The Essential Role of Chief Digital Officers in Modern Business Transformation

From telemedicine working remotely to ordering groceries online, digital activity surged during the pandemic and will never return to pre-pandemic levels. Against this backdrop, it’s perhaps unsurprising that almost every company claims to be digitally transforming. Yet, many of these transformations will fail. PwC’s Annual Global CEO survey found that "40% of CEOs don’t believe their organizations will be economically viable in 10 years if they do not transform. Therefore, the role of today’s CDO must go beyond digital. He or she must align the needs of internal stakeholders with the organization’s strategy to ensure that technology is adopted and deployed in a value creating and responsible way – and that takes a multidisciplinary mindset," according to Chris Mar, Partner & National Transformation Leader at PwC Canada.

Continued external shocks combined with unrealistic strategies and a perennial undersupply of digital talent are among the main culprits. But a lack of strong – and appropriately empowered – digital leadership talent can be an even greater drag on momentum. Add to that the challenge of balancing short-term profitability and long-term value creation, and it’s clear to see why few C-suites have the bandwidth to keep digital on track. Against this backdrop, CEOs increasingly turn to Chief Digital Officers (CDOs) to re-center the customer in their organization’s digital strategy and execution and harness disruptive technologies like generative AI.

The trendiest role on the C-suite?

The hype around the role has warmed and cooled many times since CDOs started appearing on leadership org charts around 2010. The role burst onto the scene amid the seismic shifts caused by smartphones, tablets, and social media.

So, does your organization need a CDO, and – if so – how can you set them up for success? Below, we explore what CDOs do and why they do it. And we set out some practical, easily actionable recommendations to help you evaluate whether hiring a CDO is the right choice for your business.

What is the role of a Chief Digital Officer (CDO)?

CDOs today possess a strategic vision and technological expertise that enables them to align business objectives with customer expectations, identify growth opportunities, and drive innovation. They develop and implement comprehensive digital strategies, gaining support from diverse stakeholders. By leveraging data analytics and AI, CDOs create personalized experiences and ensure that every digital interaction is designed to delight customers. Additionally, CDOs prioritize employee and ecosystem partnerships, fostering seamless collaboration in hybrid workforces through collaborative technologies and cultivating digital fluency among employees.

What value can they add?

The responsibilities of a CDO are highly contextual, considering the organization’s current state of digital maturity and specific industry dynamics. Many CDOs will take charge of the following:

Shape Digital Strategy

CDOs typically start by assessing the organization’s digital readiness, cultural preparedness, and market positioning. According to MIT, this includes delving into important questions, such as:

Understanding the landscape:

• What digital challenges does our organization face?
• Who are our online competitors?
• How does our proposed digital presence compare to industry leaders?

Shaping the strategy:

• If our business model is at risk, what digital alternative is viable?
• What competitive advantages can we leverage in the digital era?
• How can our company harness the benefits of the digital era?
• What capabilities do we need to develop?
• Are we equipped with the right leaders?

In today’s rapidly evolving landscape, the CDO’s role in assessing digital readiness and digital commitment is instrumental in setting the organization on the right course.

Create Sustainable New Value Streams

CDOs harness the power of digital tools and analytics to deliver hyper-personalized customer experiences across diverse touchpoints. Unlike CIOs, who primarily focus on data logistics, CDOs concentrate on the destination and purpose of the data. In addition, they transcend the domain of brand and advertising, distinguishing themselves from CMOs. The CDO’s remit encompasses every digital interaction, from purchase to delivery to service. This elevated perch gives them a panoramic view of the customer journey, enabling them to pivot strategically and help the organization evangelize customer obsession, significantly increasing their revenue growth.

Leverage Technology Solutions

CDOs must have a solid foundation in technology. Like a Lego building set, they need that modular agility to ‘snap in’ new applications as the needs of the organization evolve. CDOs shoulder the responsibility of assessing the potential impact of digital initiatives on customers, employees, and operations. They foster strategic alignment among departments and stakeholders, facilitating collaborative decision-making and cross-functional governance. By forging relationships with external stakeholders, CDOs gain access to emerging technologies, market intelligence, and innovative ideas, all while striking a balance with the organization’s risk appetite and resource availability.

