What is a chief digital officer and what do they do?
A chief digital officer (CDO) is charged with helping an enterprise use digital information and advanced technologies, such as the cloud, AI, machine learning, automation, IoT, mobile and social media, to create business value.
For traditional businesses, thriving in the digital arena often requires converting from an analog to data-centric business model. This shift, widely referred to as digital transformation, can entail major changes to an enterprise's technology architecture, business processes, products, roles, job descriptions and corporate culture and thus can span several years. Strategic leadership and managing change are, therefore, important elements of the CDO role.
The chief digital officer is a relatively new leadership role. The title first appeared on corporate organizational charts around 2010. By then, smartphones and tablets were enabling anytime, anywhere computing. E-commerce giant Amazon and other digitally native retailers were setting new customer expectations for online shopping and creating a market for digital goods, such as video on demand. Companies recognized they needed digital strategies to connect to tech-savvy consumers, enable employees and defend against digital disruption.
In 2012, consultancy Gartner proclaimed the chief digital officer position would "prove to be the most exciting strategic role in the decade ahead," predicting that, by 2015, about 25% of all companies would have someone in this leadership role. While the early growth of the CDO title shows signs of fading, the responsibilities associated with the position are increasing and evolving as advanced technologies like AI and robotics continue to redefine how companies serve customers and reap business value.
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Responsibilities of the CDO
As a C-level executive, the chief digital officer helps a company set and execute digital initiatives that will monetize data, drive digital revenue, improve customer experiences and employee engagements, optimize operations and create new business value. Responsibilities include the following:
- Lead digital transformation efforts across the entire organization.
- Set and implement digital strategy by working with cross-functional partners to transition from traditional to digital processes.
- Break down data silos, promote a digital culture and build a digital business technology platform.
- Monetize data collected from multiple sources by using advanced technologies.
- Implement data analytics effectively into business processes.
- Ensure business intelligence systems meet organizational requirements.
- Develop fact-based metrics to determine the ROI of digital efforts.
- Support the development and marketing of new products and services.
- Grow and nurture brand loyalty on social networks and online communities.
- Determine key influencers and empower them with tools to promote branding and corporate messages.
- Uncover new digital business opportunities and develop revenue streams.
- Build relationships externally with vendors, startups and third-party stakeholders.
- Keep pace with market innovation to maintain a fresh digital strategy.
Digital technologies such as big data, the cloud, AI, automation, IoT, mobile, social media and, more recently, augmented and virtual reality form the backbone of digital strategies. A deep technology background is not required of chief digital officers, but they must understand how these digital technologies help drive value, particularly by improving and enhancing the customer experience. Indeed, the first wave of CDOs often came from the marketing, sales and customer service ranks, where, for example, the power of social media to shape a company's brand or the need for an omnichannel customer strategy was typically better understood than in the IT ranks.
As enterprises gauge the extent of technology and enterprise-wide change associated with digital transformation and accelerate their efforts to digitally transform in the wake of the COVID-19 pandemic, they increasingly have turned to chief digital officers who possess strategy and technology backgrounds.
Chief digital officer skills and qualifications
Though still considered a fledgling role, the chief digital officer has achieved C-level status in many organizations as companies see a greater urgency to digitally transform. In addition to technical know-how and familiarity with advanced technologies like AI, analytics, the cloud, IoT and automation, today's CDO may have a business, marketing or public relations background, extensive management experience, and strong communication, collaborative and storytelling skills to drive the enormous task of digital innovation, strategy and transformation companywide. LinkedIn posted a sample CDO job description that includes the following qualifications:
- minimum of five to seven years of experience in a similar role designing and launching digital platforms;
- proven track record of leading successful digital transformation projects;
- understanding of core business processes and associated technical solutions;
- an innovative and disruptive mindset, constantly looking forward;
- experience managing and leading a digital team;
- proven influencing and collaboration skills; and
- advanced degree in business, technology or engineering (preferred).
Who does the chief digital officer report to?
Since the CDO role can vary widely and be relatively new to some organizations, the chief digital officer could report to the CEO, COO, CFO, CTO, CIO or even the CMO, depending on the job definition and responsibilities and level of importance.
