The chief digital officer has often been described as a change agent, born out of the threat of digital disruption. The position was seen by many as ephemeral, but, according to new research by the International Data Corporation (IDC), these newly minted executives could become a permanent member of the C-suite.
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"A couple of years ago, I would have told you the CDO was more fly-by-night -- that we'd see them pop up for a couple of years and then fade away. But now that we're seeing them run significant business units -- the fact that they're called a 'CDO' may change, but, ultimately, the role will remain the same," said Gerry Murray, researcher and consultant at IDC and author of the recently published report "Chief Digital Officers: Bridging the Innovation Gap Between the CIO and CMO."
In some cases, chief digital officers (CDOs) are building what Murray calls an "insights as a service" business within the organization where they're providing customers with data, analytics and other digital products and services that never existed before. Take Caterpillar Inc. The manufacturer of heavy, industrial machinery "will never stop making big, yellow trucks," Murray said. But by collecting and analyzing, say, GPS data, weather data or sensor data from connected equipment to help customers improve operational efficiencies, Caterpillar's CDO Sanjeev Addala (who Murray interviewed for his report) is doing more than embracing digital -- he's introducing a new and radically different revenue model to the 90-year-old company.
Rather than heavy machinery, which tends to have long and capitally intensive production cycles, the revenue model for a data service like predictive maintenance is the exact opposite -- low cost, high value digital products with short production cycles, Murray said. The challenge for companies is figuring out how to support both models, what Murray described as a "portfolio approach" to innovation, under one roof.
Murray pointed to Caterpillar as a leading exemplar of this bimodal approach. Not only is it keeping an eye on where venture capitalists are investing in the industry and investing in startups, the company also recognizes that there is "a different skill set, culture and cadence to running an information and data software-based value proposition for your customers than heavy equipment," he said. And Caterpillar is investing in those areas as well.
Three types of CDOs
Murray calls CDOs like Addala -- those who are running significant business units, reporting to the CEO and managing a team of 300 employees or more -- "digital GMs," and he believes digital officers at this level could be around for the long haul. But not all CDOs are digital GMs. In his report, Murray described two additional types of digital officers:
- a mobile app to enhance the visitor's experience, which includes a "Met-staches" tour of the great mustaches featured in the Met's collection. The digital disruptor: CDOs who report to an executive vice president or an equivalent, who oversee a team of 70 to 200. A digital disruptor "leads a dynamic team charged with driving product and service innovation and cultural transformation," according to the report. Sree Sreenivasan, CDO at the Metropolitan Museum of Art, is cited as an example of a digital disruptor. His team created
- The digital evangelist: CDOs who report to a vice president or an equivalent, who oversee a team of three to 10 reports, and who are charged with digital media adoption and use. A digital evangelist "leads a small team designed to raise digital IQ throughout the organization," according to the report. Mike Kruger, director of digital engagement at the U.S. Department of Commerce, is an example of a digital evangelist, according to the report. Kruger is focused on changing the culture across 12 bureaus at the DOC, which includes ramping up digital and social media engagement.
The characteristics of a digital GM, digital disruptor and digital evangelist aren't unique to each type of CDO. A digital GM is also charged with raising the organization's digital IQ, for example. But the level of CDO and who that person reports to is indicative of "how urgent and significant the CEO and the board view digital or the digital transformation challenge," Murray said.
CIO vs. CDO role in digital transformation
Introducing a chief digital officer to the mix doesn't preclude the CIO from participating in the organization's digital transformation. Murray's report lists two primary C-suite partners intrinsic to the CDO's success: The CIO and the CMO. When divvying up tasks, the red line between the CIO and CDO is infrastructure versus customer experience.
"[The CIO and CDO] may be working on very similar technology stacks and innovations," Murray said. "Technically, the technology stacks need to interface with applications, and the security protocols need to be in place, and the governance needs to be extended from the internal environment out to the products and services that the CDO is launching."
It's a relationship that's highly collaborative. But does every organization need a chief digital officer? No, Murray said. "It's a heterogeneous world. There are a lot of ways to drive digital innovation and transformation in companies. It just depends on the kind of company it is," he said.
It's not unheard of for CIOs to lead the digital transformation charge, Murray said. But in cases where the CIO is heads-down digitizing his own department -- from a client/server environment to cloud computing and from keeping the lights on to IT as a service model, the CDO is "one alternative to consider," according to the report.
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