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Given the challenges and opportunities that digitalization holds for organizations across industries, many organizations have created a new managerial position: the Chief Digital Officer (CDO) [1,2]. In 2012, Gartner predicted that the CDO would be the most exciting strategic role in the decade ahead [3]. Even though the future of the role has been debated [e.g., 4,5] and expectations have not been met in some organizations [6], a 2019 IBM study [7] found that the appointment of a CDO, along with a robust digital transformation program, is strongly correlated with corporate financial performance.

It is therefore important for organizations to understand what makes CDOs successful, and the role is attracting increasing attention from both practitioners [8,9] and academics. Management and strategy scholars have begun to investigate what CDOs do, what they are expected to achieve, what their main responsibilities are, and how they differ from other executives [10,11]. Overall, these studies suggest that CDOs have an impact on organizational outcomes, including digital innovation, data analytics, customer engagement and, more generally, strategic change and digital transformation [12].

For example, Firk et al. [13] investigate how coordination needs and digital transformation urgency influence organizations’ need for a CDO. They suggest that:

• Organizations should assess the extent to which their business models depend on information and knowledge, and whether new digital ventures can enter the industry. In situations of high transformation urgency, organizations should consider appointing a CDO to raise awareness of disruptive threats, initiate countermeasures, and advocate for digital business models and capabilities.    
• Organizations that are highly diversified can benefit from CDOs that connect and harmonize digital capabilities and initiatives, manage political tensions, and communicate and negotiate with external stakeholders.
• The CDO’s tasks and necessary skills may evolve over time, with the coordination tasks of CDOs gaining more relevance. Therefore, organizations reflecting on a CDO appointment should carefully assess the respective contextual conditions and then decide upon a CDO role with an emphasis on acceleration or coordination.

Singh et al. [1] study how CDOs pursue digital transformation activities in organizations, and find that they focus on innovation, holistic strategizing, or act as change agents. A core aspect of the CDO’s role is to coordinate horizontally between organizational units and vertically across hierarchical levels. CDOs should combine different formal and informal activities to coordinate between employees who work on digital transformation activities in the organization.

• Formal coordination mechanisms help CDOs to communicate with different stakeholders and inform decision-making bodies about ongoing activities. This may be especially important for CDOs with a change agent task focus, since formal coordination mechanisms ensure that the digital transformation is spread throughout the organization.
• If the CDO's primary task is to foster innovation, it may be important that the CDO can act independently from the formal corporate structures. Generally, informal mechanisms are used more when CDOs have a strategizing or innovation focus compared to a change agent focus.

Kunisch et al. [12] find that the CDO’s role often concerns the mobilization of the whole company in relation to digital initiatives, and that CDOs often have an organization-wide perspective and fosters cross-functional collaboration in the digital domain. This implies that CDOs face substantial generalist and specialist task demands. The study indicates that organizations need to pay particular attention to the CDO-CIO relationship. Organizations should consider the complementary nature the CDO and the CIO, especially the task division and interplay between them, when designing the CDO position.

Similarly, Tumbas et al. [14] find that CDOs who focus on digital innovation are often insulated from the demands of ongoing operations, which allow them to freely evaluate, test and learn about different digital innovations. These CDOs complement existing IT leaders who are predominantly involved with supporting operational and mission-critical activities. Organizations with well-established structures where the IT functions operate according to principles that require long planning cycles and slower execution may benefit from implementing this type of CDO.

• Other important CDO roles include digital marketers and digital harmonizers. The former CDO type focuses on complementing marketing efforts by deploying digital technologies to enhance products, customer relationships and competitive position. Digital harmonizers take an aggregate view of all ongoing digital initiatives, and aggregate the disparate digital efforts distributed across the organization into a single unit and coordinate them.
• The authors describe various reasons for organizations to adopt a separate CDO role, including:
  • The IT department is preoccupied with large-scale infrastructural projects or is in a weak political position.
  • The marketing department has a rigid focus on traditional marketing methods, and there is no trusted relationship between IT and marketing.
  • The organization has many local digital initiatives but lacks a strategic digital direction.

 

 

Tumbas et al. [15] discuss three general approaches to how CDOs reconcile their activities with that of the IT profession: Grafting, bridging, and decoupling.

