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May 28, 2015

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The Chief Digital Officer (CDO) – Defining this Critical Leadership Role

by Ravi Kalakota

“Today’s CEOs are starting to take active roles as the de facto chief digital officers within their companies. Digital transformation is  a CEO-level conversation, we’re in the board room, presenting to the board. In the last three weeks, I’ve had more conversations with CEOs around transformation than in my entire career.” Salesforce CEO Marc Benioff 

“Everything we (Starbucks) are doing in digital is about enhancing and strengthening those connections [with our customers] in only the way that digital can and only the way that Starbucks can. “ Adam Brotman, Chief Digital Officer

“Financial assets are all digital. That’s where your customers are and you want to be where your customers are.” Steve Ellis, head of Wells Fargo’s innovation group.

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New Technologies | New Possibilities | Design Thinking

Consumerization, data-driven digital engagement, insightful multi-screen and multi-channel user experiences are increasingly taking center stage. Companies are building up their Digital DNA to engage with customers, blend physical, digital and virtual elements, and interact via new channels.

There is often a big difference between the digital experience companies deliver and what the consumer is looking for. Most companies flat-out miss this point. As a result, there has been an exponential increase in executives being assigned Chief Digital Officer (CDO) titles.

CDOIn fact, there have been a tremendous proliferation of new XO titles that all focus on the customer, innovation, omni-channel platform and revenue growth in some form or fashion:

  • CDO – Chief Digital Officer
  • CDO – Chief Data Officer (data is at the heart of  digital today)
  • CCO – Chief Consumer Officer or Chief Creative Officer
  • CXO – Chief Experience Officer
  • CIO – Chief Innovation Officer
  • Cross Channel Customer Officer (also Chief Revenue Officer is title i am coming across more)

In this article, we focus on the Chief Digital Officer (CDO), an executive who is in charge of emerging digital customer experience and next generation experience (e.g, Augmented Reality or Speech Driven UI). Wikipedia describes the CDO as an executive who helps a company drive growth by converting traditional “analog” experiences to digital ones, and by overseeing operations in the rapidly-changing digital channels: mobile applications, social media and related applications, as well as web-based information management and digital marketing.

CDOview

CDO roles are permeating every large consumer facing organizations.

Take for instance, McDonald’s, where the CDO is addressing the challenging question “How will McDonald’s help lead the next generation of customer experience? [Our] goal is to evolve a seemingly simple patron experience and rework things to provide ways for them to personally direct each step of their journey. So we launched the digital organization within McDonald’s in true start-up fashion, and hired digital leaders in the U.S. and Europe to help pave the way. We are evolving how McDonald’s works as we continue to develop our transformative group. Just look at our recent partnership with Apple Pay, where we’re currently the only company to offer it at the drive-thru.” (source: http://sxsw.com/news/2014/mcdonalds-showcasing-digital-chops-sxsw-2015)

McDonald’s is not unique. According to the Wall Street Journal, executives who can help companies navigate digital and technological change will be among the most sought-after candidates to join the corporate suite next year.

A recent study conducted by MIT Sloan School of Management showed that large companies making major investments in technology-enabled initiatives tend to see an increase in revenues, while organizations prioritizing across-the-board digital transformation in both technology and leadership achieve higher profitability and market capitalizations in addition to increased revenues. Additionally, a follow-up survey showed that senior executives ‘overwhelmingly believe that failure to effectively conduct digital transformation will harm their company’s ability to compete.’

Defining the Emerging CDO’s Role

DigitalRoadmapThe Chief Digital Officer (CDO) enables a seamless connected experience where the customer meets the enterprise and gets served through a variety of channels – generating revenue through better retention, cross-sell and upsell and accomplishing the core mission of customer centricity. CDOs are in charge of the digital business strategy, online services across web, mobile and social platforms and oversight of enterprise content, applications and infrastructure.

The CDO is the executive overseeing the overall customer experience across touch points, lifecycle functions and application platforms. The customer experience is shaped by their interaction with the enterprise through a variety of touch points and channels. Customer experience is also shaped across the lifecycle through a variety of functional interactions: sales, marketing, commerce and service. At the same time, the customer is becoming more and more social.  They have the ability to influence and shape the perception of others.

However, the clarity and definition of the CDO role is quite varied and depends on the industry and size of firm.

