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We've all heard leaders say, "We are not in the digital business!" They're wrong. Almost all businesses are digital. Thanks to COVID-19, we've skipped ahead five years in consumers' and businesses' digital adoption, and the uptick is here to stay.
Today's digital solutions encompass everything from retailers simply promoting safety precautions, to letting consumers know "we are open," to uploading more complex inventory and product catalogs online, to digitizing curbside pickup and delivery, to enabling end-to-end e-commerce. Implementing these should have been a wake-up call to executive leadership that digital is not just a tool, and that their business needs to be digital at its core. But that hasn't happened yet.
There is pervasive thinking among companies with strong sales cultures that to ensure revenue remains high, and profits are protected, customers need to be upsold by sales associates; products need to be touched. With this mentality, of course, digital is simply a business enabler -- a channel to reach some customers, websites to display products, mobile apps to conduct transactions or tablets to arm the sales force.
Executives and consultants talk about digital transformation a lot, but rarely is digitizing the enterprise a top-down priority at most brick-and-mortar companies. It is largely an exercise to reorganize digital development and technology around agile pods. This does provide some benefits around speed, cost and quality, but it often fails to capture the full impact that ground-up e-commerce thinking would bring.
A real digital transformation would address some important questions: How is the digital leadership role defined? How is the organization set up for e-commerce? How is capital budget allocated? Most importantly, how "digital" are all the functions within the business -- marketing, product, operations, sales, HR, finance?
The importance of the chief digital officer role
The chief digital officer (CDO) role is a manifestation of how important digital is to a company. In 2012, Gartner vice president David Willis said, "The chief digital officer will prove to be the most exciting strategic role in the decade ahead." Despite the availability of great talent from the technology sector and digital agencies, not every company has adopted the CDO role. The companies that did have largely done a poor job of leveraging this leader as a strategic asset.
There are two key flaws in how the role is currently defined:
1. The chief digital officer is not on equal footing with other business leaders. For the last decade, the CDO has largely languished around the fringes of the business in a supporting role. Old guard business leaders view them as website builders because the CDO has struggled to effectively penetrate product, marketing, sales and operations. Over half of their time is spent influencing, bartering and walking a fine line between pushing for real change and maintaining the desired status quo.
Every digital win requires the CDO to overcome business naysayers: "Our customers will never buy that product online," "don't touch the price," "real-time inventory is too complex," "don't cross-sell the other BU's product, that customer is ours," etc.
For businesses where e-commerce is budding, and sales typically are via retail outlets or sales associates, the CDO -- forever the outsider and change agent -- has limited opportunities to attack core issues or effectively run a digital business.
2. The CDO has limited organizational breadth.The CDO has not had it easy carving out the pieces necessary for a digital business. Competencies such as social media brand building, performance marketing, offer management, call center support, mobile development and personalization, often remain with marketing, operations and IT. Digital initiatives to reach new customer segments on Facebook, test new ad copy, measure the effectiveness of bundled offers online, improve mobile responsiveness, pilot digital assistants, all require influencing or borrowing resources and budget from other leaders.
With limited decision-making authority over digital marketing, technology and operations that are core to any digital business, there is ample opportunity for conflicts to arise over time. Chief executives will sometimes have the CDO report to the CMO or CIO to reduce friction instead of making the fundamental competency ownership changes required to provide gravitas to the digital business leadership role.
CEOs and boards that understand that their business is digital will hire the CDO to sit at the executive table, carve out a digital P&L, and remove obstacles that would sub-optimize their impact.
3 ideas that C-suites should consider
Here are three thought starters that chief executives and board members should consider to make digital their business vs. making their business digital:
1. The CDO owns the digital business unit and its P&L. Digital is funded and measured just as any other business unit and is end-to-end. Marketing competencies such as digital brand building, performance marketing via digital advertising, experience design and digital analytics are part of the digital business unit. Business product, financial and process experts are digital product owners and key technology roles are carved out of IT, such as Scrum Masters, digital architects, full-stack developers and DevOps technicians.
2. Every executive team member is responsible for enabling digital transformation. No longer does the CDO bear the sole accountability to enable change to digitize the enterprise. Business and product leaders must commit to adopting Agile principles and eliminate unnecessary back-end process and paperwork. Sales leaders should collaborate with the CDO to digitize in-store experiences in conjunction with online customer experiences, including in-store tablets, digital displays and connected devices. Technology leadership should commit to automation and make source data cleansing and availability a priority.
3. Foundational technology allows marketing, digital and technology to run at different speeds, which reduces friction. An enterprise data lake acts as a clutch plate between marketing analytics teams. It exposes models for customer segmentation and Customer 360, which digital teams can leverage for targeting and personalization, and enrich with online behavior data. The microservices platform acts as a clutch plate with IT, exposing coarse system-level APIs for digital to transform into the finer grained APIs needed for mobile experiences.
Companies need to adjust the chief digital officer role now
In this new world, where digital experience is just as important as item price, selection and availability, chief executives in every business big or small and across all sectors need to think about digital very differently than they did in the past.
About the author
Anand Rao is the senior vice president of marketing and e-commerce for AutoNation. Throughout his career as a marketer and e-business executive, Rao has helped companies create new or more powerful versions of their brands in record time. As a customer-first marketer and technologist, he has been an advisor to consumer brands, B2B companies and private equity partners, and has proven invaluable to senior executives intent on both sharpening marketing and go-to-market strategies and successfully executing technology plays.