The past, present and future of the Chief Digital Officer

Companies are (still!) experiencing a digitally infused culture shock. While some enterprises are already digitally enabled, many others are discovering the best way forward on their journey to digital transformation. Businesses ultimately need someone to take charge of the significant changes that digitization brings – a function that is often aggregated in the role of the Chief Digital Officer.

However, the CDO is an endangered species as only 21% of companies have designated a CDO last year - a small increase compared to 19% in 2016. The number of CDOs hired over time reached a peak in 2016 with 160 experts and decreased to 124 in 2017 and only 54 in 2018. In our recent ‘2019 Chief Digital Officer study’, written by Pierre Pèladeau, Kai Müller and me, we share insights into the changing trends of the CDO role in the 2,500 world’s largest companies. Let me share some key findings on what it takes to lead in today’s digital environment:

 After a strong growth in 2015 and 2016, when the number of newly hired digital executives tripled, many companies in key industries of the digital economy now employ digital experts, and they are set on board level. That is why the small increase in CDOs is less surprising than their changed role.

Since we first conducted the study in 2014, our clients learned a lot about how to deal with the CDO role, what skill sets to put into it and how to link it to the C-suite. Companies now know that digital transformation should / cannot bebe the remit of a single person or a matter of function, but an effort to be taken by the enterprise as a whole.

Digital Transformation as a mere department - or rather a mindset and culture?

Digital transformation is transverse and affects an entire company. This also implies that the actual skills we are looking for in a CDO differ from the requirements we looked for at the beginning of this decade. The required capabilities are equivalent to the work of a strategist or a tech expert – they cut across the whole company and imply changes of the legacy: how to onboard digital teams, launch initiatives into evolving corporate culture, adapt mobile and customer experience management, deploy cutting-edge systems that tap into emerging technologies like AI and machine learning, etc. That explains why 41% of CDOs have a technology background in comparison to 32% in 2016, whereas 18% have a marketing, sales and customer service background, down from 39%.

Changed perception

Another reason why the required skill set has changed is that the perception of digitization has transformed. Digitization used to be something trendy, “about to happen”, that everybody was talking about. Today, it is actually happening, which requires concrete implementation capabilities on a strategy level.

This may be the reason why one third of all analyzed companies that have employed a CDO for the past 3 years, have kept the CDO role, but changed the person. A CDO has a network function and needs IT units to implement change.

As digital is becoming is a necessity for the whole organization that cannot be carried out by one single person in the long-term, the CDO role has peaked.

But what now?

We believe that if the CDO has been successful in adapting, disrupting and transforming a company, he or she will disappear. So what does that imply for the future of this role? Are you now asking yourself whether you still need a Chief Digital Officer?

Here are four action points that you should consider in 2019:

1.     Have a good look at your CDO and evaluate whether he or she is giving you the expected (commercial or transformative) benefit.

2.     Learn from leading CDOs and work on a holistic digital transformation.

3.     If you do not have a CDO in place, think twice before hiring one. Maybe you have enough (senior!) talent in your organization to fill this function other ways.

4.     You might not need a CDO, but you need to carry out digital transformation all the way. Be aware of disruptions from other players.

 Curious to learn more? Read our article “Have we reached “peak” chief digital officer?” on strategy+business, the award-winning thought leadership and management magazine by Strategy&.

Methodology

The Chief Digital Officer (CDO) is defined as an executive, whose responsibility is to develop and implement the company’s digital strategy. Independent of the title set by the firm, the function of a CDO is to lead the company throughout its cross-functional transformation to a digital enabled enterprise.