When, for example, the chief digital officer fulfills a more visionary role that drives the company's digital future, the CDO may report to the CEO or COO, with other C-level executives perhaps reporting to the chief digital officer. Companies that need to introduce new technologies into their financial services processes may have the CDO report to the CFO. In cases requiring technical decisions on products and services, the CDO may report to the CTO. If digital transformation focuses on IT-related processes, the CDO may report to the CIO. In companies striving to analyze customer buying patterns and improve customer experiences, the CDO may report to the CMO.
Consensus among experts suggests that the CDO's authority should at least be on par with other C-suite executives to maintain influence and achieve success.
Who needs a chief digital officer?
Companies in the market for a chief digital officer should start by taking stock of their digital risks and opportunities and the ability of current leadership to develop and launch an effective digital business model. Researchers from MIT Sloan School of Management have recommended that companies ask themselves the following basic questions:
- What is the level of digital threat facing your organization? (Who are your new online competitors? How do you compare with the digital leader in your industry?)
- If your current business model is under threat, what is the right digital model for your company? (Do you focus on operational efficiency or customer experience?)
- What is your current competitive advantage in the digital era? (Loyal customers? Large stores of data collected over the years?)
- How can the digital era help your company? (Does mobile give you a new way to connect to customers? Can IoT be used to improve customer service? How can AI optimize product recommendations?)
- What muscles do you need to develop to deliver on digital dexterity? (Do you need to partner with other companies or industries? Build your analytics capability?)
- Do you have the leadership in place to pull this off?
Chief digital officer vs. CIO vs. CTO vs. CDO
The CDO, CIO and CTO can all play a direct role in digital transformation. Traditionally, the chief information officer has focused on running an organization's internal IT infrastructure and services, while the CTO keeps abreast of emerging technologies, manages client relations, and creates policies and procedures that use technology to improve products and services delivered to customers. The chief digital officer role was created to be more outward-focused, looking at the people, processes and technology needed to create digital advantage and improve the customer experience.
Over time, there has been a blurring of the role of the CIO, CTO and CDO. In fact, the CDO is sometimes referred to as chief digital information officer (CDIO). For that matter, the blurred lines can extend to chief digital officers, chief data officers and chief analytics officers when defining their roles. Depending on the industry and the size of the company, many of these roles can be combined into one title.
In practice, companies are finding that converting from an analog to a digital business model means dealing with legacy systems and applications that must be integrated, modernized or jettisoned. Thus, technology expertise is increasingly seen as important to developing an effective digital strategy, resulting in a shift in job requirements for chief digital officer positions. In addition, businesses are realizing that building a digital advantage isn't a one-person job but an enterprise-wide effort, requiring expertise and input from executives across the C-suite, managerial and employee ranks.
Salary of the chief digital officer
The average compensation of a chief digital officer in the U.S. can vary widely, depending on the responsibilities associated with the CDO's diverse, expanding and evolving role. ZipRecuiter lists a CDO's average annual salary in the U.S. at about $150,000, with a range between $125,500 and $192,500, while Salary.com pegs the average annual salary higher at $204,500, with a tighter range between $181,000 and $224,000, and Payscale reports the average annual base salary at $203,000 plus bonuses.
Future of the CDO role
Many enterprises are in various stages of digitally transforming or have yet to embark on the journey. One-fourth of organizations reported they're at the maturity level of implementing and optimizing several digital transformation initiatives, while nearly three-fourths are in process, just beginning or only planning to digitally transform, according to Enterprise Strategy Group (ESG), a division of TechTarget.
In the wake of the COVID-19 pandemic and resulting disruptions to operations, workforces and supply chains, younger companies and startups are more likely to be data-centric and older companies far more motivated to transform digitally. As more companies accelerate their digital transformation initiatives to maximize their digital assets, add new technologies and continue competing at a high level, the evolving role and title of the chief digital officer should achieve greater clarity and importance and encounter less resistance to change companywide.
Future CDOs will ideally possess a combination of technology, marketing and communication skills, business acumen and executive experience.