Pivot Organization’s Culture and Talent

CDOs actively collaborate with other C-suite leaders, leveraging their unique expertise to pivot the organization’s culture and talent toward customer-focused agility. By fostering collaborative decision-making, CDOs align digital strategies with broader business objectives. They champion change management initiatives, tailoring them to embrace digitalization and empower employees with a customer-centric mindset.

What traits do CDOs need to have?

Technical and business acumen isn’t enough. Only bold, creative, and inspiring individuals can successfully overturn hard-wired practices to find sustainable new value streams. Exceptional collaboration and alliance-building skills are central to the role, along with captivating storytelling abilities. Some of the best CDOs are deeply empathetic, right-brain people, capable of emoting the consumer and igniting a bottom-up movement among employees. And adaptability is critical because CDO remits shape-shift as the organizations’ digital journey evolves.

How can we set CDOs up for success?

To maximize your CDO’s impact, it’s essential to empower them with the right support and resources. Implementing these practical recommendations to create an environment where your CDO can flourish:

Have a clear idea of where your organization wants to go

Before bringing in a CDO to tackle its transformation mission, a company must have an idea of what that mission is. This involves identifying the type of transformation you’re aiming to achieve, even before delving into the strategies for achieving it. Consider the following approaches:

• Enhance: Leverage digital technologies to enhance existing processes, without radically overhauling the business. For example, a grocery retailer may embark on a digital mission to seamlessly integrate online and offline channels, offering personalized recommendations and a unified shopping experience across platforms.
• Revamp: Embrace significant changes to operations or business models. For instance, consider the digital transformation journey of traditional media companies like The New York Times, which shifted from print-focused models to digital-first strategies, including subscription-based online content and multimedia storytelling.
• Disrupt: Introduce groundbreaking digital solutions that propel industries into new paradigms and establish new markets. For example, e-car manufacturer Tesla’s integration of electric power, advanced technology, and autonomous driving features revolutionized the industry, inspiring others to follow suit. A digital mission helps the CDO drive the right strategies, investments, and collaborations, even in the face of external shocks and disruptive technologies.

Make sure the CDO’s scope – and mandate – is clearly defined

Digital transformation requires collective effort, with the CEO leading and empowering the CDO to drive innovation. The CDO sets the strategic direction and fosters a culture of innovation, staying at the cutting edge of digital trends while maintaining a laser focus on the customer. But department heads and other C-suite leaders bear the responsibility of driving transformation within their respective functions, leveraging their deep expertise and influence to enact meaningful change. It is crucial not to overwhelm the CDO by expecting them to accomplish every aspect of the transformation single-handedly but rather collaborate with the executive team while ensuring a strong mandate and top-level support for the CDO.

Establish future-orientated targets

Traditional metrics for executive performance fall short in the digital age, particularly for CDOs who require the freedom to explore, take risks, and learn from failures to push boundaries in the digital realm. But by adopting adaptable targets and taking a broader view of success, you create an environment that cultivates the psychological safety needed to take necessary risks. Establish a holistic approach to target-setting encompassing experimentation, learning, and a long-term perspective. Shift away from rigid metrics and embrace a framework that fosters iterative learning and continuous improvement.

In today’s dynamic business landscape, embracing transformation is crucial for organizations seeking a competitive advantage. At LHH, we recognize the pivotal role of Chief Digital Officers (CDOs) in driving this digital journey. With our expertise and proprietary Hogan assessment tools, we excel at identifying transformative leaders who propel organizations forward. Contact us today to discover how our executive search solutions can help you find and develop the transformative leaders your business needs to thrive.

Tim Hewat, Partner, Executive Search, Technology and Digital Transformation Practice

For more information, please contact Tim Hewat at tim.hewat@lhhknightsbridge.com