Do you need a Chief Digital Officer?

One of the hottest topics CEOs face when tuning their leadership teams to embark in a Digital Transformation is deciding if they need a Chief Digital Officer. They do.

These are the four reasons why.

One: responsibilities

The Digital leader is concerned with strategy and models, change management, digital business outcome and supporting the rest of the business leaders develop their digital skills and agendas. She or he is the “sherpa” facilitating the development of the roadmap and nudging the transformation, understands technology profoundly but does not have to be a technical expert.

The IT lead executive on the other side delivers on technical stuff, itself a gargantuan effort – more on this later. The two must form a strong and fluid partnership since their success is mutually dependent, their agendas are complementary but different.

Two: priorities and bandwidth

Seasoned executives know that mixing workloads that have aggressive real-time demands with forward-looking pioneering work on the same individual(s) usually leads to the present mortgaging the future. In Sales it is one of the guiding principles in organization design and priority management: once a leader, team or individual executive has enough “existing” customers, growth will suffer, it is crucial to either reshuffle responsibilities or add people.

The same happens here. The CIO will usually be tasked with managing delivery and operational workloads, inevitably sacrificing time needed to research and strategize if also asked to lead innovation. The CDO has a lighter operational burden and demand-driven disruptions, and can focus on imagining, planning and building the future.

Note that the CDO must be responsible for outcomes and show results but is a lot less concerned with the day to day operational demands of the IT infraestructure.

Three: profile and dynamics

The CDO is a networker, both internally and externally. Innovation and change require a huge investment of time during the envisioning, planning or implementation phases of new initiatives. It can be selling ideas, coordinating or troubleshooting, and while structure and focus are essential to get results over time, a lot of the actual hands-on time is unscripted and unstructured.

The CIO on the other side lives in a significantly more systematized and process-driven environment required by project delivery, operations, support and security.

This requires each executive to have a specific profile – or at least wearing the right “hat” for the demands of the job since smart, experienced individuals could conceivable adjust their style as needed – but will be challenged to do both simultaneously.

Four: an additional voice

Another advantage is bringing other technically competent individual to the leadership team. Although the role is not as technical as the CIO, the CDO will have enough technical know-how to present alternative ideas and views, challenge assumptions and enrich the debate along the way.

This of course requires good planning and decision-making habits, idea curation, and a bit of conflict management. But openness to consider a wide spectrum of possibilities, have heated debates and experiment with different approaches is a desirable attribute in a digital leadership team.

Size Matters

The size of the business has a counterintuitive impact in the need to create the CDO role. Instinctively, the larger the business the more important it should be. Not so fast.

Here is other side of this story: larger businesses have larger IT organizations, giving the CIO more flexibility to delegate day-to-day operational duties, redeploy a % of the staff to innovation initiatives, and therefore reinventing the position as a hybrid CIO/CDO role. This is particularly true if the company is advanced migrating systems to the cloud – freeing resources and budget from legacy on-premises jobs.

Smaller IT organization however will have a smaller or more junior team reporting to the CIO, making it more challenging to redefine and expand the position, or redeploy resources further down the IT organization.

One solution does not fit all

In the end, this is a case-by-case discussion that must consider several factors – but most of the time separating the roles will be the preferred approach, with far more upsides than downsides.

Designed for Digital: How to Architect Your Business for Sustained Success

Most established companies have deployed such digital technologies as the cloud, mobile apps, the internet of things, and artificial intelligence.

But few established companies are designed for digital. This book offers an essential guide for retooling organizations for digital success.

Designed for Digital: How to Architect Your Business for Sustained Success
By Jeanne W. Ross, Cynthia M. Beath, and Martin Mocker

The Digital Innovation Hub

The Digital Innovation team is the source of vision, knowledge and experience in how technologies will transform the way a company does business. It is the hearth of the Transformation program and will cement the ability of the organization to innovate identifying and adopting future technologies beyond the initial change initiative.

Name and purpose

While the name may change depending on company size and convention (e.g. Digital Innovation Center in larger corporations, Digital Innovation Team in smaller ones, Digital Excellence Center after becoming a Digital leader) the purpose is similar: a compact but assertive group of specialists to lead the design and implementation of the initiatives that bring to life the Digital Transformation.

Responsibilities and influence

Members of the Digital Innovation Team collaborate with business teams to identify, assess and eventually develop innovation opportunities enabled by technology, and then guide the IT teams to implement and manage the relevant systems. Some organizations call them Product Owners, although this may be more or less applicable depending on industry and scenario.

They are also influencers and a support function, the go-to experts when line of business leaders or teams come across ideas, opportunities o problems that could be addressed with technology. They partner with and empower the less technically-savvy to help them be Digital innovators.


Digital Innovation Hub

  • Contribute to the Digital Strategy
  • Monitor industry and competition
  • Research trends and innovations
  • Imagine novel applications of technology
  • Assess feasibility and potential impact
  • Develop and lead initiatives
  • Drive business outcome
  • Ensure alignment between business and technology

Organization

The team is usually structured to match the mayor “themes” or initiatives that form the basis of the Digital Strategy: Data Analytics, Customer Engagement, Digital Marketing, Process Automation, and so on. They are part of the same team (formally or virtually) to ensure that the plans they manage are aligned and connected.

