Do we really need a Chief Digital Officer?

The Chief Digital Officer (CDO) plays an increasingly vital role for some, while others are asking if they’re even necessary. In an age when companies of all sizes are grappling with their digital transformation, the CDO embodies the driving force behind the realisation and refinement of digital strategies. But what exactly do they do and how do they add value?

“The German economy is looking for Chief Digital Officers.” Thus proclaimed a press release (German only) issued in July 2023 by Bitkom, Germany’s digital association. According to a survey of 602 companies with 20 or more employees in Germany, one in four (25%) was planning to hire a Chief Digital Officer. This was up from one in five (18%) in 2022, just one year prior. By contrast, 41% of companies with 500 or more employees indicated their intention to forego a CDO or comparable position entirely.

So does this demonstrate that companies of all sizes need a CDO or not? Would it not be possible for other, existing positions – such as Chief Executive Officer, Chief Information Officer or Chief Customer Officer – to fulfil the duties of this role? This debate is as old as the position of CDO itself. But in order to answer this question, we first need to understand what role a Chief Digital Officer actually plays and what value they bring to the table for companies.

Total commitment to digitisation

In essence, the CDO is responsible for a company’s digital transformation. After all, digitalisation needs someone to drive it forward. All too often, without this active and coordinating element all that is left over are ideas and theoretical concepts that are only half-heartedly put into play, if at all. But digitalisation requires vision and unqualified commitment. The foundation for this is provided by a company-wide digital strategy which defines the way a company uses digital technologies and platforms effectively and in line with its business objectives. A CDO is responsible for this strategy, which ranges from digitalising business processes to introducing new technologies, developing new business models and cooperating with other companies through to innovation management.

In order to ensure that this strategy can continuously adapt to meet current (market) realities, a CDO must have the latest technologies and trends on their radar screen at all times. They must be able to prioritise them and translate them into new digital products and services – for instance, to further improve the customer experience through an omnichannel model or to support employees in their day-to-day work. One of the core duties of a Chief Digital Officer is to constantly question the status quo in order to identify further optimisation potential that can be leveraged through digitalisation.

Responsible for embedding a digital culture in the company

A CDO’s range of responsibilities is thus far broader than “just” implementing the latest technologies. They have to have a multidisciplinary profile that above all combines a fundamental understanding of technology, experience with digital business models and product development. The people who fill this position hail from a wide variety of disciplines, such as business management, economics, IT and engineering. Yet no matter how different the personal backgrounds and career paths of Chief Digital Officers, they are all confronted with the same challenges when it comes to digital transformation.

These may involve data protection requirements and the technical security of applications. On top of this, many technical professions are facing a shortage of expertise, the decision-making processes are convoluted, the availability of marketable, scalable solutions is not always guaranteed, and internal specialist knowledge, budgets and time are lacking. All of these are issues which a CDO must navigate every day. Another factor which can never be overestimated when it comes to the success of a company’s digital transformation is the human factor. As I pointed out in a previous column, any successful digital transformation always requires a firmly rooted digital culture. You cannot have the one without the other. This is another thing a CDO is responsible for: defining and establishing values, standards, behaviours and working methods that are compatible with the digital transformation of a company.

Strategist and implementer, a business enabler and change manager, a catalyst and driving force

The Chief Digital Officer is therefore a strategist and implementer, a business enabler and change manager, a catalyst and driving force. They serve as an interface between every department and the management, who work closely with them to establish the necessary processes behind a successful digital transformation.

The CDO plays a crucial role in ushering their company into the digital age, not only from a technological perspective but also from a cultural and organisational one. They help to ensure that their company remains resilient, profitable and competitive in an increasingly digital world – for customers, employees and other relevant stakeholders alike.

The duties of a CDO could conceivably be spread across other positions such as the Chief Executive Officer, Chief Information Officer and Chief Customer Officer at a small or medium-sized enterprise. But this is always a risky approach that could compromise priorities and the implementation of digital strategies in the long run. Because let’s remember: digitalisation requires undivided attention, absolute focus. And in light of the current state of digitalisation at companies in Germany, the role of the CDO – or at a minimum the head of digitalisation – is not only relevant but also necessary.

Digitalisation is never complete ...

According to Bitkom, nine out of ten companies in Germany have already set a digital strategy or are at least working on digital projects in individual areas. But few have fully implemented or orchestrated their digitalisation – and those which have highly conventional production and business models have not made much progress. And finally, great innovative leaps such as generative artificial intelligence have recently shown us yet again how quickly innovation can influence products, processes and services. Any company that lacks a driving and coordinating force in this area which can tackle the issue with a dedicated team of experts will be at a clear competitive disadvantage and will miss the boat.

We now must ask ourselves: at what point has the CDO fulfilled their brief? Only once digitalisation has been firmly rooted throughout the company and has become a matter of course for all employees. This doesn’t mean that a company’s digitalisation is complete – it never is. But it does mean that digitalisation is pushed forward by the entire Group and that every employee intrinsically sees themselves as the driving force behind it.

Please note: This article was first published by Versicherungsmonitor.

Text: Mark Klein, CDO ERGO Group AG