It’s getting crowded in the CxO club. With Chief Marketing Officers rubbing shoulders with Chief Risk Officers and Chief Innovation Officers, the latter even muscling in on the CIO’s acronym. One firm has even christened their Chief Innovation Officer the ‘Chino’ to distinguish it from the CIO. The arrival of the latest club-member – the Chief Digital Officer – has excited a lot of comment, including Robert Berkman’s recent MIT Sloan Management Review Blog on “The Emergence of Chief Digital Officers”.
There is no doubt that we need a new way to lead and manage firm-wide digital transformation. Digital is different. Business cycles are now faster and more integrated, there are greater risks due to brand exposure in social media and there is an increased demand for cross-silo capabilities. As a Pfizer senior executive recently put it: “We have many different brands in many markets, so when it comes to digital opportunities, we can have one thousand flowers blooming – and that’s not really scalable to any of our stakeholders”. Many companies have adopted this “let a thousand flowers bloom” type strategy. And, they have indeed ended up with just that – a thousand flowers.
So, is the CDO the answer to governing firm-wide digital transformation in this complex, fast-paced environment? Well, he or she might be of part of the answer. But, there’s a wider issue of digital governance at play. How you chose to govern your digital transformation does not matter, the impact does. And they are several ways to get there.
A digital governance committee is the simplest mechanism to put in place. Some companies have also established innovation committees to stay ahead of fast-moving digital technologies and business practices. According to an insurance executive, “We cannot be slow to think about these technologies because our field force adopts them quickly. We have regulatory concerns that we have to deal with, we have got training and education challenges. We need people with different perspectives talking together about these emerging technologies.”But light coordination does not guarantee seamless execution.
A shared digital unit is another governance model. Resources with specific skills are pooled together in a digital unit to develop digital services company-wide. These units accelerate digital deployment while reducing redundant initiatives in the local units. A senior executive in a global insurance group explained: “It would not make sense for the different entities of the group to develop all the digital stuff themselves. It costs time and money, and requires coordination. And by doing it themselves, they would not benefit from the experience gained across the company.” But shared digital units require, at a minimum, a well functioning relationship between marketing and IT.
The Chief Digital Officer is a welcome addition to the governance “toolkit”. The power attached to the role, as well as the exact remit are key for success. In particular, the delineation with the CIO’s territory is essential to avoid conflict. Some firms have made it work. Starbucks, for example, seems to have managed to find harmony and complementarity between its CDO and its CIO to great effect. However, CDO should be part of the firm’s wider approach to digital transformation governance, not the sole answer. Top down leadership to ensure cooperation across functions is still a key determinant of success. There is also a question about the longevity of the role – once digital becomes “business as usual”, will the role remain useful?
You need to find a governance model that suits your company’s culture (e.g. centralized vs. decentralized). The right model is also dependent on your firm’s digital maturity and it will no doubt evolve as you transition to a digital business.