In smaller organizations, this may be one of only two functions that report to the Chief Digital Officer, and in most cases will rely on a sister function, the Transformation Office, to orchestrate the Digital Strategy, the rollout of projects and drive change.

The Digital Innovation team is one -if not the- most impactful and cost-effective investment of the Digital Transformation program. Independent from line of business organizations and IT, they will focus on innovation regardless of short-term pressures or complacency.

A Two-Speed IT Architecture for The Digital Enterprise

Delivering an enriched customer experience requires a new digital architecture running alongside legacy systems.

Unlike enterprises that are born digital, traditional companies don’t have the luxury of starting with a clean slate; they must build an architecture designed for the digital enterprise on a legacy foundation.

A two-speed IT architecture will help companies develop their customer-facing capabilities at high speed while decoupling legacy systems for which release cycles of new functionality stay at a slower pace.

Oliver Bossert, Chris Ip, and Jürgen Laartz
A two-speed IT architecture for the digital enterprise
McKinsey Insights, December 2014

The Transformation Advantage

One of the key insights of the Digital Transformation Framework presented in this blog is that the “Transformation” part is as -if not more- important than “Digital”. A team at the MIT Center for Digital Business proved the point.

They studied over 400 large firms in a two years of study and “found that most large firms are already taking action. They are using technologies like social media, mobile, analytics and embedded devices to change their customer engagement, internal operations and even their business models. Our research points to a real ‘digital advantage’ to those that do.

In The Digital Advantage: How digital leaders outperform their peers in every industry, they developed a digital maturity model to show how different companies are reacting to technological opportunity, and cleverly analyzed how business invest in Technology, but more importantly, how the true leaders create the leadership capabilities necessary to drive change, which they called transformation management intensity.

The numbers speak by themselves, with the truly transformational leaders achieving 9% more revenue, 26% more profits and a 12% valuation premium versus their industry peers.

Particularly illuminating is how the Digital and Transformation variables of the equation work differently: Digital Intensity generally drives up revenue, while Transformation Intensity trickles down to the bottom line and impacts profits.

A must read.

Digital Business KPIs: Defining and Measuring Success

It’s time for enterprise CEOs, chief digital officers and CIOs to move beyond the transformation stage and set metrics and goals that lay out the digital business journey. This report describes the key performance indicators necessary to do so.

Digital business key performance indicators (KPIs) are designed to assess the degree of progress in becoming a digital business — which in turn leads to a change in performance that is reflected in the KPIs of the enterprise.

A first set of KPIs is required to assess the progress in digitalizing the current business model. It is possible for many areas such as sales, marketing, operations, supply chain, product/services and customer service to have digitalization goals and KPIs.

A second set of KPIs is required to assess the progress and opportunity of pursuing new digital business models. Growth, revenue, market share and margin metrics must clearly differentiate new revenue sources from nondigital ones

Digital Business KPIs: Defining and Measuring Success (Requires Subscription)
Analyst(s): Hung LeHong
03 March 2016

Why Software Is Eating the World

Technology entrepreneur and Venture Investor Marc Andreessen masterful piece was published by the Wall Street Journal in 2011 and a decade later still feels fresh.
He made a compelling case that entire industries – from banking to agriculture – to are being upended by increasingly affordable cloud technology, broadband internet, the popularity of mobile devices, and smart software.

Why Software Is Eating the World
by Marc Andreessen
Cofounder and General Partner, Andreessen Horowitz

Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption

There is a pattern to digital disruption in an industry, whether the disruptor is Uber, Airbnb, Dollar Shave Club, Pillpack or one of countless other startups that have stolen large portions of market share from industry leaders, often in a matter of a few years.

By decoupling the customer value chain, these startups, instead of taking on the Unilevers and Nikes, BMW’s and Sephoras of the world head on, peel away a piece of the consumer purchasing process. Birchbox offered women a new way to sample beauty products from a variety of companies from the convenience of their homes, without having to visit a store. Turo doesn’t compete with GM. Instead, it offers people the benefit of driving without having to own a car themselves.

Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption
by Thales S. Teixeira and Greg Piechota

What’s Really Disrupting Business? It’s Not Technology

Technology isn’t the main force hobbling many companies today—it’s changing customer needs and expectations.

Supporting and illustrating one of the two principles originating this blog that digital transformation is not about technology, marketing professor Thales Teixeira argues that successful disruptors are quicker to detect and cater to emerging customer needs than larger competitors, often with access to similar technologies and similar amounts of technology.

Mr. Teixeira discusses several cases of newcomers entering mature markets, and how incumbents reacted or adapted.

What’s Really Disrupting Business? It’s Not Technology
by Danielle Kost
Harvard Business School Working Knowledge, February 2019

See also: Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption