The Proliferation of Chiefs

I am the Chief! No, I am the Chief! I am Chiefer than You!

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If innovation was measured in terms of new C-level roles being minted, society would be awash in scintillating innovation. Alas, that isn’t so.

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The Problem

The Illusion of Innovation

• Companies now have an alphabet soup of C-level strategy officer-like roles: Chief Strategy Officer, Chief Digital Officer, Chief Data Officer, Chief AI Officer, Chief Transformation Officer, Chief Innovation Officer, and Chief Digital Innovation Officer. They have overlapping and fragmented responsibilities.
• Even with all this C-suite firepower and expense, only an “illusion of innovation” exists. (Thank you, Elliott Parker, for coining this delightful term.)
• The CSO (Chief Strategy Officer) role has lost its edge and power. In most companies, the CSO essentially collects forecasts from market Presidents, and creates a one-year operating plan that is the very definition of incrementalism. Years two and three in the “three-year rolling strategy” are aspirational. However, because the plan is a rolling strategy, there is no accountability for those revolutionary/hockey-stick promises. Every year is the year zero: There is a new forecast compilation (the one-year operating plan) and a new three-year “strategy.” This is strategy built with melting ice.
• The cosmetic “innovation” in incumbent companies is partnerships with startups. In other words, incumbent companies gradually give market power and profits to startup companies that learn, establish a footprint, and build their at-scale products on the basis of large-company partnerships.
• Lastly, there is M&A (mergers and acquisitions). Many large companies have a venture arm or an M&A budget. While these typically bring in a good financial return (superior to organic operations), they fail to transform the business. Once the big company buys a startup, it inevitably ends up killing its innovation. The startup company founders and key team members leave after they cash out, and start building other startups.

Insights

Business Transformation = Portfolio Management

• Any company past the extremely small/startup phase is a portfolio of businesses, a smaller version of a fund portfolio.
• A company needs to allocate resources with the same dispassionate discipline and rigor that a fund does. This allocation is an integrated analysis. In other words, it should include the whole organization.
• The execution of different investments needs different teams with varying skills, attitudes, ownerships, and risk-taking profiles.
• A new development in the business world is that, now, every business needs to be transformed over three years. This has never existed in business history (with a partial exception for Silicon Valley).
• Most transformation needs a new team; creating at least the initial business/products should be in dedicated startup-like teams as opposed to in business units.
• A strategy needs to look more like a project—with a start and an end for that strategy’s implementation—rather than an ongoing business discussion.

A Recommended Playbook for Organizations

Four Difficult Steps to Transform the Organization

• #1: Create a single role to drive strategy and transformation. “CSIO (Chief Strategy and Innovation Officer)” is an acceptable name, although the title is less important than the fact that it is a single role.
• Stay away from technology fever du jour: Digital, Data, AI, Cloud, Machine Learning, Deep Learning, etc. These names:

o?? Misrepresent the charter of the role: business transformation with all appropriate technologies, as well as non-technological transformation.

o?? Create resentment among employees who are not in the “cool” group.

o?? Inevitably face backlash and cynicism when the tech goes down on the hype cycle. This happens to every technology, including cloud and AI.

• #2: Create three-year non-rolling strategies. In other words, have the Chief Strategy and Innovation Officer and appropriate Presidents/EVPs be accountable for something three years out. In collaboration with the CEO, it is OK to modify goals in small ways because of a significant market event, e.g., availability of Generative AI. But it is not acceptable to create a new three-year story every year as virtually every company does.
• #3: The CSIO should be empowered and accountable to create new businesses and MVPs, with organic and/or inorganic levers. Once the initial product-market fit has been established, they should be absorbed in different business units, or held as subsidiaries.
• #4: The CSIO should be a confidant of the CEO. Ultimately, the CEO is the company’s chief strategy officer. However, the CEO has many things to drive. He/she needs to collaborate with a transformation expert to drive strategy creation, digital transformation, and inorganic growth. The CEO needs to either back the CSIO’s recommendations and plans or let him/her go.

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I welcome your thoughts and suggestions about a single C-level executive for strategy and transformation, and the best charter for that executive.