Who should really be driving digital transformation?

The C-suite is getting crowded with a growing number of digital leaders. Does this mark a shift to team-based leadership? Or can CIOs still lead transformations alone?

Who should really be driving digital transformation?
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A meeting of the digital leadership team at Schneider Electric gets crowded quickly when you add up all the people in charge of technology at the energy management and industry automation company.

The Schneider Digital unit, formed in July 2017, includes a chief digital officer who oversees all of IT, the CIO, a chief data officer and a chief experience officer, as well as the IoT and digital services product development lead, digital engineering lead, and sales and service lead who supplies the front line with the critical data they need. Plus, the CSO and CTO take an active role in all IT projects.

It may seem like a crowd, but it’s a necessary part of the company’s massive digital transformation that brought together 100 separate IT departments from around the globe to improve resource allocation and processes, and centralized all the innovation that was once carried out in every country.

“The role of IT now extends beyond what was primarily applications and internally central systems, and into platforms that enable digital services and offerings to our customers,” says Herve Coureil, chief digital officer. Many of those projects extend beyond the purview of the CIO.

When it comes to digital transformations, the CIO isn't always the leader in charge. Often the responsibility is shared with the organization's data, digital, innovation and technology chiefs to bring digital transformation plans to fruition. 

“What we are seeing is that many companies are starting to rely on a chief digital officer or someone similar that typically does come from the business and has that understanding and knowledge of how to monetize it in the context of the business,” says Khalid Kark, U.S. CIO program research leader at Deloitte. Coureil, for example, previously served as CFO and CIO at Schneider, before becoming its chief digital officer.

The shifting view of IT leadership

How do these relationships work? And is there really a need for broad IT leadership team at most companies undergoing transformations? Forrester believes that tech executive teams are on the horizon, if they haven’t happened already.

“In the future, there’s going to be one or a set of tech executives responsible for moving business forward — not necessarily the CIO,” says Brian Hopkins, vice president and principal analyst at Forrester.

But today, CIOs still lead transformations at most companies. According to a survey of 700 IT professionals in IDG’s “Digital Business Transformation 2019” report, the CIO still takes ownership of most aspects of the digital transformation process, from data protection strategies, to tech needs and IT skills assessments, to change management and data management strategies. Only the CEO has leadership over developing a workforce strategy (41% CEO vs. 36% CIO) and determining the metrics of success (47% CEO vs. 36% CIO). Companies represented in the survey averaged 14,000 employees.

Still, Forrester contends that enterprises that are truly looking for market differentiation and explosive growth will deploy separate advanced innovation teams and tech-driven approaches that will use new technologies to change and dominate their market.

“Companies that take this advanced tech-driven approach, in addition to their current innovation practices, are going to be the ones who are going to discover breakthroughs in the future and set these trends,” Hopkins says.

Companies such as Ford, BP, Aetna and United Healthcare have hired CTOs, innovation officers and chief data officers and placed them outside IT where they are at the business strategy table with the rest of the C-suite, he says. Projects involving blockchain, artificial intelligence and quantum computing are not filtered through the CIO.

How it works

At Schneider Digital, teams are organized around major capabilities. For instance, helping customers have more efficient energy processes falls under the digital services team, and innovating at the back end for the company in accounting, finance or HR falls under enterprise IT led by the CIO. Technologies such as AI or data analytics are looked at horizontally across those capabilities.

CIO Elizabeth Hackenson leads 2,000 of Schneider Electric’s 3,000 IT employees in her transversal role over traditional IT operations worldwide. She spends about 20 percent of her day interacting with her fellow digital leaders on various projects or meetings. The key to positive relationships between the digital leaders, she says, is transparency. “It is very important to be able to be open, especially when it comes to discussing difficult topics,” she says. “It is also important to be able to prioritize and consistently focus on what’s good for [the company] at large.”

Seventy percent of Hackenson’s time is spent on transformational projects in her own practice, she says, including optimizing the company’s supply chain network and transforming talent acquisition functions, to name a few. 

CIOs still lead most transformations

While larger enterprises may lean toward tech leadership teams, most companies tap CIOs to manage their digital transformations.

At the American Academy of Family Physicians, one of the largest medical organizations in the U.S., CIO Michael Smith felt that the $90 million association with just 400 employees could undergo a major transformation by beefing up the responsibilities of its current IT team rather than piling on more leaders at the top.

“I think I am the chief innovation officer right now, and the chief digital officer and the chief data officer,” Smith says, “because I’m leading those functions and driving innovation forward.”

The three-year plan will “overhaul everything,” Smith says, from moving its data center to the cloud, to adopting a product and services company mindset, to adding technology platforms to better interact with members.

Smith started by replacing two-thirds of his 40-member IT team and hiring two new people. “Some people just didn’t have the skill sets, and we had to exit them out. Some people didn’t want to go on the journey with us. We also had normal attrition,” Smith says.

Smith then created new positions, including an enterprise and data architect, and an application architect, both filled with existing staff, and he promoted the manager leading the business analyst and application developers to director of IT. “He focuses on the day-to-day operations of IT, so I can focus more of my time on the strategic execution and also working with senior leadership to drive initiatives forward,” he adds.

Now two years into the three-year plan, AAFP leaders will begin planning for the next phase of transformation that will focus on innovation, but there are no plans to add a chief innovation officer.

“Innovation is every person’s responsibility. It doesn’t matter if you’re in IT or not,” Smith says. “I think the challenge that existed previously was that the environment didn’t support [innovation], and a lot of people were frustrated. Now that environment is there.”

AAFP’s data-intensive product and service offerings might also indicate that a chief data officer is needed in the future, but with 72 percent of U.S. family practices already members, Smith doesn’t feel that a CDO could add much more value — a common sentiment inside many companies that are finished with the initial phases of their digital transformation.

“A lot of companies are starting to realize that, yes, having a CDO is going to be a good short-term solution, but in the long term it has to be integrated into the broader technology organization,” Kark says. “You have to really push for a couple of years to … get technology embedded into some of the more leading-edge business solutions. But ultimately, if it’s not tied back into the back-end of the system it supports, it’s going to be very hard for it to scale up.”

Even Smith will be transitioning out of his multi-hat CIO role over the next three years as AAFP moves on to Phase Two. “I enjoy that big piece around transformation,” Smith says. “The foundation has been built, and they’re now in this steady state of supporting that and driving innovation forward.”

Coureil believes that for larger and more tech-driven companies, the CDO is here to stay. “I’m not sure there’s a one-size-fits-all answer, but I think within Schneider we’re going to have an organization working on how to scale technology for a long time. But if you need to have a team working on platform-level technology, making sure you’re not reinventing things everywhere and that you inject AI and analytics in your services wherever it makes sense, making sure you solve business problems and not just add technology — then I think there’s a place for [chief digital officers],” Coureil says. “All things change, but I don’t see that mission disappearing in the short- to mid-term.”

Copyright © 2019 IDG Communications, Inc.

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