A chief digital officer is charged with helping an enterprise use digital information and modern technologies, such as cloud, mobile and social media, to create business value. For traditional businesses, thriving in the digital arena often requires converting from an analog to a digital business model. This shift, widely referred to as digital transformation, can entail major changes to an enterprise's technology architecture, business processes, products and job roles, and thus can span many years. Strategic leadership and managing change are, therefore, important elements of the chief digital officer role.
Chief digital officer is a relatively new leadership role. The title first appeared on corporate organizational charts around 2010. By then, smartphones and tablets were enabling anytime, anywhere computing. E-commerce giant Amazon and other digitally native retailers were setting new customer expectations for online shopping and creating a market for digital goods, such as video on demand. Companies recognized they needed digital strategies to connect to tech-savvy consumers, enable employees and defend against digital disruption.Content Continues Below
In 2012, consultancy Gartner proclaimed the chief digital officer position would "prove to be the most exciting strategic role in the decade ahead," predicting that, by 2015, about 25% of all companies would have someone in this leadership role. While the early growth of the chief digital officer title shows signs of fading, the responsibilities associated with the position are increasing and evolving as new digital technologies, such as artificial intelligence (AI) and robotics, continue to redefine how companies serve customers and reap business value.
A chief digital officer helps a company set and execute digital strategies that will drive digital revenue, improve customer engagement, optimize operations and create new business value. Responsibilities include the following:
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- Grow brand loyalty on social networks and online communities.
- Determine key influencers and empower them with tools to promote branding and corporate messages.
- Develop new digital revenue streams.
- Keep up with market innovation to maintain a fresh digital strategy.
- Develop fact-based metrics to determine the ROI of digital efforts.
- Work across the enterprise to break down data silos, engender a digital culture and build a digital business technology platform.
Digital technologies such as cloud, mobile, social media, big data and, more recently, the internet of things, augmented and virtual reality, and AI form the backbone of digital strategies. Having a deep technology background is not required of chief digital officers, but they must understand how these digital technologies help drive value, in particular, by improving and enhancing the customer experience. Indeed, the first wave of chief digital officers often came from the marketing, sales and customer service ranks, where the power of social media to shape a company's brand, for example, or the need for an omnichannel customer strategy was typically better understood than in the IT ranks.
As companies have gauged the extent of technology and enterprise-wide change associated with digital transformation, they increasingly have turned to chief digital officers with strategy and technology backgrounds. (See chief digital officer vs. chief information officer.)
Who needs a chief digital officer?
Companies in the market for a chief digital officer should start by taking stock of their digital risks and opportunities and the ability of current leadership to develop and launch an effective digital business model. Researchers from MIT Sloan have suggested companies ask themselves the following questions:
- What is the level of digital threat facing your organization? (Who are your new online competitors? How do you compare with the digital leader in your industry?)
- If your current business model is under threat, what is the right digital model for your company? (Do you focus on operational efficiency or customer experience?)
- What is your current competitive advantage in the digital era? (Loyal customers? Large stores of data collected over the years?)
- How can the digital era help your company? (Does mobile give you a new way to connect to customers? Can IoT be used to improve customer service? How can AI optimize product recommendations?)
- What muscles do you need to develop to deliver on digital dexterity? (Do you need to partner with other companies or industries? Build your analytics capability?)
- Do you have the leadership to pull this off?
Chief digital officer vs. chief information officer, changing expectations
Traditionally, chief information officers (CIO) have focused on running an organization's internal IT infrastructure and services. The chief digital officer role was created to be more outward-focused, looking at the people, processes and technology needed to create digital advantage and improve the customer experience. But there has been a blurring of the role of a CIO versus a CDO over time.
Mercer Chief Digital Officer Gail Evans on using AI for business benefit.
In practice, companies are finding that converting from an analog to a digital business model means dealing with legacy systems and applications that must either be integrated, modernized or jettisoned. Thus, technology expertise is increasingly seen as important to developing an effective digital strategy. This has resulted in a shift of job requirements for chief digital officer positions.
According to a 2018 study by PwC consulting unit strategy+business, chief digital officers with a marketing background had dropped to 18% in 2018, down from 39% in 2016; by contrast, 41% of chief digital officers had a technology background, up from 32% in 2016. Moreover, the study found that a third of individuals appointed to chief digital officer positions have been replaced because of the evolving demands of the job.
In addition, companies are realizing that building a digital advantage is not a one-person job, but an enterprise-wide effort, requiring expertise and input from executives across the C-suite, managerial and employee ranks.
According to PayScale, U.S. salaries for chief digital officers range from $84,000 to $493,000, with an average salary of $203,473. ZipRecruiter posts average pay as of September 2019 nationwide at $235, 026.