Why you shouldn’t rush out and hire a CDO

Chief Digital Officer (or CDO) is the latest in a long line of snazzy C-level titles to emerge over the last few years. At Forrester we’ve been watching this trend for a while now and have made a few comments, but I think it’s time to put a firm stake in the ground.

 
Don’t hire a Chief Digital Officer!
 
There. I said it.
 
Now, why might I say this when a number of high profile firms are in fact hiring CDOs? Well, to put things in perspective I want to look at a tale of three brands, all of which I’ve spoken about in the past:
        
  • Amazon…born digital. You could say “dot com” firms have an unfair advantage, as digital is in their DNA. Firms like Amazon don’t have a CMO responsible for traditional media and a separate interactive marketing team running search and social. They don’t have an assortment and merchandizing team for the web and a separate one for wholesale or stores. They don’t think in terms of channels – they think holistically. This is true of any internet first firm (Asos, Net-a-Porter, Pixmania, Zalando and my old employer the now defunct Egg to name a few). They are born digital. So why would they need a chief digital officer?
  • Burberry…achieved digital mastery. A benchmark of digital transformation, Burberry’s bold metamorphosis from outfitter of the ASBO generation to heritage British luxury brand is unprecedented. Burberry has woven digital experiences throughout its brand – in its stores, its catwalk shows, its celebrity associations and everything in between. It now boasts what I’d hold up as a best in class luxury eCommerce site. It hasn’t done any of this by accident, but neither did CEO Angela Ahrendts recruit a CDO to lead this charge. Burberry’s recipe was a digitally savvy CEO who could clearly articulate her vision that “every customer will have total access to the Burberry brand and culture, regardless of where, when and how they access the company.”
  • Blockbuster…had digital thrust upon them. In a world going digital, Blockbuster clung to an unwieldy and expensive distribution model and failed to look for an escape plan. iTunes, Love Film, Netflix, Spotify and a host of other cable-delivered, on-demand services eroded Blockbusters’ value proposition, leaving it with a huge cost base of people, rent and inventory which was less accessible to its consumers that the streamed content from its digital rivals. Arguably Blockbuster made two mistakes. It failed to recognize the fact that the fulfillment model for its content was changing, but it also failed to embrace digital as a means of engaging its customers. Would a CDO have been able to change this? Possibly, and given that the trend for hiring CDOs has largely originated in the media industry, out of all three brands, Blockbuster would probably have benefited the most from such a person.
 
If you boil all of this back to the core, underlying issue, it’s that firms that weren’t born digital need to get digital pretty damn quick.
 
So this raises a key question – what competencies are needed to drive this transformation? To drive the scale and level of change we are talking about here, I believe that two key competencies are required:
  • The ability to develop and articulate a digital vision.
  • The ability to embed large scale cultural change into an organization.
Appointing a C-level individual to be responsible for driving a digital agenda could be disastrous for many traditional firms. It risks degenerating into a political minefield as other executives say “hey, digital is her job, nothing to do with me”. Rushing out and hiring a digital upstart could set many firms back, rather than propel them forward. Not many people are both digitally savvy enough to develop a bold vision for the future and really know how to drive a transformation on this scale. In many cases such a fundamental shift for a firm may be better led by the CEO with the support of the entire C-suite.
 
I am in no doubt that firms need to transform. But rather than pin the hopes on a single Che Guevara style revolutionary, CEOs in particular must recognize that this is an incredibly complex problem.
 
At Forrester we are at the inception of a major research project looking into exactly how firms can tackle this challenge. Our eBusiness forum in Chicago will focus on exactly this subject, and Nigel Fenwick is also looking at the impact of becoming digital on Business Technology teams. Stay tuned to our blogs, our research and look for our forthcoming events to see how this research evolves over the coming months.

Comments

Long overdue...

Thanks for putting this particular stake in the ground, Martin. Great article.

I've been thinking for some time that the usual contributors to this 'conversation' are still describing digital almost as if it's a fad rather than a critical, non-optional, agenda.

Digital is the core route to market for most businesses, so why wouldn't it be embraced by the entire C-Suite, and driven by the CEO? I agree that just another single voice - CDO - at the table is not the answer... like you said, it then becomes political. Not unique, of course. Replace 'digital' with any other transformation agenda.

Thanks for sharing.

CDO no silver bullet but can add value

@Martin, thanks for an empassioned debunk of the Chief-Digital-Officer-as-latest-enterprise-savior phenomenon. I agree with the "Shouldn't rush out" part of your premise but disagree that some firms can't benefit from CDOs. I'll argue that some firms can but agree with you that the CDO isn't a silver bullet for achieving "transformation."

Some of the broad market forces confronting legacy firms/brands/organizations can be addressed by CDOs. Firms are in crisis because the competitive advantage of organization itself, which was the ability to organize and perform work very efficiently, is greatly weakening. Social technologies and digital data now enable *any* group of people to organize and work together very efficiently. No, I'm not saying that ad-hoc groups are the equivalent to finely oiled organizations, only that the relative value of organization is falling.

In addition, the expectations of "customers" are changing rapidly, and most "enterprise" leaders have little experience with their customers' digital experiences and expectations.

