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R.I.P. CDO? Chief digital officer role’s future looks less bright
Despite the business imperatives of digital transformation, chief digital officer hiring has slowed. As the line between business and technology strategy blurs, so do the long-term prospects for the CDO role
In 2012, Gartner predicted that the chief digital officer (CDO) would be the most exciting executive role in the decade ahead. Russell Reynolds described the CDO as driving change across the organization with great potential as a successor to the CEO role in the digital transformation era. Indeed, the CDO role has become more prevalent in the years since, with CDOs working at companies including United Technologies, Michelin, NCR, 7-Eleven, and Chubb.
On balance, however, the CDO role has not taken hold everywhere. New CDO hiring has slowed, according to a study conducted by PwC’s Strategy& consulting group, with 21 percent of companies in the study having a CDO (up only slightly from 19 percent in 2016). Gartner puts the number at 15 percent. As the line between digital strategy and business strategy has blurred, so too have the long-term prospects for the CDO title.
[ Read also: Digital transformation strategy: 7 key pieces. ]
“CEOs originally created CDO role because they felt their CIOs didn’t have enough business knowledge to drive digital transformation and their business unit leaders didn’t have enough technical skills to know what was possible,” explains Tony Saldanha, former Procter & Gamble IT executive and author of Why Digital Transformations Fail. “However, reality has shown that adding this extra layer brings its own problems.”
Some boards and CEOs have determined that enterprise transformation needs to be owned and led by business leaders, says Saldanha. Others are changing their terminology. “We’ve seen it evolve in some cases toward a chief transformation officer,” says John Barrett, Boston-based partner with ON Partners. “This role is more tangible than the older definition of a CDO. Today’s CDO is increasingly expected to think about how to fundamentally change the business in ways that directly lead to improvements in profitability.”
Indeed, a flurry of companies appointed chief transformation officers in late 2018 and early 2019, as noted by Michael Wade, professor of Innovation and Strategy at business school IMD. The mandate for this role is change and growth. (For more on CTOs, read also: Meet the Chief Transformation Officer: 8 key tasks for this new role.)
The short – and less-than-satisfying – answer to whether companies need a CDO anymore? It depends.
The pro chief digital officer camp
David Mathison, who created the CDO Club in 2011, says the demise of the role has been predicted from the start. “If we do not need them,” he asks, “why are companies still hiring them?” His monthly CDO Jobs Update monitors the market. The CDO Club partnered with Bain Capital to produce a 2018 report outlining the 101 CDOs who have become CEOs, including Harper Collins UK CEO Charlie Redmayne and Wunderman CEO Mark Read.
“Overall, the critical importance of a digital leader who has experience dragging analog companies into the digital age continues to grow in importance,” Mathison says. “In the beginning, the title dominated in media, entertainment, and advertising, yet certain sectors that were slow to be disrupted (oil and gas, energy, insurance, medical, pharmaceuticals) are only just now hiring CDOs.”
Automation and power technologies manufacturer ABB hired IoT pioneer Guido Jouret as CDO in 2016. “[The CDO role] has continued to evolve rapidly beyond acting simply as a technology enabler. I like to refer to chief digital officers as a company’s chief storyteller,” Jouret says. “We help our organizations align on a cohesive vision for the future and then leverage the power of digital and human capabilities to provide solutions and advancements to make that vision a reality.”
Jouret’s role has both enterprise and customer-facing facets. “My internal role is to accelerate the digital transformation of the company. This includes changing our products, services, and the way we do business,” he says. “Externally, I work with clients to guide them in visualizing their ideal future and then help them leverage the power of digital to bring those visions to life. That’s why as long as ABB is in the business of helping other companies digitally transform, the CDO position will be critical.”
The long view for the CDO role
“Digitalization will only continue to grow as an imperative aspect of business development, and many of today’s largest industries still have a long way to go, creating a greater need for chief digital officers,” Jouret says. “We’re witnessing an incredible wave of emerging technologies that are evolving at a quick pace: artificial intelligence, augmented reality, 5G, blockchain, drones, just to name a few.”
But what happens if – or when – digitalization becomes less of a large transformation and more of a day-to-day way of operating?
Saldanha says that the role is destined to be temporary. “The fact is that digital strategy has got to be the same as the business strategy,” he says. “I see the role decline both in the number of CDOs and their power in the next couple of years.”
In companies or industry sectors that have been faster to adopt digital technologies, the CDO role often disappears or becomes integrated into a company’s core leadership and business model, says Barrett.
The CDO Club’s Matthison says the question of whether the CDO is ultimately a stop-gap role or a long-term strategic position will depend on the particulars of the situation, but he argues that the best will go on to even higher-level executive positions.
ABB’s Jouret notes that once all parts of the company’s products, services, and operations are digitally optimized, his role may no longer be necessary. But, he adds, the reality is that new digital technologies are emerging all the time, which creates new opportunities.
[ What's next for the CIO role? Read also: CIO role: Everything you need to know about today’s Chief Information Officers. ]