Why do organizations need chief digital officers (CDOs)?

Or, better phrased: do organizations need chief digital officers?

“Not all organizations do,” Martin Gill, vice president and principal analyst for Forrester Research, told CMSWire. “Many have internal leaders capable of owning the digital agenda and driving digital transformation, but for many firms, digital is something new, challenging and difficult to master. One of the ways in which CEOs are signaling their desire to drive digital transformation is by appointing a senior digital role ... the chief digital officer.”

It’s About the How, Not the Who

Forrester’s new report released last week -- “The Chief Digital Officer: Fad or Future?” -- addresses these challenges for organizations regarding creating the role of a CDO. 

Ultimately, Forrester said organizations need digital champions, just not necessarily in the form of a CDO. Some need CDOs as catalysts in the digital explosion era, but others, Forrester says, simply need an existing digitally savvy senior executive to coordinate digital resources across the company.

Forrester’s Gill told CMSWire his organization interviewed more than 20 CDOs in a range of different sectors, as well as leveraged a range of survey data from Forrester's executive panel surveys in building this report.

Asked for one big takeaway from the report, Gill told us, “Whether a CDO leads it or not, your firm needs to build a digital business strategy right now.”

Faith in CDOs

David MathisonOne person who believes in the power of a CDO is David Mathison (at left). As well he should -- he’s the curator for the Chief Digital Officer Summit whose agenda includes all sorts of CDOs such as those who worked for Barack Obama, NBC News and News Corp.

Regarding Forrester’s report, Mathison said he thinks Forrester is “finally coming to terms” with this new position, but “not as aggressively” as Gartner has been to adopt and promote it. He cited headlines from Forrester like "Why You Shouldn't Rush out to Hire a CDO" (Gill, April 2013), and "Don't Hide Behind a CDO" (Carrie Johnson, Gill, September 2013) as just spreading “FUD,” or fear, uncertainty and doubt.

“Forrester should focus on helping their client organizations become successful in this brave new digital world,” says Mathison, the founder of the CDO Club. “In that regard, I think this report is a big improvement over Forrester’s fear-mongering posts of the recent past.”

These are the “glory days for digitally savvy CMOs,” Mathison said, “who can now bypass IT entirely by using the cloud, and AWS, and BYOD. They should be looking at the underlying reasons for the drive to hire digital leaders such as CDOs versus having the CIO or the CMO do the job.”

CDOs Popping Up

Mathison said he sees higher education hiring chief digital officers; i.e., Columbia University, Harvard University and MIT, and they are looking for CDOs right now at NYU's Tisch School of the Arts, UCSB in California and Quinnipiac University in Connecticut.

“The hiring in this area shows no sign of slowing down,” he added.

The CDO position, Mathison added, is increasingly the fast-track to the CEO seat. In 2013 alone, he said, more than seven CDOs became CEO, and more than four CDOs joined public boards.

“Considering there are not many CDOs around, that is a very impressive statistic, and reflects the importance of digital in business, education and our culture,” Mathison said.

New Gartner research cited earlier reported more than 20 percent of worldwide government departments will appoint a chief digital officer as part of their digital strategies. The report -- “Beyond the Government CIO: Chief Data or Digital Officers?” -- said 10 percent of government organizations will appoint a chief data officer in 2014.

Even the home of some of the finest non-digital human creations -- Metropolitan Museum of Art in NYC -- found the need for a chief digital officer.

CDO Duties

What should be primary among a chief digital officer's duties?

CDOs typically have three primary account abilities, according to Forrester’s Gill.

customer experience, Forrester Report: Do We Need Chief Digital Officers?

The first, he said, is operational -- managing and optimizing digital touch points such as e-commerce or mobile. The second is the strategic -- setting and evangelizing digital strategy. The third is transformational -- driving a mind shift in their organizations to embed digital skills, competencies and processes throughout the business.

Gill_2013.jpgTo appoint a CDO, or not to appoint a CDO.

“This is about education and about breaking down the silos between ‘traditional’ business and digital teams,” Gill said (at left).

CDOs in general are tasked with building a digital business, Mathison said, and this is reflected in their backgrounds: general management with profit and loss responsibility. He gave the example of the new, first-ever CDO at McDonalds, Atif Rafiq, was most recently GM of Kindle Direct at Amazon. Before that, he was GM at Yahoo! and founding member of the Corporate Strategy and Business Development groups at AOL.

“Clearly a digital native,” Mathison said.

Four CDO Objectives

Building a digital business can be broken down, according to Mathison, in one of four (or all four) of the following:

  • Increase digital revenues: through new product development, such as a Publisher creating more e-Books and fewer print versions, mobile applications or creating partnerships with aggregators
  • Decrease costs: through digital fulfillment and distribution, for example the music, film or entertainment companies using digital distribution to cut delivery costs
  • Improve customer service: by using online tools and services such as Twitter, virtual customer service reps, etc. companies can have a 24-7 direct relationship with the customer that was almost impossible prior to the introduction of social media
  • Improve ROI on web and mobile: with the combination of the cloud and improved insights and analytics from mobile devices and social media platforms, it's easier than ever for CDOs to improve their ROI for the online initiatives

“Having said that, however, it’s dangerous to generalize primary responsibilities for CDOs, since there is so much variability across sectors,” Mathison said. “For example, the requirements for a CDO in the municipal sector differ from other sectors, as well as within the sector itself. Think of the wildly different responsibilities for a CDO in a city like NY (CDO Rachel Haot), or a state like Rhode Island (CDO Thom Guertin), or a small town like Gilbert, AZ (CDO Dana Berchman).”

Digital Challenges

So what can this Forrester report do for organizations tackling this part of the digital revolution?

“The digital business revolution is here. It's undeniable,” Forrester’s Gill said when asked by CMSWire about the value of the report. “There are early warning signs in some industries. ... Yet in other sectors like financial services or retail, the ripples of digital disruption are just beginning to hit.”

Firms must build a digital business strategy before their industry undergoes the same disruption as we've already seen in the entertainment and media sectors, Gill added.

“Whether you are an incumbent digital leader or a newly appointed CDO,” Gill said, “this document helps outline some of the key challenges you will face and the key building blocks you will need to consider as you build your digital strategy.”