Ryan Scott explains the evolution from CDO 1.0 to CDO 3.0, and what this means for your organization.
The definition and expectations of the Chief Digital Officer (CDO) role continue to evolve as digital technology becomes increasingly engrained in companies’ operations and strategies. Digital objectives can vary greatly across companies, and some types of digital leaders are better equipped to lead certain digital journeys than others.
Successfully delivering on a digital agenda requires understanding these differences and determining the type of CDO that will best serve your goals (which could mean no CDO at all).
Three different types of CDO
CDO 1.0 - Digital Trail Guide
CDO 1.0s were charged with developing an initial digital agenda as companies sought to counter the slew of digital disintermediation and direct-to-consumer plays that started to emerge in the 2010s. CDO 1.0s helped light the digital lamp, but were not owners of main lines of business.
CDO 2.0 - Digital Operator
CDO 2.0s today are business operators who have built strong digital businesses with deep organizations and real P&L commitments that represent significant parts of a company’s overall revenue and an outsized part of growth. These leaders push the boundaries of direct eCommerce channels versus traditional and wholesale channels and are charged with beating back challenges not only from pure plays, but from the other competitors who have successfully made the digital leap.
CDO 3.0 - Digital Transformation Leader
In many ways, CDO 3.0s emerged from the COVID chaos. COVID brought unprecedented - often existential - urgency, matched with higher corporate tolerance for risk and generous latitude from customers and even competitors. Today, CDO 3.0s are driving broad-spectrum digital transformation, chartered with Board-level mandates to consider holistic business models to understand where technology can create more speed, better customer understanding, and higher revenue, profit, and loyalty.
CDO 3.0s are not running digital channel P&Ls. Rather they are working across the traditional businesses to make them better with digital. The success of CDO 3.0s is not measured as digital’s percent of overall revenue, but rather overall corporate growth and market share gains. And, CDO 3.0s are becoming leading contenders in the pipeline for next-generation CEOs.
Which CDO is right for your company?
Start with your digital goal. Do you want to be great at digital or great with digital? Let's explore the difference:
When you need to be great at digital, you need a CDO 2.0, Digital Operator
CDO 2.0 is a star athlete who can drive a good team forward to win. To build a winning digital business, you can charge a star athlete to lead in a mostly encapsulated way. Give them a meaningful P&L that can be measured externally, give them digital product and engineering along with marketing latitude and budget to compete and win.
Treat your CDO 2.0 as an important and strategic leader of part of the business - not the whole business. Specifically, your CIO should retain overall tech accountability - security, enterprise integrations, customer data management, network and infrastructure should all be managed within enterprise IT, not separately on a digital tech island. Similarly, your CMO still owns brand, broader media and digital elements like social.
When you need to enable digital throughout your whole business, you need a CDO 3.0, Digital Transformation Leader
A CDO 3.0 is like a head coach able to act as transformation agent for the entire company - from the Board to frontline workers - bringing the right changes together at a massive scale. A CDO 3.0 needs to partner directly with the CEO and have a mandate, clear backing, and the wherewithal to succeed.
The CDO 3.0 does not run a standalone line of business - their success will be the movement of the whole business. CDO 3.0s are not a fix for talent gaps in your functional leadership. They help make leadership across the company successful - but sometimes, that still means finding some new leaders. The IT leader has to be ready to partner with the CDO 3.0 to build the organization’s digital future. Commercial leaders are accountable to run a better-as-digital business, and marketing teams are required to win in the digital sphere using data, and not just in 30-second ads and Twitter memes.
CDO 3.0s also act as a more holistic version of that CDO 1.0 digital trail guide, often partnering with a CIO or CTO to see where technologies are headed next. They are also responsible for keeping the organization on-task and not letting anyone get hung up on what color the metaverse is.
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What about the CDO 1.0?
In their heyday, CDO 1.0s were mostly just a sign of lack of commitment to digital. Today, companies should not create a C-level position charged with a CDO 1.0 agenda. If digital is truly urgent, a C-level leader cast as CDO 2.0 or 3.0 is needed to pick up the digital pace. CDO 1.0s are truly relics of a simpler time where digital felt both inescapable and unknown - but still at some arm’s length - like it was a choice to be made.
Contrast that with today and how AI and ChatGPT have changed seemingly every product roadmap, executive talk track, and technology project’s scope in the last six months. Where the integration of “digital” took a decade, we’ve all skipped ahead and already expect leaders, including CDOs, to be taking AI onboard and build plans based on what it can already do and what it will do that we don’t yet even understand.
When is the answer 'No CDO'?
There are some very digital-savvy companies that have no Chief Digital Officer in place. These organizations see digital expertise as something expected of all company leaders - no new CxO level role required. No company has a Chief Spreadsheet Officer - why should digital, especially in 2023, be any different?
When there is no CDO, clear accountability stays with functional leaders, and is not muddled with a new CxO in the mix. That said, don’t expect a traditional PMO function to provide the horizontally-aligned execution and thought leadership required to deliver on bet-the-company digital transformations. That transformation-centered head coach is still needed to support functional leaders who remain accountable for existing responsibilities and delivering on revenue commitments.
What about the CIO?
Often when there is no CDO, the CIO becomes that CDO 3.0, digital transformation leader. Many CIOs today have emerged as strong digital leaders in their own right, but they still need a clear CEO-based mandate and capacity in the IT team to provide strong consultative support to functional leaders. Those CIOs will also need technology and consulting partners who are up to providing sustained transformation support.
In time, a CDO will likely be seen as a transitory role that fades out as digital is “solved” in successful companies. Meanwhile, the right CDO can play a key role in creating gravity and building momentum to deliver on a digital agenda.
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