The role of chief digital officer could be in trouble – or they might just be working for companies that are already in trouble. And if they do too well at their job, their role might disappear completely.
Public companies with chief digital officer under-perform their public market peers without CDOs, according to a new analysis for CB Insights.
Over the past decade the role of CDO has emerged as a disruptor for hire; a strategic role to help companies embrace opportunities provided by digital technologies like mobile and social media, to unlock growth and fend off competition from digital insurgents.
According to CB Insights 17 per cent of the S&P 500 employ a CDO. Between January 2017 and October 2018, the 86 companies in the S&P 500 with chief digital officers on staff dramatically underperformed the 414 companies without them.
The research found companies without CDOs returned an average of about 35 per cent over that period, while companies with CDOs returned an average of only 25 per cent.
But don’t blame to CDO for their company’s lacklustre performance, those businesses were likely underperforming their competitors anyway, the research argues.
“In many ways, the role is tailor-made for companies that have done the bare minimum to adjust to a world of always-online devices, online shopping, and other technological innovations. These companies are generally more likely to exhibit lower returns than their more technologically-advanced competitors anyway,” the authors write.
“A company that is successfully adapting to the internet and to digital technologies likely has little need for a CDO. Adapting to the digital world is a responsibility that everyone in the C-suite shares, not a task for one individual.”
A successful digital transformation requires executive buy-in and a holistic strategy, rather than piecemeal innovation pilots and projects.
Gartner analysts argue the role of chief digital officer will disappear completely, with its responsibilities either absorbed by executives throughout the c-suite or simply rebranded into a new role.
In a research note from March, A CIO’s Guide to the Chief Digital Officer, notes the role is defined inconsistently between different organisations.
Gartner’s analysis of CDOs identified four archetypes:
- Strategic CDO — Creates a digital strategy and builds enterprise-wide digital dexterity.
- Functional CDO — Implements digital investments in a specific function (e.g., marketing, supply chain, HR, finance).
- Customer Experience CDO — Coordinates digital investments across the end-to-end customer experience.
- Product CDO — Owns the profit and loss (P&L) for a customer-facing digital product or service.
According to the research, strategic and functional CDOs are more likely to be found at organisations with low digital dexterity. If they do a good job, they’ll no longer be necessary or be absorbed by another role.
Meanwhile customer experience CDO and the product CDO are more likely to appear at an organisation with a digitally savvy leadership team, focused on improving customer experience. These roles are likely to be expanded and rebranded, Gartner argues.