• The Grafting approach involves leveraging and tightly connecting to the existing IT function. This approach is particularly valuable when the existing IT domain in the organization is rather homogenous, and the power is unified.
• Bridging involves establishing links between existing functional units to achieve a new digital initiative. It is not grafting on one or the other function – but a separate collaborative function that gets its legitimacy specifically from integrating the two functions (typically between IT and Marketing functions).
• Decoupling implies isolating the CDO’s organization from outside scrutiny, allowing it to form on its own terms. Decoupling enables greater independence and flexibility for CDOs but may be the most difficult approach to sustain over time.

Firk et al. [16] emphasize the importance of integration of digital knowledge in the top management team (TMT). These researchers find that digital knowledge in the TMT is positively associated with digital innovation. Organizations should therefore consider the relevance of digital knowledge in TMT composition processes and the design of leadership development programs (e.g., training, workshops, etc.). The study also shows that organizations can benefit from the existence of a CDO in utilizing the TMT digital knowledge for digital innovation. Organizations should consider the need for information exchange and collaborative behavior in designing structures and processes at the TMT level that facilitate the organizations’s digital innovation endeavors. In benefiting from the CDO as a TMT integrator, the study outlines the relevance of a flat hierarchical structure.

 

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References

1. How do chief digital officers pursue digital transformation activities? The role of organization design parameters 
   Singh, A., Klarner, P. & Hess, T. (2020). Long Range Planning, 53(3).
2. How to choose the right digital leader for your company
   Wade, M. & Obwegeser, N. (2019). MIT Sloan Management Review.
3. Gartner: Do you have a chief digital officer? You’re gonna need one.  
   Cooney, M. (2012). Networkworld.com
4. The chief digital officer era is ending. What next?
   Riccio, J. & Acker, O. (2019). Digital Pulse, PwC.
5. Have we reached “peak” chief digital officer?
   Péladeau, P. & Acker, O. 2019). strategy+business.
6. R.I.P. CDO? Chief digital officer role’s future looks less bright
   Overby, S. (2019). The Enterprisers Project.
7. Is your chief digital officer MIA?
   Berman, S., Baird, C.H., Eagan, K. & Marshall, A. (2019). IBM Institute for Business Value.
8. ‘Transformer in chief’: The new chief digital officer
   Rachards, T., Smaje, K. & Sohoni, V. (2015). McKinsey & Company.
9. The evolving role of the chief digital officer
   Evans, N. (2017). CIO.com.
10. How chief digital officers promote the digital transformation of their companies
    Singh, A. & Hess, T. (2017). Management Information Systems Quarterly Executive, 16(1).
11. Chief digital officers: the state of the art and the road ahead
    Kessel, L. Graf-Vlachy, L. (2021). Management Review Quarterly.
12. Chief digital officers: An exploratory analysis of their emergence, nature, and determinants 
    Kunisch, S., Menz, M. & Langan, R. (2020). Long Range Planning.
13. Chief digital officers: An analysis of the presence of a centralized digital transformation role 
    Firk, S., Hanelt, A., Oehmichen, J. & Wolff, M. (2021). Journal of Management Studies, 58(7).
14. Three types of chief digital officers and the reasons organizations adopt the role
    Tumbas, S., Berente, N. & vom Brocke, J. (2017). Management Information Systems Quarterly Executive, 16(2).
15. Digital innovation and institutional entrepreneurship: Chief digital officer perspectives of their emerging role 
    Tumbas, S., Berente, N. & vom Brocke, J. (2018). Journal of Information Technology, 33(3).
16. Top management team characteristics and digital innovation: Exploring digital knowledge and TMT interfaces
    Firk, S., Gehrke, Y., Hanelt, A. & Wolff, M. (2021). Long Range Planning.

Photo credits: Image used under license from Freestock.com

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Other relevant external content:

Don’t Put a Digital Expert in Charge of Your Digital Transformation. Article in Harvard Business Review by Nathan Furr, Jur Gaarlandt, and Andrew Shipilov.

The five stages of the chief digital officer – and why they often fail. Article in The Mandarin by Michael Wade.

Driving digital change during a crisis: The chief digital officer and COVID-19. Conversation between Kerry Naidoo, Shweta Juneja and Alex Sukharevsky at McKinsey & Company.  

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Digital innovation

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