Rise of the Role of Chief Digital Officer

Chief Digital Officer, or CDO, is a relatively new title being used by large companies, as many industries started to wake up to the realities of digital transformation around 2013. While a critical imperative, digital transformation doesn’t happen overnight. A 2017 CEO Pulse survey by PwC showed 47% of Chief Executives believed the speed of technological change was a key threat to their company’s sustained success in the future. Companies are realizing they need have a C-level role to manage the complicated change initiative from legacy IT systems to data intelligence and new digital applications. Yet, while systems and infrastructure are at the heart of this imperative, digital transformation isn’t just an IT issue. It’s about much more than just investing in new IT infrastructures like Cloud or SaaS. It’s a customer issue too. It’s about creating new and better customer experiences. This isn’t an either/or issue. It has to embrace both and that means this is an area where IT and Marketing must work hand in hand.

What is behind this growth of the CDO role?

Driving the need for a new role is the number of Big Data initiatives that are transforming businesses in a big way. At the end of 2017, two-thirds of Global 2000 CEO’s listed digital transformation at the core of their corporate strategy. Digital Transformation is a big deal; it impacts technology, people, process and culture. It’s not just going to “happen” without a strategy and massive amounts of change management.

The drivers of the digital revolution include the demand for data enablement to improve productivity and create a better customer experience. This is underpinned by the convergence of Cloud, connected devices, IoT, AI and a mobile workforce. Companies are now compelled to break down data silos, embrace new digital technologies, rethink how they engage with the customer, and to take an eye to putting their data to good use to create both ease of use in the workplace as well as for the customer. This is impacting B2B as well as B2C industries: even legacy industries like manufacturing and energy are rethinking how to make their businesses to more agile and customer-focused to increase revenue. And while that might sound touchy-feely, it all boils down to this: Innovate or Die. B2C has been the initiator in the digital movement, where there is a more direct connection to the buyer that’s honed by digital marketing. However, more B2B buyers are using social and mobile during their buying journey, so that even with more channels and touchpoints, B2B has an opportunity to leverage digital data to create a better customer experience. McKinsey studied the digital quotient (DQ) of B2C and B2B companies and found B2B had plenty of incentive to catch up to their B2C peers in leveraging digital:

“Top-quartile B2B players generate 3.5 percent more revenue and are 15 percent more profitable”

Doubling Down on the Chief Digital Officer Role

Today, the Chief Digital Officer has become the voice and the champion for digital transformation and big data projects in large firms across the globe. According to the Chief Digital Officer Study by Strategy&, PwC’s strategy consulting business, by mid-2016 19% of the world’s largest 2,500 public companies had a CDO, 60% of whom were hired since 2015.

By early 2017 most estimates indicate that the number of companies with a Chief Digital Officer or equivalent hit the 50% mark. In their 2018 study, NewVantage Partners reported that 63.4% of their respondents report having a CDO.

Chief Digital Officer Responsibilities

The Chief Digital Officer might sound like an IT role but marketing data has a significant impact on customer experience and personalized digital marketing. CDO’s typically live in the intersection of technology application, customer experience and corporate strategy.  They are innovators who can lead companies through times of digital transformation. “It’s a bit of a cross-functional role,” says Curt Stevenson, chief digital officer at insurance software company Duck Creek Technologies in a CIO.com article.

“It means very different things to different people. In some cases, it’s an internal role about maximizing digital marketing. In our case, it’s about helping our customers embrace digital and provide better experiences to their customers.”

Chief Digital Officer, Chief Analytics Officer or Chief Data Officer?

As AI and predictive analytics play a larger role as a strategic differentiator, other roles that companies might have in place of the Chief Digital Officer is the Chief Analytics Officer (CAO), or Chief Data Officer (awkwardly also CDO).  A 2017 Data Science Central article examined the difference between the roles. They cited an Experian study that illustrates that while the Chief Digital Officer role is a business focused role tasked with overseeing the transition to a digital world, the Chief Analytics Officer typically has a data science background and is concerned with all things data including the promotion of advanced data usage. The CAO role is about how you drive insights off data.  How do you make the data actionable? The Chief Data Officer is focused on managing data as a corporate asset and has roots in risk management and governance, having been born in the financial crisis of 2008 and 2009 due to increased regulatory and compliance reporting demands and the need for strategic, C-level central oversite over their Big Data driven by high volume customer interactions. Those first-generation Data Officers focused primarily on governance and managing risk.  In late 2015, slightly over half (54 percent) of firms in the financial services industry had appointed a Chief Data Officer. Regulated industries such as telecom, life sciences and healthcare followed suit. More recently, personalized customer experience using AI and digital transformation have surpassed risk management and compliance to be the big data focus.

Wait, what happened to the CIO?

Both the CDO and CAO positions are essentially carve-outs from the traditional CIO job.  A 2017 Experian study showed that 37% of CDO’s reported directly to the CEO and the rest reported to the CIO, CFO or Line of Business (LOB) executive. The decision about where the CDO reports is an important one.  CIO’s have not traditionally been as focused on strategy, customer experience nor dealing with the vast amounts of data spawning from many more areas of the business than just IT. Companies typically look at data and analytics as tactical subsets of IT. And even if you do happen to have a strategic CIO, these new initiatives can easily overwhelm an already massive workload. Having a CDO at the table reporting to the CEO provides a key champion for how data can create competitive differentiation – at the heart of today’s digital transformation. The CDO helps set the new strategic digital roadmap, balancing old and new technologies, bringing together the stakeholders and smoothing the path for the digital journey. There have been reports (already!) of the impending fall of the CDO, with Forrester estimating the CDO to no longer have a seat at the table in 5 years.  The varying theories are that the CIO will take the role over or that companies will be done with their digital transformation and that role won’t be needed.

We don’t think the demise should be predicted quite so soon.  For one, CIO’s have plenty to do and the amount of data that’s coming from new facets of the business isn’t going to diminish.  Far from it.  And AI is just is still at just its infancy with more room for automation and intelligence to be built into the modern organization. Add to that, as I pointed out above, digital transformation is a big task and I don’t think most companies would count them selves done, even after three, five, seven or more years.  Does anyone think marketing will become less digital?  Or customers suddenly find they are totally fine with the experience they have? Have you found any companies who are saying “We have completed our digital transformation”? I have not seen any studies showing this as yet.  Until then, the role of the Chief Digital Officer promises to have a bright future.

This is part one in our series about Digital Transformation.

About the Author: Kathleen Glass is a strategic advisor for WyeComm, a Stagwell Company, and founder and CEO of Oinkodomeo, a B2B sales and digital marketing agency. Follow on Twitter @KathleenGlass