Why companies need a Chief Digital Officer

At the beginning of 2007, the iPhone hadn't yet been launched, the iPad was a gleam in Steve Jobs eye, Pinterest didn't exist, and Facebook was a niche site for college kids with 15 million users. In roughly 5 years, the digital world has changed dramatically and, more importantly, the pace of change is accelerating given the rapid adoption curve of new devices and sites over the last 2 years.  Want proof?  Consider that  the Ipad is just over 2 years old, yet accounted for over a quarter of online retail sales last Christmas.  Or the rapid adoption of QR codes in both media and at Point of Sale.

This pace of change, combined with the fact that digital initiatives cut across multiple functional areas (Marketing, Sales, Technology, Operations, Customer Service, PR/Communications) has driven a growing call for a new, senior level role - The Chief Digital Officer (See Tim Bourgeois' article in CEO Magazine, or Maija Palmer's recent article for the FT - The Digital Career Switchover - sorry, you have to register to see it). Tim Bourgeois even provides a threshold at which point a company should hire a CDO.  If the company spends more than 5% on digital initiatives that cut across 3 or more functional areas, the company needs a Chief Digital Officer. The reason is simple - given the pace of change, having a flexible, cross-functional digital strategy is critical across three time parameters - 12 months, 24 months, and 36 months (beyond 36 months is almost impossible given the rapid rate of technological changes).  Having a senior level executive with the CEO's ear and keeping on top of the impact that emerging trends have on your business is critical to both the long AND short term success of the company.  Industry leaders such as Borders, Kodak, Blockbuster, and Blackberry have been destroyed due to underestimating the pace of change and adoption of new technology.

Digital doesn't fit neatly into any functional area.  Consider the following:

Marketing - The days of your brand, product, or service being defined by a 30 second TV spot or billboard are long gone.  How should you engage with customers across the purchase funnel (Awareness through advocacy)?  How do you use social media, mobile, crowdsourcing, loyalty/CRM programs, and other tools for digital customer engagement?

Sales/E-Commerce - Sales of products and services online are growing at double digits across virtually every category, and B2B sales have been accelerating.  But how does E-Commerce interact with physical retail?  How do you diversify existing distribution channels and place bets on emerging ones?  Pinterest wasn't on the radar 9 months ago and now is a leading sales generator for several retailers.

Technology - The move from local to Cloud based hardware and software over the last 3 years is revolutionizing technology, as is the move to increasing powerful mobile devices driven by employee adoption rather than business adoption (look at how iPhones and iPads are replacing Blackberrys in the workplace). How will the growth of voice recognition software affect business processes going forward (think SIRI)?


Operations - iPads have moved to the factory floor and into stores, supply chain initiatives are rapidly replacing proprietary networks with Cloud based resources, and customers are getting used to less paper and more online interaction.  But which SaaS companies are the best fit for a business?  Which ones will be around in 3 years?  Where is technology and process re-engineering going?  Given the long cycle times to re-engineer a part of the supply chain, are you sure choices being made a year or more out are the right ones?

Customer Service/Experience- The old adage was, if a customer is happy they'll tell 2 friends, if they're unhappy, they'll tell 10. With Social Media, that becomes thousands. Understanding customer expectations, leveraging advocates, and engaging with them to gain insights on process, product, and promotional improvements are critical for success in building the business.

PR/Communciations - PR leaders took the initiative a few years ago to "own" social media in most organizations, and have been successful using the Internet to optimize company communications for SEO and pickup.  In terms of Social Media however, the challenge has been that digital customer engagement goes well beyond communications to touch on customer experience and marketing, which has created conflicts within larger organizations over ownership and messaging strategy.

The new CDO has to work across all of these areas, and ideally has some level of experience in at 3 of the functions with respect to using digital platforms.  (S)he must be able to work cross-functionally, be a team player, and be comfortable that specific executional resources should reside within the appropriate department to maximize success.  Will this become an established C-level role within the next three years?  If not, companies risk the fate of being in the buggy whip businesses as cars fill the road.