assess the challenge of “Authority and Mandate” to be a substantial challenge, which raises the question as to whether a CDO should function as part of a specific department or be completely independent. The majority of the CDOs we spoke with (almost 80%) believe that it should be an independent role.
In terms of lines of reporting, 68% of CDOs do not supervise another C-level position and 10% have no direct reports. This demonstrates that the authority of many CDOs within the organization is often very limited. However, the fact that almost all (96%) CDOs report to another C-level position, mostly to the CEO, demonstrates that many CDOs have a direct connection to the management board and are often directly in touch with key people within the organization.
All in all, while many CDOs are directly reporting to or are in touch with the CEO and the board, they often lack the necessary authority within the organization to lead a digital transformation or influence other related strategic activities. CDOs who are responsible for bigger, multi-disciplinary projects can succeed only if they receive enough power and money to implement them independently of others.
In a Nutshell
Through the CDO research, we have learned that the CDO position is crucial to many organizations’ survival. This is due to its universal, versatile place inside the corporate structure and the importance to “translate” between various needs and interests. However, it is often ineffective because of the structural and financial constraints.
To optimize the CDO role within an organization, you should implement a few rules:
1. Appoint the right type of a CDO based on your stage of digital transformation.
2. Allocate budgetary support for the CDO based on their particular business goals.
3. Create a direct line of report between the CDO and the CEO.
Once you have done that, the CDO is going to get a great starting point to map the needs and challenges and act accordingly.
The other tips and tricks as well as a short and crisp guide of how to start can be found HERE. Best of luck!
