How Do You Know if You Need a Chief Digital Officer?

How Do You Know if You Need a Chief Digital Officer?

At a recent meeting, a select few heads of HR at global companies were having a high-level discussion on digital business models when one participant from a big consumer products firm brought the conversation back down to earth: “On a practical level,” he asked, “what is the value of having a chief digital officer?” He went on to explain that he was the only executive in his C-suite who had experience in a digital company and was trying to figure out how to drive digital business transformation at his organization.

This is a question that many experts and pundits have weighed in on over the past several years, with some predicting the demise of the role, while others believe it can have tremendous value. Our own data at CEB, now Gartner, suggests that about 1 in 5 companies has a dedicated leadership position for digital business transformation. Just slightly more (1 in 4) have an overarching digital strategy for their entire enterprise. (CEB CIO Leadership Council members can read more about what we expect the digital enterprise to look like by 2020 and how organizations are getting there.)

Many organizations are asking this question: Do we need a chief data officer? The broader question, however, is what governance structure best enhances the focus, speed, and scale of your digital transformation initiative—and there’s no one right answer. This was an important takeaway from the discussion at our meeting: All participants seemed to agree that organizations need some sort of dedicated digital governance structure, but having a single leader (other than the CEO) in charge of it isn’t necessarily the right solution for all organizations.

The HR leaders whose organizations had decided against appointing chief digital officers said they had done so because they tended to be more centralized in both structure and leadership philosophy. They were more confident in being able to set a consistent tone throughout the organization that digital business transformation was every leader’s responsibility. That said, these chief HR officers were careful to note that they did have some governance structure in place to ensure that the right people were making the right digital strategy decisions at the right time. These structures ranged from having leaders who were digital champions across the organization, to a small committee reporting to the CEO on digital matters, to standalone digital business operations where there was a team incubating new digital business ideas.

The rebuttal from those participants at companies with chief digital officers was that if digital is everyone’s responsibility, then it’s no one’s responsibility. This camp strongly believed that you need a dedicated executive to crystallize your business’s digital vision and catalyze its transformation. In our research, we’ve found that a number of CIOs are taking on this role, evolving into “digital evangelists” or “productizers” at their firms (CIO Leadership Council members can learn more here). Many executives are too focused on short-term “firefighting” of urgent business issues and the quarterly performance of current business lines to drive new digital innovations forward, they argued, so this initiative calls for a full-time leadership role.

Nonetheless, one participant noted that after their chief digital officer came on board, he discovered that his real job was one of an evangelist rather than a visionary. After taking stock of what various business units were already doing, some of which was quite advanced, the new executive realized that rather than creating a new vision for the company, he needed to find ways to vet the digital innovations already being pioneered within these business units and scale them across the organization.

Fulfilling that mandate requires network performance, a leadership skill our research shows is increasingly important in the digital enterprise—for all senior leaders, not just chief digital officers. Network performance is a leader’s ability to surface new or better ways of working from across the enterprise, to adopt those ideas inside their own business unit, and to share their own skills, knowledge, and techniques in return. CEB Corporate Leadership Council members can check out our webinar on Enterprise Leadership for the Digital Age to learn more about how to develop network-oriented leaders.

As an HR leader preparing for your next meeting about your firm’s digital strategy, take a careful look at whether your organization has a dedicated digital governance structure. If the answer is unclear, ask your colleagues at that meeting whether they think you need a chief digital officer, if the question hasn’t already come up; this will help you gauge people’s underlying thinking about digital governance and start a conversation about what it should look like at your organization. Whether you decide to add a digital specialist to your executive team or to pursue a more distributed approach to digital leadership, the right solution will depend on your culture, your leadership structure, and what stage you’re at in your digital transformation.