Once seen as disruptors for hire, and often met with entrenched organisational resistance, Chief Digital Officers have emerged as key strategic operators. Increasingly they also have a direct reporting relationship to the CEO, according to studies conducted by Forrester Research and others.
However, despite the growing centrality of digital strategy, the role of CDO is still regarded in many quarters as a transitory one.
That is certainly the view of another leading industry research outfit, Gartner.
“Mostly, the digital officer is a change-driving role. It has no permanence because there is no enduring asset to command,” a Gartner analyst told Which-50.
“CFOs manage money, CHROs manage people, CIOs manage computer systems. But what is ‘digital’? It lacks any real definition or substance. Really CEOs are appointing CDOs as change agents,” the analyst said.
“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.”
The necessity for a CDO depends on the organisation and its maturity, says Gartner, but it remains steadfast in its view that the hiring of CDOs will peak before the end of next year — and the role will disappear entirely by 2025 as digitisation becomes ingrained in business strategy and culture.
With the clock ticking, Which-50 spoke with a number of digital leaders across different sectors to gauge how their roles had evolved and how their organisations were approaching digital.
The executives Which-50 spoke to identified two closely linked but distinct approaches to digital, largely dependent on the organisation’s digital maturity. In blunt terms, digital can either operate as a stand-alone department with all its own resources, or it has a smaller footprint with resources largely distributed in the business units, with the CDO and their team operating as internal consultants or service providers.
And both approaches still pay homage to the idea that a digital strategy implemented separately to other business departments remains a useful and often necessary initial step.
The decision of which approach to adopt is usually a function of the nature of the business, the scale of the transformation, and the extent of capabilities available.
A Role fit for purpose
One common theme uncovered through these discussions was the need to elevate digital within executive leadership ranks — perhaps driven by their somewhat awkward position in the C-suite.
CDOs are usually positioned somewhere on a spectrum capped by the CMO and CIO/CTO, according to Alana Fisher-Chejoski, a business and digital transformation strategist working with executive teams.
Where exactly they sit will vary by organisation, Fisher-Chejoski says, but most will lack an individual yardstick to ensure their long-term survival. “The problem for many of today’s CDOs is that they are responsible for innovation and digital transformation, but the accountability for the customer and technology — and overall authority — often still resides with the CMO and CIO/CTO respectively.”
However, digital leaders are still pushing for executive recognition.
“I want to see a CEO and COO that get the importance of digital. This means backing digital transformation as a core priority and committing to the required level of investment,” an executive from an international insurance company told Which-50.
That sentiment was echoed by a spokesperson for PwC, who told Which-50 “A CDO role needs to be positioned as a leadership role with the right level of executive board support to enable you to help the business understand and realise the benefits of digitisation.”
This need for seniority is also borne out by research conducted by both Gartner and Forrester, revealing that digital leaders continue to ascend leadership ranks. In fact, Forrester predicts that 2018 will be the year CDOs “move from defence to offense” as firms push digital leaders to drive innovation. According to the firm’s research, the trend towards CDOs reporting directly to the CEO is growing, and within a year over half of all CDOs will report to the boss.
This is a trend Forrester encourages. “Don’t repeat the mistakes many firms still make by creating a CDO organisation a few levels below the CEO,” Forrester’s analysts write.
Indeed, the digital executives Which-50 spoke with identified a failure to include CDOs in top-level leadership discussions as a major red flag, and one that would prevent them from considering any potential new digital leadership jobs.
“There must be buy-in across the executive group for any change agenda to have a chance of being successful,” according to Rebekah Horne, Chief Digital and Data Officer at the National Rugby League.
“Alignment of interests is really important,” Horne told Which-50.
She argues that shared KPIs across teams help digital leaders drive outcomes and secure budget and resources. It’s something Horne relies on to lead the transformation of the NRL’s digital business.
Digital in action
The NRL is spending a reported $120 million on its digital strategy over the next five years. However, it had a more immediate need after taking control of its digital assets from longtime partner Telstra this year. That change created a challenge to deliver 57 digital products in just a matter of months.
“The only way in my mind that we could have achieved that was to stand up a team and get them delivering against milestones,” Horne said, explaining the NRL digital team had been established in a “hybrid” way.
The short-term requirement meant it was necessary to treat digital as a separate department initially. This step allowed the NRL to start connecting with fans almost right away (Horne is also responsible for the digital marketing team).
Ultimately, digital requires a more holistic strategy, Horne said.
“In parallel to this first horizon to meet the market, there is a greater strategic need for organisations to prepare for disruptions that their industries will face emerging from digital trends.
“Treating digital as a separate department “over there” creates the risk that the CDO role — and the department itself — is seen a panacea, when what is really required is a longer term, strategic view for the entire operation of the organisation,” says Horne.
“Digital capabilities need to be developed that align activities, people, culture and the organisation’s structure to the organisational goals.”
Horne says that’s a major change and one that requires time. It’s also one often met with resistance from established departments. However, Horne argues that there is no perfect time to move from an old way of doing business to a new one.
“It’s about understanding the market opportunity and expectation and being prepared to work collectively across the business to create new processes and ways of doing business to achieve that outcome.”
