by Esther Shein

The rise of the chief digital officer

Sep 03, 2019
CIODigital TransformationIT Leadership

As digital transformations become increasingly customer-centric, organizations are looking for leaders to drive change with the customer in mind. Enter the CDO.

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The C-suite is growing increasingly crowded as organizations are bringing in a variety of new roles, including chief digital officers, who often work in tandem with CIOs on digital transformation initiatives on an enterprise-wide basis and rethink how to best serve customers. But what exactly do CDOs add to the C-suite mix, and why are so many organizations turning to them these days?

The CDO title is not a new one; the position dates back at least to 2011, when executive search firm Russell Reynolds began receiving calls looking for candidates, but it has evolved into more of a customer-focused role, according to Libby Naumes, a consultant in Russell Reynolds Associates’ Digital Transformation Practice.

“Today, we’re still getting calls for CDOs, but more often it becomes a broader call about putting the customer at the center of everything,’’ says Naumes. “So ultimately, where we guide them and have a broader conversation is in thinking about the connected consumer and how their business model is ultimately connected back to the consumer.”

Customer technology and the go-to-market strategy must work hand in hand, and the CDO fits in the middle of those two functions, Naumes says. Historically, companies’ go-to-market strategies were disconnected from platforms such as marketing and sales, and now they are all overlapping, and executives need to think about the customer being the focal point and all those other functions being the enablers, she explains.

As a result, newer tech-focused roles have sprung up, including that of chief customer officer and chief experience officer, she says. “Those are different roles bursting out of the old-school CDO.”

Yet, the CDO is still very much in its first generation: 84 percent of CDOs are the first to hold the role in their organization, and 65 percent have been in the role for three years or less, according to a recently released study by global leadership consulting firm Egon Zehnder International.

And the role tends to vary widely in definition and scope, with some CDOs tasked with managing technology, while others manage small creative teams, the study finds.

While they often partner with the CIO, they typically don’t report to them; 63 percent report directly to the CEO, according to the study.

When the CIO is a direct report

This is the case at Novant Health, where Angela Yochem, executive vice president and chief digital and technology officer, reports to the CEO. Yochem wears two hats: The first is being responsible for all technology capabilities and data and security across the health system, and digital health channels and informatics. The second hat is serving as a member of Novant’s executive team.

“I engage in that outside of a technology-only role,” she explains. “Every member of the executive team is expected to be a strategic leader across all aspects of the company. This is the part of the job that allows me to collaborate closely with the clinical and functional leaders to find better ways to serve our community.”

As such, Yochem has a number of direct reports under her — including the CIO, CTO, CISO, the chief data officer, the chief medical informatics officer and chief digital health and engagement officer.  

Yochem says it’s “optimal” for the CIO to report to her so she can make decisions around digital strategy. Because Yochem is responsible for all aspects of Novant’s digital health system, she also needs to understand the impact of new strategies that emerge, she says.

Oftentimes, the CIO and CDO “are housed in different parts of the organization,’’ which results in an “unusual fragmentation of responsibility, and it can slow a company down, depending on the personalities involved,” she notes. “That creates unnatural or artificial tension and that’s not the case here.”

Yochem adds, “I don’t have competing goals inside my own organization; we have clearly aligned goals, which are aligned with all other system leaders’ goals and it works well for us, and I think it would work well everywhere.”

The journey to CDO

Yochem’s career trajectory includes serving as a CIO, global CTO and divisional CIO. She started out building software and designing networks, ultimately moving into “building massive computer systems” before taking on division leadership roles in a variety of industries, she says. In addition to running traditional IT, she says she was able to define, design and sell digital products and services and, most importantly, generate revenue.

That’s key to her role, she believes, because CDOs are typically hired either to build new digital lines of business for a company or to digitally transform existing lines of business. “Because it’s often a business-focused endeavor, it makes sense you’d source a CDO from a revenue-generating background; someone who knows how to make money for a company,’’ Yochem says.

She also believes it is important for a CDO to have a technical background as well. “It can’t just be about dreaming up new functionality you provide to your customer base but understanding the impact of introducing new components into your portfolio,” she says.

Novant was among the first major health systems to bring in a chief digital officer, she observes. “We weren’t slow to the punch here; this was an early adoption. There’s a recognition that digital capabilities and [your] digital strategy [have] to be solid and in place to achieve the access care goals we have for our communities.”

Like Yochem, Alan Stukalsky, CDO at global staffing firm Randstad NA, also grew up in technology. Stukalsky was a mechanical engineer and eventually segued into a CIO role. Prior to becoming CDO, he served as CIO of Randstad Technologies. He also reports to Randstad’s CEO, while the CIO and CMO fall under his purview. The reporting structure differs company by company, he says.

“Some CDOs are responsible for the [digital] transformation but don’t have the team responsibility and one thing that was important for me and the CEO at the time was accountability,’’ Stukalsy says. 

