CXO

How to decide if your company needs a chief digital officer

Popularized by many large companies, the chief digital officer role is now being considered by smaller entities. Here are a couple questions to ask before making a decision.

It seems that every couple of years a new executive role appears, and more often than not, these new roles are technology-related. In the past, all things technology generally fell under the domain of a CIO (chief information officer). As the technology began to separate from the organization required to manage it, the CTO (chief technology officer) role became prevalent, and more recently additional roles like the CISO (chief information security officer) have been created, crowding out the C-suite in many organizations. Digital transformation is the latest technology trend, and many companies are asking whether they need a dedicated role to manage their digital efforts. Before hanging a CDO sign on the nearest vacant office and calling your favorite headhunter, consider why a CDO might help or hinder your digital efforts.

What role do you want a CDO to play?

One of the greatest challenges to determining whether or not you need a CDO, and ultimately whether or not that person will be successful, is defining the role you want them to play in the organization. The overused term "digital" encompasses a wide-ranging basket of domain knowledge and expertise at most organizations, but is perhaps most easily understood as fundamentally changing an organization with technology (and technology-based methods) as an enabler. For example, your digital efforts might involve creating a new technology-based product that's brought to market using Agile techniques.

In the best case, your organization will be ready to embrace new ways of thinking and working, and find a leader who can lead the charge. In the worst case, you'll hire another IT manager with no real power or interest in creating change, who will do little more than engage in turf battles with your existing IT leadership, so it's critical that you ask hard questions about what this role should accomplish, and whether your company is ready to embrace broader change.

SEE: IT leader's guide to achieving digital transformation (Tech Pro Research)

Who will the CDO report to?

The next major question organizations are asking is where the CDO sits within the organization, and whether they should report to the CIO or potentially to the CEO. Much like the long-running debate about where CIOs should report, the basic question is similar: Is the role meant to drive organizational transformation, and thus require a direct line to the CEO, or is it meant as more of an internal innovation engine where the CIO, COO, or other relationship makes more sense?

SEE: Tips for building and advancing your leadership career (free PDF) (TechRepublic)

The jury is still out

In most of the organizations I work with, which are generally larger companies, digital presents a significant challenge since it's a story that's still being written. For many, GE has served as a model since it's an industrial company with a long history that's made a significant bet on digital, to the point that they've essentially created a software company alongside their traditional industrial businesses. Most of GE's businesses now have a digital component run by a CDO, and in many cases the IT function and CIO report into the CDO, making the latter the key driver of technology decisions within the business unit.

However, Jeff Immelt, the driving force behind GE's transition to a digital company recently retired as CEO, a move that pundits suggest indicates the company's transition to digital may not be going as well as planned, and in some cases calling into question the need for a CDO, and the broader emphasis on digital in general.

Whatever the title, it's clear that technology has gone from a support function to a key enabler of business transformation, whether that manifests in dramatically optimizing your current business, or allowing your company to enter new markets or create entirely new business models. Whether riding this wave takes a single technology executive, or a small army of C-level technologists, each with a slightly different focus, IT leaders should carefully consider whether they have the strategic chops, relationships, and ability to transform their business regardless of title. If that capability is missing, it may be time to consider a dedicated digital role.

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Image: iStock/Tzido

About Patrick Gray

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

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