The Rise of the Chief Digital Officer

Stephen DeAngelis

November 20, 2013

Two years ago, Tim Bourgeois wrote, “With spending on digital-related initiatives and activities accounting for 10% or more of all expenses at many companies — and forecast to increase at double-digit rates for the foreseeable future across most industry segments — it’s time for CEOs and boards to give serious consideration to establishing a ‘Chief Digital Officer’ (‘CDO’) office or equivalent.” [“The Case for Establishing a ‘Digital Strategy’ C-Level Office,” Chief Executive.net, 12 October 2011] He adds, “The stakes are too high, and the issues too complicated to leave this domain left managed by an informal, undefined, and mostly powerless assemblage of mid-level managers across an enterprise.” McKinsey & Company analysts Brad Brown, David Court, and Paul Willmott agree with Bourgeois. They write:

“Over the past 30 years, most companies have added new C-level roles in response to changing business environments. The chief financial officer (CFO) role, which didn’t exist at a majority of companies in the mid-1980s, rose to prominence as pressures for value management and more transparent investor relations gained traction. Adding a chief marketing officer (CMO) became crucial as new channels and media raised the complexity of brand building and customer engagement. Chief strategy officers (CSOs) joined top teams to help companies address increasingly complex and fast-changing global markets. Today, the power of data and analytics is profoundly altering the business landscape, and once again companies may need more top-management muscle.” [“Mobilizing your C-suite for big-data analytics,” Insights & Publications, November 2013]

Some people may wonder why the Chief Information Officer (CIO), someone who is already familiar with a company’s IT systems, can’t assume the CDO role. David Meer, a Booz & Company partner, helps explain. He writes, “‘Big data’ — the large data sets that can be managed and analyzed only by increasingly powerful and sophisticated tools — is an expansive and rapidly evolving field. … Why is this important? Because the amount of data generated by digitization will always exceed our ability to store, process, and make sense of it. … The real magic happens when these disparate data sources are combined, harmonized, and used as the basis for powerful experiments and predictive models.” [“What Is ‘Big Data,’ Anyway?strategy + business, 25 June 2013] In other words, Big Data is about analysis not hardware. Add to that the fact that even though most companies have a CIO or equivalent, they are struggling to use Big Data in the myriad of ways it can be of value.

 

Brown, Court, and Willmott argue that, in some cases, CIOs, CMOs, or similar corporate executives might be able to take on this role; but, whoever assumes those duties needs to be on C-level. They write:

“Capturing data-related opportunities to improve revenues, boost productivity, and, sometimes, create entirely new businesses puts new demands on companies — requiring not only new talent and investments in information infrastructure but also significant changes in mind-sets and frontline training. It’s becoming apparent that without extra executive horsepower, stoking the momentum of data analytics will be difficult for many organizations. Because the new horizons available to companies typically span a wide range of functions, including marketing, risk, and operations, the C-suite can evolve in a variety of ways. In some cases, the solution will be to enhance the mandate of the chief information, marketing, strategy, or risk officer. Other companies may need new roles, such as a chief data officer, chief technical officer, or chief analytics officer, to head up centers of analytics excellence.”

Personally, I believe that a Chief Digital Officer is a good idea because such a position is more likely to break down corporate silos and use Big Data analytics to support all corporate functions, not just marketing, or operations, or risk management. Bill Goodwin, for example, asserts, “Companies are not taking full advantage of data analytics to improve the performance of their workforce, according to a report by Bersin By Deloitte. Research by Bersin by Deloitte shows that 86% of businesses have yet to progress beyond using their HR data to generate basic reports.” [“Companies are not taking advantage of data analytics, research says,” ComputerWeekly, 31 October 2013] A CDO would be tasked to see how Big Data could be used across the company. Almost all corporate executives agree that corporate alignment is important. Yet many seem to need convincing that a CDO could help them achieve such alignment. Brown, Court, and Willmott believe that convincing C-level officers is the key to making Big Data analytics part of a company’s DNA. They write:

“Senior teams embarking on this journey need both to acquire a knowledge of data analytics so they can understand what’s rapidly becoming feasible and to embrace the idea that data should be core to their business. Only when that top-level perspective is in place can durable behavioral changes radiate through the organization.”

Fortunately, there has been some movement in this direction. “There aren’t a lot of chief digital officers around,” reports Michael Fitzgerald, “but the position has already become something of a springboard to a chief executive or president’s title.” [“CDOs Are Reaching New Heights — and Quickly,” MIT Sloan Management Review, 1 November 2013] They continue:

“There are at least seven recent moves by a chief digital officer (CDO) into top management slots. Mostly, people shift from one company to the next, a la Michael Bloom (@Michael_Bloom), who was CDO at Wenner Media and is now the CEO at Guardian News and Media, NA, or David Cautin, the former CDO at NYSE Euronext, now CEO at kgb, a directory service company. People also move up the ladder in their own company, like Paul Gunning, who was a chief digital officer at Tribal DDB and global CDO for DDB and is now the CEO of DDB Chicago. Given that there were only 75 CDOs in 2011, having several of them move into top management positions so quickly might seem surprising. It might also reflect title inflation: would DDB Chicago have had its own CEO a decade ago? But David Mathison, who is tracking the rise of the chief digital officer through his firm, says it reflects the digital reality of business today, and the needs businesses have for blending digital and business savvy.”

I agree with Mathison that the rise of the CDO reflects the fact that a CDO, because he or she breaks down silos and helps with corporate alignment, quickly sees how Big Data analytics can make a business better. Unfortunately, too few CEOs recognize the importance and value of Big Data analytics. I can tell you from firsthand experience that vendors offering Big Data solutions are too often shuffled off to see CIOs rather than CEOs; because, too many CEOs still don’t understand the value of Big Data analytics. Where CDOs do exist, the reception is much different and the conversations are much more productive. Fitzgerald reports that inroads are being made, but that most CDOs work for companies providing content. He writes:

“While some of the businesses leading the way in creating CDOs aren’t what you might expect — Starbucks was an early adopter — most CDOs work at companies connected closely to content. Mathison says 40% of CDOs are in advertising, another 15% are in publishing and the same at media companies. Mathison says this is probably being driven by the extent of digital disruption affecting content-related businesses. The biggest sector for other sorts of companies are non-profits, as well as government organizations. Despite this concentration in content, Mathison says there are CDOs in every industrial sector. The industries moving slowest to adopt the title are insurance, banking and pharmaceutical companies. Most American CDOs have profit-and-loss responsibilities and significant business experience, but in Europe many CDOs are being hired who are in their 20s. Mathison speculates that European companies may be seeking people with a deep understanding of social media.”

Bourgeois writes that it is understandable why so few Big Data specialists have made it into the “inner circle” of corporations. Other, more established, disciplines have over the years carved clear paths to the top. “Because of its newness and amorphous or non-existent definition,” Bourgeois correctly observes that no such path exists for analytic professionals. “But,” he concludes, “someone needs to be given the proverbial ‘seat-at-the-table’ in order to make things happen.” He adds:

“The harsh reality, however, is that digital doesn’t fit neatly in any existing functional area, and – from an organizational management perspective – requires its own unique category. Because most successful digital programs impact multiple functional areas, and broader digital strategies – without question – cut a swatch across the enterprise. And if only for this reason alone, it’s time to make the move and create a new senior office of responsibility to set strategy and oversee successful digital operations, before it’s too late.”

I agree.