CDOs of a different flavor

Sometimes, CDOs have jurisdiction over a slice of the business. In early 2019, Santiago Perez became chief commercial digital officer and senior vice president of solutions and services, US, at Schneider Electric. As the commercial CDO, Perez is tasked with enabling the sales and execution teams “to scale our ability to listen to our customer’s digital transformation goals, to understand our customers’ pain points and ambitions, and to be able to connect our offerings to solve their pain points and achieve their objectives.”

His background is operational; Perez spent many years leading large sales and executions teams and getting them to understand how to transition from selling traditional offerings to increasingly connected solutions and services, he says.

Since customers want digital solutions to help them become more energy efficient, “we need to fully understand their processes, and to work with them to tweak and improve these processes,’’ he says. 

To make that happen, the sales team needs to be transformed so it can address customers’ pain points and “speak to them in the language of solutions in the industries in which they compete,” Perez says. “In order to support their digital transformations, we must go digital ourselves.”

He reports to Schneider Electric’s CEO and president, and also works closely with the company’s digital organization, which is led by the global CIO, CDO and CTO. That organization is responsible for building the digital architecture of its EcoStruxure offering, accelerating the digitization of interaction with customers and driving Schneider Electric’s internal digital transformation, he says.

Perez is tasked with transforming the sales organization to execute on Schneider’s digital offering in the U.S., which he says is part of this broader digital strategy.

The challenges of being a CDO

The Egon Zehnder study found that 54 percent of CDOs surveyed spend more time on evangelizing — pushing for internal acceptance and change — than executing, while 80 percent of respondents discovered that evolving company culture was either more difficult or much more difficult than they expected; 68 percent also cited integration of data and breaking down silos.

Evolving company culture jives with Stukalsky’s main challenge: change management. “It’s really about adoption [of technology] and getting levels of usage and process changes we employ at levels we’re going to be happy with and seeing maximum results,” he says.

On a more personal level, another challenge Stukalsky cites is feeling confident about the decisions he makes while keeping up with the speed of innovation and moving the company forward properly.

Perez also finds that to be successful at digitally transforming a sales organization — or any organization — a CDO needs to understand they are leading a cultural change.

“The ability of the organization to understand how to talk about digital solutions in terms of solving customer problems, and how to communicate that differently for each customer, takes a huge time investment,’’ he says. “Our biggest challenge is to be able to scale our ability to do this, not come up with new technology. Understanding the legacy of your company helps you prioritize where to invest your efforts first to accelerate the digital transformation.”

Because Yochem was new to the healthcare field, her biggest challenge, she says, was “gaining the trust of an internal community of extremely talented, highly credentialed and super smart people.” But she adds, “The good news is Novant Health didn’t need additional healthcare expertise,” and her colleagues are highly collaborative with “a very strong appetite for the incorporation of advanced technology into their domain.”

Traditionally, organizations have been very siloed, and it’s incumbent upon the CDO to make sure they are getting buy-in from groups like marketing and IT and be able to tie in their needs to the entire organization, says Russell Reynolds’ Naumes.

For example, if an organization has a strong CMO and strong branding, “the CDO can come in and help with performance marketing,’’ she says. “On the CIO front, have they been more of an infrastructure CIO or thinking about the front of the house customer technology vision? That’s where you have to assess the current leadership structure and where people have strength and weaknesses, and where the CDO can come in and complement the other functions.”

Fitting in

As a first-generation CDO, Stukalsky says he’s learned the importance of getting involved in the business and becoming a business partner to the other executives. He’s also worked to make sure he is seen as “the one they should reach out to for help and being successful, so you have to be the point of contact — not necessarily for digital — that’s not always the solution; sometimes it’s more about lean approaches.”

With all the new positions being added to the C-suite, it begs the question, do CDOs have an identity crisis? Naumes addresses this by saying that a person in the CDO role “has to be very adaptable …. that’s where the CDO shines most; where they’re able to make sense of what exists and what doesn’t, and where they can be most effective.”

This will of course also depend on how willing a company is to adapting to its future needs and the needs of its customer — and understanding who their customer is.

“If this mind shift hasn’t trickled down [from the executive team], the CDO will find friction, but it’s about having a broader vision of the company and what they’re trying to solve, at the end of the day,’’ she says.

The April survey Russell Reynolds conducted of  3,000 CMO, CEOs and CDOs to understand their viewpoint of their customers found that only 14 percent believe they know their customers very well, while 80 percent of CEOs say their business model is at risk, Naumes says.

The findings indicate CEOs need to think about how their business models are changing and who they are serving, she says. Corporate boards also need to figure out what the leadership structure is: who is driving change, who is looking at the customer and what the end goal is. This is typically why a company brings in a CDO or chief customer officer, she says.

“The chief digital officer was the first that encapsulated change in the organization related to how customers are engaging with technology,” Naumes notes. “Now, it’s not one size fits all and there’s lots of different themes to [getting to], ultimately, the same goal, which is how we’re engaging with our customers in a new, modern fashion.”