The world is going digital. If you don't realise this yet, it may be time to crawl out from under that rock. But just what do we mean by going digital? Is this just another passing fad or perhaps a new spin on an old story? The answer in both cases is "no".
Digital business describes the increasing use of mobile, social, and cloud-based technologies to energise systems of engagement (systems used to communicate and collaborate; systems of engagement touch customers and employees in contact with customers). Today, many customer experiences centre on critical touch-points involving these digital systems of engagement. As a result, we are witnessing the transformation of our organisations into digital businesses.
Along with this transformation come challenges: Do we need to restructure the organisation to take advantage of this new reality? Can we avoid latency from organisational silos built to support product or market oriented operations?
While we’re still early in our research into these questions, it’s already clear that a number of companies are establishing new organisational structures to deal with these challenges. Central to these new structures is the creation of a team with overall responsibility for customer-facing systems of engagement. And in a number of organisations like CVS in the USA, these teams are headed by a chief digital officer. A new C-suite title giving emphasis to the importance of the function to CEOs.
The structure and composition of such teams varies widely, as you might expect. One common factor, at least for many consumer-facing businesses, is responsibility for revenue generation through systems of engagement. This is especially true where companies are generating sales through a website (e-commerce).
But simply hiring a 'chief digital officer' is no silver bullet - as US Sports retailer Finish Line found to their cost in 2012. For the CDO role to succeed, IT and marketing organisations also need to undergo changes, aligning the business goals and KPIs of all three groups.
For example, in a large US retailer, IT was split in two, with a new team created to focus on omnichannel delivery. The head of the omnichannel team is a peer to the CIO and has a full team of IT professionals. This new IT team works alongside the customer experience team in marketing and the ecommerce business unit to deliver the omnichannel digital customer experience, or agile commerce. To make it work, the team uses agile development, focuses on limiting scope within releases, and targets tangible business outcomes for KPIs of the team members. It’s not a 'digital business' team in title, but it is in many other respects, except for the responsibility for e-commerce, which remains with the e-commerce business unit.
Because the role of designing digital business requires understanding of technology, e-commerce and marketing, the emerging chief digital officer role will be a hard one for many organisations to fill. And to be successful, the new CDO must also be capable of marshalling all this knowledge to diplomatically lead the collaboration needed between marketing, IT, customer experience and e-commerce. No small undertaking in itself!
The key trait that a budding CDO will have to be able to demonstrate is the ability to act as a change agent. Tomorrow’s executive leaders will think of digital as one of the skills in their toolkit, alongside finance, marketing and other 'traditional' subjects taught on any MBA curriculum. But it will be the job of the CDO to lead the shift from the old approach and to embed digital throughout their business, educating their executive peers and transforming culture, organisation structures, processes and metrics to become fundamentally digital.
And then there is the question of reporting lines: should the CDO report to the CMO, the CIO, the COO or the CEO? Clearly this is a question for the CEO and the executive team. We expect the most successful CDOs to report into the CEO, reflecting the CEOs perspective that digital business is a strategic thrust of change for the organisation. It remains to be seen if the CMO and CIO will eventually report to the CDO - anything is possible. And if you believe this is not only possible but likely, as I do, you may want to think about whether you have the skills needed to be successful in the CDO role.
As the chief digital officer role emerges with responsibility for systems of engagement, we can expect to see a few missteps along the way. These will no-doubt be compounded as executive teams grapple with the underlying organisational changes needed but not fully implemented. Regardless, every organisation, including yours, will be impacted by this shift toward digital business, where systems of engagement are responsible creating outstanding customer experiences. Your business will become increasingly dependent on the design of the digital customer experience (and if you have none, you may find your customers walking away). This is why we predict the emerging chief digital officer will be more critical to the success of many firms than the CMO or the CIO.
Nigel Fenwick and Martin Gill are principal analysts at Forrester Research, serving CIOs and eBusiness executives respectively.