I think that main rationale for the CDO-as-transformer is that legacy processes require full-time executive management, CMOs, CIOs, etc.—and transformation is not a part-time job. Meanwhile, customers aren't waiting for legacy firms/brands to become relevant. The problem for legacy firms is, digital communication is an accelerator: every quarter they're not in the game, they're losing ground and approaching the point of no return because other firms/brands, once they are in the accelerator-digital-loop, build the ability to understand, relate and sell to customers at a new level.

This is a complex situation; maybe it's akin to retrofitting Spanish galleons under sail—to be smaller and quicker. Many things determine whether a CDO would add value. Here are a few, off the top:

-Current executive team: is their strategic knowledge and hands-on experience digital enough, as defined by their vision and knowledge of how to provide value to "connected customers"?
-Current adoption of analytics and big data: as you reference, firms like Amazon.com are best in class ecommerce operators and have deep/broad experience with turning data into customer experience. They are in the minority, though. Most data that firms collect has data architecture that's very difficult to use.
-How product-focused are executives? I've argued that [for one, http://bit.ly/sochanexecsum] customers have never liked products as much as producers: customers buy holes, not drills, they want outcomes of having used products. And digital social information makes it possible to focus past the product, to outcomes. Most products and services firms, though, don't know how to relate to customers and interact around outcomes. Their relevance will drop like a stone. The CDO can use analytics, mobile and social competencies to focus this realignment to customer outcomes and "experience."

I agree with you that just hiring a "digital upstart" will serve very few firms well. Failing to hire one could be worse for firms that haven't other C-level leaders to lead transformation, and the CEO must be onboard in any case. Successful CDOs will be diplomats who will work closely with CMOs, CIOs and COOs to transform the enterprise into a much more responsive entity that's able to deliver personalized interactions and experiences to individuals. Those that fail—either with CDOs or without—will just disappear.

Thank you for this thoughtful

Thank you for this thoughtful comment Christopher. Some firms absolutely need a CDO if for no other reason than to make a strong statement to the organization and customers that the company is committed to digital transformation. Product companies, as you noted, in particular that can't rely on manufacturing or distribution as points of differentiation any longer are at the highest risk and could benefit most from a CDO. A panacea though it is not. I think I may have typed the following sentence a thousand times when it comes to organizational structure... there truly is no such thing as one size fits all. I love the dialogue and debate around this topic.

Amazed that execs don't let go of panacea idea

Carrie, you're welcome. I went into management consulting in the mid 80s, and I can't remember how many times I've read and written to beware of the "panacea fantasy." Anyone with experience who thinks about solving (relatively) complex problems knows there's work and risk involved, no "cut and paste" here. I think, though, that "common sense" among humans, primates and other animals holds that "I observe someone succeeding in a way I want to succeed, so I'll just do as s/he does"; it probably persists because it's in our DNA. And this can work for simple problems we humans have had to solve up to now. Duncan Watts brilliantly outlined the distinction between simple & complex problem solving—and the role of common sense—in Everything Is Obvious. Here's my review [http://tinyurl.com/EvthingObvious]. Much of the value of strategy consulting begins by identifying assumptions held by the executive team; I have found that creating a "clean" use case, free of assumptions, is key to mitigating risk and maximizing benefits.

What to do instead

Hire a digital CEO rather than Chief Digital Officer (or CDO) and nobody would dare to say “hey, digital is her job, nothing to do with me”.

The Argument FOR a Digital Change Agent

While I did not hold the title of "Chief Digital Officer" at ACNielsen, as VP of Global Marketing for our Internet Services, I effectively operated as one. This was in the middle 1990's, right as the Internet was becoming a commercially viable medium. We enjoyed a disproportionate amount of success at a time when others in our industry were still contemplating what to make of this thing called the Internet. Here are some of my observations:

Most companies have achieved their success in a decidedly non-digital manner. The executives that have risen to the top have built strong competencies that have served the company well. It is not realistic to just decree "get digital" and expect everyone to morph their strategies and processes accordingly. There is a need to first craft a vision for how new technologies can take the company to the next level. Then there is a need to instantiate that vision into a set of strategies. Then, goals and bonuses need to be aligned to "put your money where your mouth is".

I don't think it is realistic to hire a CEO that is both excellent in the companies core domain (be it retail or banking or whatever) AND also be their digital messiah. Instead, I would advocate the hiring of a digital expert to act as change agent within the organization. This person should be smart & collaborative. Humble, yet doesn't take "no" for an answer. This person can craft the strategy (in concert with business unit & department heads). Then it is the responsibility for the CEO to step up and get organizational commitment to that change. Strategies need to be ratified. Bonuses need to be tied to successful completion of milestones and realization of key metrics. The so-called Chief Digital Officer then becomes an indispensable resource to the other execs in helping them achieve their goals.

So, in my opinion, old school companies CAN benefit from an empowered digital change agent so long as there is commitment to the agreed upon changes from his/her peers and the CEO. Commitment means it becomes part of the company's plans and bonus structure.

I welcome feedback!
Daniel
www.cmo-togo.com