Why you Need a Chief Digital Officer

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Your next CEO may be in your midst, says Forrester.
Your next CEO may be in your midst, says Forrester.

Here's the reason you need to immediately search for a chief digital officer for your successful and established organization: You work for a successful and established organization.

According to a new Forrester report called “The Chief Digital Officer: Fad or Future?” entrenched enterprises stand the most to lose if they hesitate to fill this essential—if perhaps transitional—position. Companies serious about improving customers' experiences must provide them with consistent and relevant interactions across all touchpoints, the report maintains, and accomplishing that in a large organization requires a digital champion with the knowledge and power to enforce culture change.

“When you have a global enterprise with several divisions, senior executives are going to do what's right for their divisions not for overall company performance. A lot of the dysfunction in organizations emanates from how people are measured and compensated,” says Forrester analyst Nigel Fenwick, a co-author of the report. “When it comes to setting a digital policy, marketing and social media strategy are low on the list. You need someone capable of understanding marketing strategy with IT. You need someone with political skills.”

It's the reason so many tech startups are able to leapfrog entrenched enterprises, Fenwick says. Startups enter the game not only with a digital strategy in hand, but also without a need to dismantle and reassemble a legacy operation.

In most B2C companies, digital business means selling products online, says Forrester, while in actuality the digitization of business has spread to encompass product design, customer service, and manufacturing. Digitally empowered consumers expect companies and brands to communicate with and service them in a consistent manner across all their devices, and the number of companies currently exploiting this situation with value-added services is few. The Nike Fuel program is the poster child for up-to-date digital tactics, yet the Forrester report points out that well-thought-out and implanted digital strategies often provide customer value that customers may never be conscious of. Rolls Royce and General Electric, for instance, have added digital sensors to their aircraft engines that monitor dynamics in flight and transmit data to ground control stations. The result: more accurate mechanical servicing, safer and more on-time planes, happier customers, and richer engine-makers.

The process of installing a digital don to help effectuate such situations falls to CEOs. “To succeed with a digital strategy, you have to have a CEO with a vision,” Fenwick says. “It's not essential for the CEO to be savvy about digital, but about how the organization runs. It's about maturity and experience.”

Fenwick says that the CDO is primarily a change agent who can deliver the company into the digital age. Whether he rises up internally or is discovered outside the organization, the right person for the job is the one who can do it the fastest. An internal candidate has the advantage of knowing all the networks and secret alleyways of company politics. An outsider can force a fresh perspective on an organization with the CEO's backing.

“One large global company we spoke with hired the person running its U.S. division as its CDO,” Fenwick says. “It's working because he had the leadership chops and the company had a very strong IT group and a very progressive marketing group that have been able to work together.”

Once an organization has implanted an effective digital strategy, it could be time to uproot the CDO. “Most CEOs we spoke with see it as a transitional role. The idea is that the CDO's goal is to sufficiently drive digital thinking across an organization until that role is no longer needed,” Fenwick says. Three to five years is the current CDO life expectancy.

 

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