Tuesday, July 7, 2015

Chief Digital Officers: Bridging the Innovation Gap Between the CIO and CMO

The chief digital officer (CDO) is no longer an exotic, quixotic, flash-in-the-pan role. In some of the world's leading brands, the CDO is now the general manager of a large digital business unit with significant revenue targets reporting to the CEO. This is one of the fascinating conclusions from IDC's latest report on the CDO role based on interviews with CDOs from: Caterpillar, CVS Health, The Metropolitan Museum of Art, Meredith Corp., SAP Digital, Travelex, the U.S. Department of Commerce, and Under Armour.
The title of this study should in no way insinuate any lack of innovation on the part of CIOs or CMOs. Both roles are managing digital transformations that are reshaping everything about their organizations. Those efforts can be all consuming, so some brands are establishing the CDO to lead strategic innovation. Free from the operational KPIs of the CMO and infrastructure demands of the CIO, the CDO is expected to invent the digital growth engines of the future.

Information and software-based companies are moving into services and support areas across industries. They are bringing new business models based on data services, sharing economies, and mobility much faster than established companies can. This is a huge threat as these areas are major revenue growth opportunities in industries that may be in low single-digit growth mode. Legacy brands typically don't have the core competencies in software development or data and analytics needed to bring information-based products to market. In addition, cultures at many large enterprises are not used to the extreme cadence of digital business. As a result, leading companies are not only driving internal innovation and developing their own talent, they are investing and acquiring start-ups.

Based on our interviews, we have developed three archetypes for today's CDO:
  • The digital GM: Reports to the CEO and leads the establishment and/or transformation of a significant business.
  • The digital Disrupter: Reports to the EVP or equivalent and leads a dynamic team charged with driving product and service innovation and cultural transformation.
  • The digital Evangelist: Reports a level or two down but is highly visible to the executive level. Leads a small team designed to raise digital IQ throughout the organization.

In practice, the CDO role spans a spectrum of overlapping responsibilities. The digital GM also drives innovation and raises the digital IQ of the entire enterprise. The digital disrupter is also in charge of raising digital and social adoption across the company. The digital evangelist is more of a support role that helps senior leaders drive digital transformation.
Two key questions every company should ask itself during the annual executive planning cycle are:
  1. If we wanted to completely disrupt our industry, what kind of company would we start?
  2. How do we become that company?

The executives running the companies profiled in this study have asked themselves these questions in one form or another. They may not have all the answers yet, but they have dedicated themselves to finding out before they get "Appled," "Ubered," or "Airbnbed." New mantras for the digital era are:
  • The only way to control the pace of change is to set it — that's the primary mission of the CDO
  • Always be disrupting
  • Follow the money: find out where the VC money is going in your industry and watch those companies closely, partner with them, and invest in them or buy them if you can


For more information about this report please contact me: gmurray(at)idc(dot)com.