The chief digital officer: agent of change

(Disclaimer: CDOs may be shape-shifters to some degree, but most of them aren’t werewolves.)

The major business initiatives of the next five years will be led from an office that barely existed five years ago. Chief digital officers (CDOs) have sprung onto the scene to bring order, perspective, and focused leadership to the explosion of digital channels and strategies.

“The CDO is the role you need when you realize that digital transformation is more than a technology shift. It’s a business model shift,” says Ray Wang, Constellation Research principal analyst.

Building the CDO

Like many emerging CXO titles, there is no single, uniform definition of a chief digital officer. Even the acronym has competition from the equally chic “Chief Data Officer,” a role with a more specific focus on protecting and unlocking the value of corporate data assets.

Think in terms of opportunity, rather than any specific technology-driven initiative. CDOs are tasked with finding the right ways to engage and sell to today’s connected buyers in ways that weren’t even conceivable just a decade ago.

“The CDO isn’t the same thing across all industries, but it’s a necessary function,” Wang says. “Top CDOs will change the way you look at customer segmentation, and help you figure out how your digital natives interact with digital holdouts.”

A CDO should not just be an intermediary between the marketing group and a portfolio of channels. For example, social media being such a strong digital channel, it may seem a natural fit for a CDO. But in many real-world settings, the CDO focuses on developing new channels and modes of outreach, leaving the now-established social media opportunities to the marketing group to execute.

“Some CDOs are active on social and are responsible for it, usually in agencies, non-profits, and education,” says David Mathison, founder of the CDO Club trade group. “But the CMO in most organizations is still responsible for end-to-end brand management, including social.”

Mixing it up

The need for a CDO is typically mandated from the highest level of an organization. Pushback from the traditional flag-bearers of marketing and technology is common.

“The CEO or board is typically the one to recognize the need for a Chief Digital Officer, [so] a CIO or CMO can feel undermined by the hiring of a Chief Digital Officer,” says Josh King, consultant with search firm Ridgeway Partners.

Because most organizations do not yet have a CDO (Gartner projects one-quarter of firms will by year’s end), there’s still time to get your house in order before rocking the boat. “If your CIO and CMO are not getting along now, it makes no sense to bring in a third person who won’t get along,” Mathison says.

Some organizations born of the digital age have chosen to stay out of the CDO sweepstakes, seeing digital as inextricably linked to marketing’s core functions. Veterans United Home Loans was founded in 2002 as a pure-play digital lender, and still manages all digital efforts through the CMO’s office. “A lot of the new opportunities we tackle come from directors in charge of specific pipelines,” says CMO Kris Farmer. “For a company that has retail locations and is also figuring out their online strategy, there probably is room for that role, but I don’t see us making that move.”

Up and out?

CDOs are asked to transform business strategies, often at the heart of a fundamental turnaround or overhaul. That’s why CDO Club tracking shows a marked spike in high-profile CDOs moving to CEO or corporate director-level positions over the past year. Success stories are percolating to the very top of the hiring pool.

As CDOs succeed and move up, history may record that the entire exercise was an important but short-lived event. Constellation’s Wang projects that CDOs will surge into the marketplace, then fade away as the digital transformations take hold. In his model, CDO responsibilities will be redistributed into the remaining leadership positions. “You’ll see CFOs who understand that they must change the way you price your goods, chief human resource officers who understand how to hire digital artisans, and CMOs who realize how to shift to sell brand promises in an attention economy,” he says. “The CDO role itself will start to fade in favor of these digitally-enabled CXOs.”