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The chief digital officer era is ending. What next?
Key takeaways
- The number of Chief Digital Officer roles being created is falling, indicating the era of the CDO has peaked.
- Businesses are becoming cognisant that digital transformation efforts should be led by the broader organisation, rather than fall on one person.
- Like the strategy itself, the capabilities and focus of the CDO should be regularly revisited to ensure they’re meeting the needs of the business.
Back in 2016, we predicted that the era of the Chief Digital Officer would be short-lived. After all, the role of a good CDO is to put themselves out of a job.
The data from this year’s PwC Strategy& Global Chief Digital Officer Study points to a trend that, after a relatively quick rise to prominence, the corporate world has hit — and past — peak CDO. The study, which examines the top 2500 publicly listed companies by market capitalisation globally, found that just 54 companies created a CDO role in 2018, a sharp decline from two years prior, where the number reached as high as 160.
Overall, 21% of all companies studied had a CDO in 2018, compared with 19% in 2016. It’s marginal growth when considering the number more than trebled in two years from 2014, when the number was 6%. But this slowdown isn’t cause for alarm. Rather than a sign that organisations aren’t prioritising digital transformation, it’s evidence that creating a digitally enabled, competitive company isn’t (and shouldn’t be) the job of one individual.
Digital in the DNA
The role of the CDO — defined by the study as an executive whose responsibility is to develop and implement the company’s digital strategy — is to sculpt an organisation into one that is more agile, enabled, and digitally focused. The rapid rise of this role within the past decade has corresponded with leaders of the world’s biggest companies recognising the urgent need to overhaul their digital capabilities to compete.
Indeed, the study, now in its fifth instalment, illuminates how much has changed in terms of how companies perceive and prioritise digital transformation. As ‘digital’ begins to form part of businesses’ DNA, the profile and position of the CDO role are changing. More than half of digital decision makers (54%) now sit on the C-suite of their organisation, compared with 40% in 2016. This also signifies that leadership understands for transformation strategies to gain the momentum and gravitas required to effect change across the whole organisation, it must come from, and be driven by, the top.
The evolving CDO
The profile of a CDO is changing as expectations of the role matures. The tendency for CDOs to have a technology background rather than marketing capabilities is a continuing trend. Just 18% of CDOs identified in the study have a marketing background, representing a sharp fall from 51% in 2014 when the study began, while those with a technology background now account for 41% of all CDOs, up from 14% five years previously. In some companies, chief information officers are stepping into the CDO role, which may be contributing to this rise.
While they of course must be tech savvy, the trend towards CDOs with technology backgrounds may pose a risk to transformation efforts. To truly transform an organisation, what is needed is a broader strategic CDO that drives innovation, starting from the core — the business model. Rather than look at their background, decision makers should look for a CDO that fits one of the five archetypes outlined by Strategy&: the progressive thinker, the creative disruptor, the customer advocate, the innovative technologist and the universalist. There is, in our view, a need for more progressive thinkers (those with a focus on developing a fully digital strategy and operating model, drawing on innovation from both inside and outside their industry), and creative disruptors (those who seek competitive differentiation, often by incorporating ideas from outside their industry) sitting in the CDO chair.
While the study has identified trends that are setting a paradigm for what a CDO looks like, the sands are beginning to shift for many businesses when it comes to the actual transformational strategies.
As 2020 approaches — the deadline many firms have set for themselves to finalise their strategies — the expectations of what this role is designed to achieve may be changing. As detailed in the study’s flagship article in our sister publication strategy+business, some leaders are coming to the realisation that putting one person in charge of a firm-wide digital transformation may no longer be the best model, if it’s to achieve its objective of becoming an intrinsic strategic priority permeating the entire business.
The disappearing CDO
Indeed, the next natural step is that the CDO role will likely disappear altogether. In the ideal state, the responsibility for digital transformation — both in a strategic and holistic, ongoing basis — will soon fall to each member of the executive team.
It’s fair to say we are not there yet, as much as we’d like to think that the leading companies are preparing their companies for the revolution that artificial intelligence, the Internet of Things and other technologies are promising to deliver, the latest Digital IQ survey has shown that 37% of respondents still equate digital with IT only, while just over half agreed that their leaders were digitally savvy. Indeed, any company that in 2019 is creating a CDO role from scratch is likely to be one that is behind the market.
Keeping speed with changing needs
In order to ensure that the strategies of companies on the transformation journey remain relevant, the leadership teams must ensure that the CDO has the right skill set to meet the unique challenges they are facing, and continues to do so. While 2020 looms as a strategic deadline for many, due to the rapid nature that technology is evolving, a whole new set of challenges have arisen the businesses must rise to. In that sense, transformation must be seen as a journey — not a destination.
This journey is never static, so it’s important to take into context how the business is changing and where along the transformation journey it sits. Has the strategy changed dramatically? Does it need to be reworked, or is the company on track? In order to answer these questions, the CDO role itself may need to be revisited.
While the Chief Digital Officer may not yet be an extinct species, we have still not yet reached the point where agility, change, technology and disruption are etched into the DNA of every executive. From here, it’s clear that much like the transformation strategy itself, the key to success is to continually revisit the role and ensure that it meets the needs of the business.
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