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On digital transformation, will CIOs get stuck in the shadows?

Organizations must play to their digital strengths if they want to survive digital disruption, advises Forrester. Is there a place for the CIO?

Digital disruption is about to tear down and rebuild every product in every industry. The competitive context for corporate leadership teams has shifted. Competitive advantage no longer comes solely from being bigger and more optimized than the competition, and competition is no longer limited to a set of similar, big, optimized organizations. Competition now features lean, dynamic and adaptable networks of innovators who are disrupting every industry by delivering value-added services to digitally savvy consumers. And, in this new environment, C-level executives must learn how to adapt.

Nigel FenwickNigel Fenwick

In particular, this is a pivotal time for CIOs -- a time to step into the limelight or remain in the shadows. While the role of the CMO is critical in shaping the future of digital business, digital business also requires business technology, and CIOs are ideally positioned to partner with CMOs to lead the digital transformation. The shape of digital leadership will have profound and potentially lasting impact on the CIO and the technology leadership team. Many CIOs have the experience and expertise to lead digital strategy for their business, but to do so they must shift their focus away from information technology toward business technology.

Play to your digital strengths or lack thereof

Firms don't just organically transform; someone has to do some heavy lifting. Exactly who is capable of driving a digital transformation and where they should sit within the organization depends on two critical factors:

Digital disruption is about to tear down and rebuild every product in every industry.
  • The digital competency of key incumbent executives. Some firms are blessed with visionary and digitally savvy leaders. For instance, Burberry's digital transformation has been led by a tight collaboration between its CEO and chief creative officer; at Delta Air Lines, the vice president of marketing and digital commerce is filling that role. In organizations where the current leadership has a level of digital competence, the role of digital leadership is often best fulfilled by an existing executive or a pairing between the CMO and CIO. This approach is least likely to cause further disruption by introducing a new executive role. Where both marketing and IT are digitally savvy, both the CMO and CIO should appoint a senior leader inside their respective teams with responsibility for digital.
  • The digital capabilities of the organization. The relative maturity and sophistication of key digital teams, such as e-commerce or marketing, combined with the firm's IT and BT digital sophistication can help guide both the need for and the focus of a chief digital officer (CDO). The extent of existing digital capabilities within existing functions, along with the industry sector, also helps to define where the CDO is best placed within the organization. Initially placing the senior digital leader inside the organization where your digital capabilities are the strongest will allow your organization to maximize the business impact of digital.

Successful digital leadership demands three core competencies

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Three competencies CIOs need to master digital disruption

The exact responsibilities of a firm's digital leader will depend upon the relative maturity of the marketing and technology management groups' digital capabilities. This is also likely to determine reporting lines -- whether digital leadership sits within marketing, IT, or outside under a C-level CDO. Wherever the role sits, senior digital leaders agree that there are three core components to their roles. In practice, digital leaders dial aspects of their three accountabilities up or down depending on their organizational circumstances; and in each case, these digital leaders must understand the operational realities of the firm as they work to determine the scope and focus of the role. These competencies are:

  • Strategic: Rally support around a digital vision and strategy execution. Digital teams must set a clear strategy in terms of how digital will transform the organization's relationship with its customers and must develop associated roadmaps and plans. This means activities such as selecting core technologies, setting global user experience (UX) standards and defining high-level customer journeys. For instance, Nissan's digital team, reporting to the CDO, is responsible for setting consumer technology strategy and in some cases delivering proof of concept implementations across digital content, mobile, social and other digital touch points.
  • Transformational: Embed digital skills and competencies across the business. A key requirement of embedding digital skills into line-of-business teams is training and education. Nestlé's digital acceleration team is responsible for internal education. Nestlé has built a global center of excellence in Switzerland, which is equipped to bring in executives from Nestlé brands around the world, train and educate them in digital skills and embed them back into their business units. In many cases, such centers of excellence remain as lean global or corporate functions with responsibility for ongoing specialist support of country or brand teams in deeply specialized digital activities such as search engine optimization or UX design.
  • Operational: Optimize digital touch points to drive revenue growth. Some CDOs have no operational accountability and see themselves as purely strategic, though in many cases operational accountability for digital touch points sits with the digital leader. For B2C firms, this often means ownership of the e-commerce P&L. Equally, this can also mean managing suppliers or Software as a Service vendors that provide key shared service digital platforms such as analytics or e-commerce platforms.

Nigel Fenwick, vice president and principal analyst at Forrester Research Inc., serving CIOs.

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