A spokesperson from Moët Hennessy made a similar point, arguing that as organisations mature, so too should the reach of digital. “In digitally immature organisations it makes sense to have a digital department to build capability. But as it matures, digital should become the responsibility of the entire organisation.
“I wouldn’t support that any centre of excellence, shared services, or subject matter expertise should be grouped together as ‘digital’ in any digitally transformed organisation any more than ‘non-digital’ should be grouped together.”
For its part, PwC takes the Centre of Excellence approach to digital but, importantly, this includes providing services to all areas of the business, according to a company spokesperson.
“In my experience, when digital departments act as Centres of Excellence working in close partnership with each business area, they are better enabled as key drivers of sustainable digital transformation and organisational success. This model ensures business priorities are well integrated and firmly understood within the department while, at the same time, being able to operate as its own function with the agility to adapt quickly to meet organisational objectives.”
A modern CDO is much like an API, according to the PwC executive, helping “drive collaboration, digital transformation and maximise the benefits from technology investment.”
“The key focus is on driving greater value for customers and/or clients (and therefore the business).”
We also asked Bridget Gray, the managing director of Harvey Nash Australia, a Sydney based executive recruitment firm to describe the kinds of red flags she would advise anyone shooting for a CDO role to watch for.
“When going through the selection process for a CDO appointment, you need to be convinced that the exec team understand the value proposition and mandate of the CDO, and the board are bought into the digital transformation journey and vision,” she said.
“Having a CEO who ‘gets it’ and a direct reporting line to them is a must have, and access to the board to engage and update when required is essential to setting yourself up for success.”
Gray told Which-50 that as transformations are dynamic a CDO must be able to access key stakeholders. “The access is important as they need to be transparent and clear on any variables, risks and changes in the marketplace that may affect timeframes, outcomes or the need to stop something and take a new direction.”
Clarity on budgets is also very important, she said. “Too often the appetite to appoint a CDO is greater than the appetite to have tough discussions with their peers on where budgets will sit. A CDO should definitely push for clarity on this point.”
Public sector digital
The strategies apply to the public sector too, despite some important differences underpinning digital change in government.
CDOs from both state and federal government told Which-50 that treating digital as a separate department may be suitable for less mature organisations or departments, but the goal should be to integrate digital more broadly and drive a culture of shared digital capability.
“If the culture and structure alienates the business then it will fail to be effective in the end,” according to a former digital leader from state government, in a similar role abroad.
“Sometimes it is appropriate to have a separate disruptive digital department,” the executive argued — especially when the level of disruption is significant.
“Building a digital capability group in an organisation is effective as a shared capability as long as the business groups are treated as the group’s customer — not neanderthals who need us to do their job for them.”
The view of the Australian government’s digital transformation agency is that it is incumbent on digital leaders like themselves to help drive that cultural change.
“In my view, digital delivery and capability uplift is a key role of the CDO. The CDO should be looking to provide services to other parts of the organisation,” said a spokesperson for the leadership team.
“I originally saw the CDO as the advocate for agile and new technology. I now see it as a much broader and more critical role than I once did. It is about understanding the needs of people and businesses and delivering the services to them that ultimately help to address these needs. It is about service delivery reform and transformation of the way government, or even other industry services, are delivered.”
The changing role of a CDO
The government executive was not alone in recognising that their role had changed significantly over time. According to the NRL’s Horne, a significant part of her job is now stakeholder management.
“I believe a large part of my role is to enable better business process across the entire business — to provide data and insights to stakeholders to enable them to make better business decisions.
“The best idea is worth nothing if nobody understands or cares about the benefits of making the change. In my mind, the sooner you can start that journey the better so that you can face into and productively participate in the changes to any industry.”
Cat Matson, Chief Digital Officer, City of Brisbane, agrees, saying that CDOs have a responsibility to develop digital across the entire organisation and often that means empowering others.
“There are areas like marketing, for example, that should have digital specialists within them. But really, digital is a paradigm, not a discipline or a deliverable,” Matson told Which-50.
“So in that context, digital has to be championed and led across the organisation, preferably in the C-suite, not separated into its own department.”
Matson identified empowerment as one of her key responsibilities as a digital leader for a city council.
“My approach now, still in the city context, has been through the lens of empowerment – how do we empower businesses and residents to thrive in the digitally-enabled, globally-connected world in which we live? The solutions to the challenges we face in that context are many and varied – but they’re not necessarily requiring digital solutions.”
The executive from the insurance industry stressed the need for senior executives to collaborate and deliver the best customer outcome. “Successful CDOs partner with CIOs to drive rapid deployment of new customer applications and experience improvements in a systematic way, whilst helping shape the ongoing transformation of core systems.”
An endangered species
Still, despite the growing reach and influence of the Chief Digital Officer, the role’s days may be numbered, according to Fisher-Chejoski. She agreed with Gartner’s assessment that the role of CDO would probably exist for another three to eight years, depending on organisations’ maturity. But she also expects the role will change significantly over time, including potentially morphing into a Chief Strategy Officer.
“Due to the mix of creativity and operations required of CDOs, the best CDOs of today will be the high-performing Chief Strategy Officers of the future. They will have their finger on the pulse of the organisation, the customer and boards and shareholders, where relevant – and, of course, be digitally literate.”