Do Chief Digital Officers Spell Trouble for CIOs?

CIO — When consumers wanted movies, TV, music and other media to be online and on mobile devices, entertainment companies started recruiting chief digital officers (CDOs) to transform their businesses.

Now the brisk hiring of CDOs and similar executives in other industries, including manufacturing, retail, food and financial services, leaves CIOs wondering where they stand. Contemplate too long, though, and you could be sidelined.

Twenty-five percent of companies will have a CDO in two years, Gartner predicts. In the past year, the number of employment searches for CDOs in the United States has grown by one-third, says recruiting firm Russell Reynolds. Some CIOs will get the job, no doubt.

CIO — When consumers wanted movies, TV, music and other media to be online and on mobile devices, entertainment companies started recruiting chief digital officers (CDOs) to transform their businesses.

Now the brisk hiring of CDOs and similar executives in other industries, including manufacturing, retail, food and financial services, leaves CIOs wondering where they stand. Contemplate too long, though, and you could be sidelined.

Twenty-five percent of companies will have a CDO in two years, Gartner predicts. In the past year, the number of employment searches for CDOs in the United States has grown by one-third, says recruiting firm Russell Reynolds. Some CIOs will get the job, no doubt.

About 20 percent of CIOs have already taken on digital officer duties, according to Gartner. For example, CIOs at the construction company Brady Corp. and clothier Burberry recently expanded their roles that way.

In many more cases, however, the CDO is an executive from outside the company--and outside IT--who parachutes in at the behest of a CEO who is adamant about corporate transformation. Usually reporting to the CEO, the CDO gets the authority to rearrange staff and request funding to launch big plans. (See "So What Does a Chief Digital Officer Do All Day?" at the end of this article")

In other words, the CDO is handed the keys to drive the change the CEO wants but isn't getting from the established hierarchy. Which means the future that elite CIOs thought they had sewn up--strategy setting and entrepreneurship--could be stolen. "You could call it a vote of no confidence," says Dave Aron, a research fellow at Gartner. Companies that hire CDOs say the CIO is important, Aron says, but they're clearly seeking something the CIO isn't delivering.

The potential of becoming digital reaches beyond enterprise IT to ideas such as sending real-time pricing to customers' mobile devices as they place digital orders to pick up later at a local store. Or, as at Starbucks, infusing technology innovation into the retail experience every bit as thoroughly as the fresh-ground coffee aroma permeates its stores. Or, as at Best Buy, completely transforming a dying core business. (See "Best Buy Trying to Give Customers That 'Aha' Moment.") 

Ideally, CIOs should have already been setting up the technology needed for such a digital transformation, says George Westerman, a research scientist at MIT's Center for Digital Business.

CEOs are apt to bring in a hotshot CDO in cases where the CIO lacks the political pull to reorient the company, Westerman says. CIOs "have the right skills, but this depends on relationships. You're talking about asking business-unit and marketing chiefs to change," he says. "That takes power and respect."