SPRINGBOX / Insights

Chief Digital Officer — Do You Really Need One?

by Tom West, December 20, 2017

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In this age of digital transformation and disruption, the Chief Digital Officer is the fastest growing executive job title worldwide. Gartner estimates that 90% of the top 1,000 companies will have a CDO by 2019. Linkedin shows that the number of executives with that title is up to 5,123. This is all compelling evidence for the CDO’s growing significance, but if your company is not part of the Global 2k or does not have the majority of your revenues coming from digital channels, do you really need one?


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eMarketer


Role of the CDO

First, it is important to understand the role and cost of a CDO. At its most basic, the role of the CDO is to be responsible for working across your organization to coordinate all digital channels and touchpoints. For a digital strategy to be successful, company strategy, go-to-market and technology must all be aligned and executed seamlessly. Governance, data standards, user journeys, metrics and outputs must all be developed with the whole of the organization in mind.

Download the CEO's Guide to Digital Transformation

While that represents the coordination and value delivery aspects of the position, perhaps the most important role is providing a digital vision. Top CDOs stay abreast of leading-edge technology and mega-trends. They are able to help your company see where the market is going ahead of the competition.

For example, some of the leading technologies we should all be on top of today include: predictive analytics, AI, Machine Learning, IoT, augmented reality, virtual reality, social graph, AMP and PWAs, to name a few. It is very hard for the average company to stay ahead of the commercial applications of these technologies.

Perhaps the biggest trend in the executive suite is the convergence of the CMO and CTO roles. Increasingly,marketing is utilizing martech as a core element of their go-to market model, while the CTO is being asked to become more customer facing. In many ways, the CDO can serve as a bridge between these two very different worlds.

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While this all sounds great, it comes with a cost. Top CDOs are hard to find. There are a limited number of seasoned digital leaders with the capacity to lead across an organization. As a result, the price tag can range from $300-500k+ per year. CDOs will need an organization to support them along with the tools of the trade. All in, building a capable CDO function can cost between $1.5 million - $2.5 million per year.


CDO Cost Model

CDO leader:  $300-500k per year

Strategist:  $150-200k per year

Program manager:  $100-125k per year

Business analyst:  $80-120k per year

Technical Leader:  $150-200k per year

Engineering:  $300-600k per year

Licensing/outside svcs:  $500-700k per year

 

Transformer-In-Chief

In a recent article, McKinsey has proposed that, more and more, the CDO is functioning as the chief transformation officer. They argue that the situations where CDOs are most needed are those in which comprehensive organization-wide change is required for success — where the team cannot coordinate for themselves and is in need of a centering influence. McKinsey goes on to provide a number of very smart questions to help determine the need to consider a CDO:


  • Is the marketplace where I compete undergoing — or vulnerable to — significant changes that are reshaping value?
  • Is my company ready to move beyond basic digital experiments and embark on a fundamental and integrated transformation of the business?
  • Is my company ready to signal its digital-transformation efforts to audiences both internal and external?
  • Do we need a disruptive perspective from someone who can objectively and credibly challenge the status quo with a “digital first” mindset?
  • Does the current leadership team have the capacity to steward the digital transformation and support this new role?

While these are all good questions, they are primarily reserved for the Global 2000 leaders who are looking for change at a massive scale and where there are multilayered approval processes that require months and even years of planning and business case analysis.

 

Digital Transformation in the Middle Market

For those of us not running Global 2k companies, our objectives have to be focus and time to market. As I shared in a recent post, the main advantages we have over our larger enterprise competition is quickly rallying around an idea and getting to market before the big guys even complete the internal approval process.

Let’s quickly explore each of these requirements:

First you have to identify the transformational idea. This can be a challenge for an organization that is not used to innovation. Springbox has had a lot of success using design thinking workshops, which center around the customer and develop innovative ways to improve the experience. These sessions can be done internally or can be completed with an experienced external moderator in the room. The key to success is to have strong representation of customer knowledge and the potential uses of new technology in the room.

Once the idea is in place, it is time to lay out the project plan and to tap the right resources to build and launch the solution. Typically, this is where I see many middle market companies falter. They do not have the skill sets internally, and hiring can be very expensive and risky as technology is not the core business of most companies.

Even if you are able to hire the right team, experts suggest that it takes between 6-12 months for the average new employee to ramp and become productive. By that time, you have missed the opportunity window to beat the competition to market.

 

Finding the Right Partner

As middle market CEOs explore the need for a CDO, I believe that they will increasingly find that the cost is too prohibitive and the time to market is too slow to address the challenges of transforming in a real-time world. To win, it’s my belief that the smart CEOs will look for partners that have the skill sets to immediately step in and make an impact on the company.

The good news for these CEOs is that there are a large number of consultants, agencies and integrators who are ready to help. The challenge is to determine how to best select the right partner. Here are some key questions to ask in the evaluation process to help increase the chances of breakout success:


  1.  Are they able to be my end-to-end partner? This is a critical distinction. Separating strategy from execution in digital is a recipe for disaster. Getting digital transformation right means paying significant attention to detail. The engineers who are coding the solution need to be connected and on the same project team with the strategist and designer who are envisioning the solution. The launch team needs to be connected directly with the engineering team to make sure that they promote all the elements necessary to deliver product/market fit. Most important, by hiring one team, you have a single point of accountability.

  1.  Are they data driven and ready to align around your business goals? Most agencies make every excuse in the book as to why they are not an accountable partner. The key is to find a partner that truly understands the business opportunity at hand and is willing to back you on the outcome. This is a mindset that is driven by the culture of the organization. Is their focus on the short-term profitability they gain from your account or on the long-term return on your investment with them? This is a relationship business, and organizations that are not willing to put skin in the game and focus on the long term are not the right partners for helping you drive digital transformation.

  1.  Do they have a track record of creating breakthrough outcomes? This is not about glossy case studies but about really understanding the history of shareholder value creation at the client’s company. What has been their success rate? What role have they played in those successes? We are looking for someone who has played the general contractor role from idea to launch. Ask about their failures. What have been the learnings of those programs and how can we avoid them? The best partners are the ones who are confident enough in themselves to be able to openly share challenges and to be intellectually honest about how to work through them.

 

Do I need to hire a Chief Digital Officer?

In the end, digital transformation is hard, and the way the Global 2k is attacking it is by hiring fully capable CDO organizations and chartering them with a multi-year transformation journey. Given that the middle market CEO does not have the budget or the time to pursue that approach, the best option is to find a ready-now, capable partner who has experience guiding and delivering digital transformation solutions to middle market clients. In my experience, when done right, this approach can result in significant shareholder value creation at a disruptive pace that will have the big enterprise players in your industry trying to figure out what happened.

Download the CEO's Guide to Digital Transformation

 

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About the Author:

Tom West is a career Digital Business Leader having run multiple top 100 ecommerce sites as President and general manager. Today he acts as a digital director for multiple companies and helps many more to reach their full digital potential through his company, Springbox. You might also like Tom's Practical CEO Guide to Digital Transformation. 

Topics: CDO