Take, for instance, the organizational structure. Should this role report to marketing (CMO) and be responsible for digital marketing, sales and commerce; or should it be independent of marketing and report directly to the CEO? Perhaps there is a dotted line responsibility for some aspects of marketing, IT and operations as related to the customer experience.

Role clarity is also a challenge as boundaries and responsibilities are fluid. How is the CDO role different from the CIO and CTO?

Every CIO needs to be more digitally oriented in order to be relevant. So where does the CDO role start and end? If customer experience is key, then should the CIO and CTO report into the CDO?

Job Description for a Chief Digital Officer (CDO)

“The digital transformation occurring at American Express cuts across many business units, and it has to because of the breadth and depth of our business. From customer service to merchant services to our entertainment and travel business units, to corporate affairs, as well as our newly formed digital partnerships and development team, social media is a company-wide initiative.” — Leslie Berland SVP of Digital Partnerships and Development

I reviewed and analyzed several Chief Digital Officer (CDO) job descriptions posted on various executive job sites. I distilled the core elements that most corporations are looking for in a CDO.

The job description for a CDO needs to cover some key bases:

  • Vision & Strategic Leadership: tie all of the company’s digital aspects together in support of the company strategy. Strategy should include new product development, product ideation and development rather than harvesting what already exists or coordinating different elements.
  • Engagement & Change management competencies: aligns people and organizations around change. At the highest levels, not only acts as a change leader, but creates a series of change leaders to support a coordinated effort.
  • Governance & Cross-divisional matrix communication: Can manage across the matrix; ability to build consensus for a digital strategy across news, marketing and advertising. Must have skills to manage through influence and by building strong relationships.).
  • IT and Technical skills: manage the quants and engineers with people with digital visual skills to get projects done.
  • Divisional P&L responsibilities: In some industries like entertainment, where digital is central to the P&L, there might be a dedicated Digital Division. In such a case, the CDO would be directly responsible for the Digital division, which consists of Core and New Product Management, Digital UI/UX Design, product portfolio management, project management, systems management (enterprise, product, advertising, etc.), content, data infrastructure and analytics, front office applications like Marketing, Sales, Service and Commerce platforms and engineering.

In summary, the position of CDO is not defined by infrastructure or hardware like the CIO and CTO roles, but instead it is defined by customer experience, productivity and innovation. The focus is on the outcome – customer acquisition, engagement and retention.

Conclusion

Most strategic business solutions actually start with empathy with the consumer or end user (outside in), whether that’s going to be a prospect, customer or an employee. Innovative design and new experiences that blend physical and digital elements is very much at the center of that.

The role of a Chief Digital Officer (CDO) may be tougher than one would expect. To be successful this role will require the leader to bridge the unique aspects of a particular industry, the nuances of the digital customer experience in that industry, and the necessary engineering savvy and know-how to build WOW experiences.

Additional Reading and References

  1. Time Inc. is turning to data to help evolve its digital transformation…. it hired JT Kostman for the newly created job of senior vice president and chief data officer. Kostman is a data scientist, mathematician and psychologist, who, according to Time Inc., will bring “deep insight into consumer behavior.”
  2. Mayur Gupta, the Global Head of Marketing Technology & Innovation at Kimberly-Clark.http://www.chiefdigitalofficer.net/cdo-cxo-xxo-the-new-c-suite-winning-the-lap-or-the-race/
  3. “The Digital Advantage: How digital leaders outperform their peers in every industry” Capgemini Consulting & MIT Center for Digital Business, 2012.
  4. “Embracing Digital Technology: A New Strategic Imperative” Capgemini Consulting & MIT Sloan Management Review, 2013
  5. Digital and Innovation Chiefs Among Most In Demand C-Level Jobs, Wall Street Journal, Dec 5, 2014 (http://blogs.wsj.com/cmo/2014/12/05/digital-and-innovation-chiefs-among-most-in-demand-c-level-jobs/)
  6. Forrester warns CDOs: Don’t expect career longevity
    “Predicting the corporate demand for chief digital officers is turning out to be a tough task. On one hand, a report released today from research firm Forrester suggests that most firms that have not already hired a CDO are not planning to do so over the next year. That is in contrast to a report released last October from fellow research from IDC, which predicted that, within five years, roughly 60 percent of CIOs would be supplanted by CDOs.”http://www.zdnet.com/article/forrester-warns-cdos-dont-expect-career-longevity/
  7. Disrupting_beliefs_A_new_approach_to_business-model_innovation 
  8. McKinsey.com – Digital Enterprise Articles – Good Read
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