The digitalisation of the business entails a fundamental change of the enterprise’s business model based upon the extensive and pervasive use of digital technology.
Digitalisation will require the comprehensive transformation of the business,[1] which typically leads to change, conflict and resistance in the organisation.
The balance of the old business model will be shaken up and structurally adapted to reap the promises of digitalisation. The role of technology changes massively from a support function to an inherent driver of the products and services offered. Due to the comprehensive nature of the change, it is fundamental that digitalisation is supported and actually driven by the highest executive level – the CEO and the Board of Directors. The changes will not be cosmetic, and continued executive support is a critical success factor for the pervasive transformation process.
Strong leadership is needed to design and drive such change.
It is one of the most important tasks of the company’s CEO to establish and empower a division within the organisation with responsibility for the transformation.[2] As the head of this division, the role of the Chief Digital Officer (CDO)[3] must be established either through the creation of a new position or by an existing position assuming the role. The new division supporting the CDO could be termed the CDO Office.
It will be the CDO’s responsibility to understand the market opportunities of new digital products and services, define the enterprise’s new business model and drive the fundamental changes necessary in the business organisation to embrace the potential of the digital business.[4] To be clear – simply defining the target state is not sufficient. The CDO must also be capable of driving the transformation process that the enterprise will experience, and be empowered to do so. He or she will initiate appropriate modifications to the conception, production and delivery processes of the enterprise, and will drive the change process through all layers of the organisation, adapting it and familiarising its various stakeholders with the new business model.
It is paramount to select the right person for the CDO job, whether sourced internally or externally.
The CDO must combine profound technical and business understanding to create the new business model, putting technological opportunities into a business context and thus ultimately shaping the digitalised business.
Furthermore, they must have strong change management skills to accomplish the required transformation of the company’s organisation.
Depending on the skills, background and personalities of existing managers, there can be various options regarding where the CDO will come from.
As a first option, the CDO can come from the business side with sufficient technical skills to truly gauge the potential of new technologies.
For example, based on the requirement for customer centricity, the CDO role can be covered by the Chief Marketing Officer (CMO) or Chief Operating Officer (COO) assuming additional responsibilities traditionally assigned to business lines and IT.
As a second option, the CDO role can be the next evolutionary step of the role of Chief Information Officer (CIO), developing the CIO from the ‘old role’ of a supporting function to a new role of actually shaping the business itself.[5] Thirdly, the CDO might come from outside, for example bringing experience from a highly digitalised business into the enterprise and fulfilling the complex skill profile outlined above.
The first two options enjoy the benefit of the CDO candidate’s familiarity with the company’s business and operation, but also suffer from the hard task of rapid personal evolution (‘teaching an old dog new tricks’, as the saying goes). The last option may offer a better selection of candidates from a skills and experience point of view, but has the drawback that an outsider first needs to develop a deep understanding of the status quo before being able to properly design effective transformation measures. In any case, these options reflect the duality between a profound understanding of (a) the business and (b) technology, and the imperative of merging both as a critical success factor for successfully transforming the business by making it digital.
We have defined the CDO role as responsible for creating and implementing the new digitalised business model. However, the CEO must, in close cooperation with the CDO, define appropriate digitalisation targets for all Executive Board members, who in turn must fully and positively embrace the digitalisation agenda. It will be the responsibility of the CDO to track overall change progress and drive the digitalisation initiative to success. Starting from the top, managing the relationships and various interests within the Executive Board, the CDO must command very strong change management skills to drive forward the digital transformation agenda in the organisation.
It is also essential that the CDO has considerable influence on the organisation’s IT agenda as the main change agent and transformation tool. Only then is the CDO able to drive the transformation process comprehensively.
Business project portfolio management also takes a key position, because it is this process by which the CDO and existing business lines negotiate the key steps to transforming existing business models into new digital ones.
In addition, the CDO Office runs the day-to-day transformation process. Subsequent sections describe the CDO Office’s activities across concrete projects, including interaction with corporate functions such as HR, Finance, Legal, and Risk and Compliance. Most prominently, the CDO Office not only fleshes out the details of the transformation, but also drives the digital business case and the strategy for organisational and technical change.
Given the fundamental nature of digital transformation, it is clear that the CDO must interact intensely with a vast range of the enterprise’s functions.
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[1] Matt, C., Hess, T., Benlian, A.: ‘Digital Transformation Strategies’, Business & Information Systems Engineering, Vol. 57, Iss. 5, pp. 339-343, 2015.
[2] Elderman, D., Dorner K.: ‘Achieving a digital state of mind’, McKinsey, 2016.
[3] Hughes, P.: ‘The rise of the Chief Digital Officer’, Deloitte Digital, 2015.
[4] Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., Venkatraman, N.: ‘Digital Business Strategy: Toward a Next Generation of Insights’, MIS Quarterly, Vol. 37, Iss. 2, pp. 471- 482, 2013.
[5] Gumsheimer, T., Felden, F., Schmid, C.: ‘Recasting IT for the Digital Age’, BCG, 2016.
