All organisations must embrace a central champion who ensures that the digital business principles and policies are in harmony with the organisation's overall strategy, says Ray Wang, principal analyst and CEO at Silicon Valley-based Constellation Research.
Wang calls for fostering a culture of digital DNA in the organisation as it strives to build new business models with disruptive technology.
Digital leadership is important, and digitally transformed organisations do differentiate themselves with higher margins, greater market share, and increased brand relevancy and massive scale. And this is really where we want to go, as we live and work in this era of digital business, notes Wang, who discussed this theme in his upcoming book Disrupting Digital Business: Create an Authentic Experience in the Peer-to-Peer Economy .
But this redoubtable task does not fall on just one person, he says. While a chief digital officer can lead the charge, there need to be a broader bench of digital CXOs.
"Contrary to popular belief, I don't think a single chief digital officer will be enough," Wang tells CIO New Zealand.
"It's a good start but the goal is to digitally enable all CXOs. For example, the HR head should be hiring for digital artisans - those who get digital DNA. The head of finance should be looking at on demand digital models."
"The head of IT should be looking at agility to support digital," he adds. "The line of business leads should be understanding the possibilities and constraints of technology."
"The bottom line: digitally enabled CXOs are needed."
While the existing patterns of CDO appointments may run by industry, Constellation Research sees three board trends emerging, he says.
The first is that the the chief digital officer role will continue to proliferate.
Constellation expects that half of the Fortune 500 companies will appoint a CDO by 2016, he says. The roles and responsibilities may vary slightly but the emphasis on new business model creation and support will remain a key and common denominator, he says. "A chief digital officer must have P&L responsibility to be effective. Most will but many will not."
The second trend is that digitally enabled CXOs will emerge over time.
While the CDO will spearhead and rally the troops towards digital business transformation, Wang says all leaders inside the organisation must gain a digital orientation. More than technology, this shift involves both business and technology savvy required for CFOs, CEOs, CIOs, CMOs, COOs, chief people officers, and others. Digital infusion is a requirement for the modern leader."
The third trend, he says, is that the digital moniker will disappear before 2020. "As with cyber, social, e-business, etc, these monikers will go away as digital becomes mainstream," says Wang.
"However between now and 2020, boards will see the largest change in requirements for their executive management team. Technology savvy and business acumen will no longer be isolated and separate requirements of future leaders."
The chief digital officer lineage
Lately, he says, there has been a proliferation of appointments to the chief digital officer role.
A question often arises as to what lineage these roles come from, he states. "Is it a CMO going digital or is it a CIO taking a business model digital, or is it a CTO becoming digital? Boards seeking to appoint a chief digital officer remain confused as to who or what role should be elevated. Which skill sets should be valued or emphasised?"
A closer examination by Constellation Research, reveals some patterns by industry, says Wang.
Keep in mind job descriptions do vary greatly by industry which is why in most cases role based research often fails to produce the cohorts that folks hope to achieve.
For chief digital officers, several splits have emerged, says Wang. In over 200 discussions with executive leaders on the CDO role, Wang says four common scenarios came up:
First scenario: The chief marketing officer is selected to become the CDO.: In consumer facing and brand driven enterprises, a tech savvy marketing chief often makes many of the enabling and supporting technology decisions. The focus on creating digital business models and new experiences is often a driver for selection of CMOs. Constellation sees this in consumer package goods, hospitality and gaming, home building, luxury and fashion brands, media, retail, and telecommunications.
Second scenario: The chief technology officer elevates into the CDO role: In many organisations where a chief technology officer has existed and an acceptance that the enterprise must move to a digital business model, the CTO will assume many of the requirements of a CDO. In addition, many organisations creating a CDO role often include the CTO components with a focus on business model transformation. This is often seen in academia, creative agencies, financial services, insurance, media and entertainment, public sector, and professional service organizations.
Third scenario: The chief operating officer takes on the digital business challenge: In the transformation of traditional businesses, COOs can take on the CDO position. Experience in business operations, business transformation, and general management position the COO to design, implement, and execute digital business models. Traditional enterprise facing organisations such as architecture, engineering, and construction; aerospace and defense, discrete manufacturing, industrial supply, oil and gas, and wholesale distribution often show COOs taking the key role.
Fourth scenario: The chief information officer is chosen as a CDO: Organisations seeking a progressive and tech savvy CDO, often choose very innovative CIOs. Commonly known as the Chief Innovation Officer persona of the CIO, these individuals help organisations navigate the world of start-ups and their innovation while making sure innovations meet enterprise class requirements. These organisations have built strong business and IT partnerships, says Wang. Industries that will follow this scenario include financial services, high tech, insurance, media and entertainment, mining and exploration, pharmaceutical, and transportation and warehousing.
But whatever the factors organisations need to consider as they build their digital DNAs, Wang says they should ask these questions: "Who is disrupting your business today, and how might non-traditional competitors disrupt your market?"
The goal, he states, is this: "Disrupt digital businesses before you get disrupted!"