Most companies facing digital disruption need to transform the business model and/or the way of delivering services and products. Designing the organization in order to enable digital transformation is increasingly prioritized at board and top-management level. Consequently, at Flensby & Partners we experience a growing demand for advice on how to best allocate the organizational responsibility for driving various digital transformation initiatives.
Key questions asked by executives are:
- Do we need a Chief Digital Officer (CDO) or should we simply extend line-responsibilities?
- If we need a CDO, how should we scope the role?
- What are the key capabilities of a successful CDO?
Based on experience from several client assignments, numerous discussions with leaders and boards, we are pleased to share some basic learnings and thoughts on the topic.
Do we need a CDO or should we simply extend line-responsibilities?
There is no straight forward answer to this fundamental question, but according to our experience, the following aspects are important to review:
Firstly, it is necessary to understand at which organizational level one needs to have digital skills in order to take advantage of the business opportunities arising from digital disruption. This will vary among industries, whereas those facing strong competition from digital natives must upgrade digital skills faster and more dramatically on all levels, e.g. in the finance industry challenged by FinTechs.
Secondly, it is crucial to assess if current leaders have the needed capacity, capabilities and experience to drive a digital business transformation across organizational functions.
Thirdly, it is important to understand to what extent integrated digital line-responsibility would interfere with current focus, responsibilities and decision processes.
In our experience, a review of these three aspects, would be helpful before you consider recruiting a CDO to drive the digital transformation.
If we need a CDO, how should we scope the role?
To answer this question, it is important to assess the digital readiness of the organization, as well as to understand the business context of needed changes:
- Business Model changes: Digital modifications of products and services, development of new digital products and services, improve decision quality through big data. A relevant example is how Philips is utilizing cloud-based technology to offer connected lighting as a service to cities. Another example is the integration of lighting with other technologies in building automatization.
- Delivery Model changes: Increased productivity through digital processes and robotics, reduced sales and distribution costs through digital interfaces across the value chain. Example given is the leveraging of machine learning in insurance in order to analyze data for quicker and more accurate pricing of risk. Another example is the automatization of claims handling through software robotics.
- Customer Experience changes: Improved customer insight, simplify customer “touch points”. For example, in case of implementing omni-channel strategies in retail, different customer touchpoints must work together in multiple ways in order to support the customer journey.
The business context will consequently determine to which extend the role would be strategic, transformational, or operational. If the context is a solely operational one, e.g. to develop and optimize the customer experience trough digital touchpoints, the best solution might be to hire e-commerce line expertise rather than appointing a CDO. On the other hand, if changes substantially impact the business and delivery model you might want to consider a CDO role with impact and influence on executive level to effectively drive and follow up cross-functional initiatives.
What are the key capabilities of a successful CDO?
We have experienced that in particular the following capabilities and skills are crucial in order to succeed in a CDO role:
- Relevant business insight in order to set the vision and ambition for digital business transformation
- Impact and influence to ensure that digitalization is integrated into the business strategy
- Relationship building skills and strong ability to navigate in the organization
- Strong change management capabilities and ability to inspire and engage leaders and staff in implementing operational and organizational changes across the organization
- Technological interest and understanding in order to set requirements for internal and external deliverables
For more information, please contact:
Thomas Kirsebom, Partner, Flensby & Partners
Rune Sørensen, Partner, Flensby & Partners