One fifth of large corporates now have Chief Digital Officer

10 August 2017 Consultancy.uk

The swift rise of the Chief Digital Officer (CDO) has seen companies in every industry begin to implement the role, thanks to the pressing need to ensure an orderly transition to the age of innovation and avoid becoming victims of digital disruption. A new study has found that approximately 19% of top global companies now have a CDO, 60% of whom were hired since 2015.

A new CDO study from Strategy& has revealed that a growing number of top companies now see Chief Digital Officers as integral to their continued prosperity. Researchers at the strategy consulting firm identified the world’s 2,500 largest public companies, defined by their market capitalisation via statistics from Bloomberg on July 1, 2016, before identifying the companies among the top 2,500 who had a designated CDO.

Earlier in the year, the CEO Pulse survey by Strategy&’s parent firm Big Four consultancy PwC showed 47% of Chief Executives believed the speed of technological change was a key threat to their company’s sustained success in the future. Headline results from the Chief Digital Officer study reflected this, showing that 19% of the companies considered had CDOs already installed by 2016, with six in every ten having been hired over the preceding year. That number rose to 38% in organisations based in the EMEA region of Europe, the Middle East and Africa, while North America’s estimated figure stood at 23%. Asia-Pacific performed well below average, with just 7% of the world's largest 2,500 companies based in the region presently having a CDO.

Companies in EMEA

Just 67% of the global CDO tally actually carried the title of Chief Digital Officer. Meanwhile, the survey also found that only 16% of CDOs were women, well below the global average for senior and strategic management positions, which reportedly stands at around 25%.

Of the global total, a large number were external hires, with 46% being on-boarded to assume office, while a sizeable 32% chunk came from a technology background. This suggested their expertise in the field of technology had made them attractive to headhunters from the top companies, to the extent that 40% of CDOs are also C-suite members, indicating the level to which they are entrusted with a company’s future, even as potentially new external hires. This is a marked change from the previous year’s analysis, when Strategy&’s researchers found CDOs predominantly had marketing and sales backgrounds, at 34% and 17% respectively. A 14% shift towards technologically minded individuals therefore seems to indicate firms taking the role more seriously from a developmental perspective, seeking a holistic approach to transform multiple aspects of their business, as opposed to simply making sales simpler.

Chief digital officers

A growing number of companies, are finding effective coordination of digitalisation is key to future prosperity according to the study, particularly as new digital markets mature, meaning a unified approach is needed to execute a more comprehensive digital strategy.

Larger companies particularly continue to remain ahead of the curve in appointing digital leaders, as market incumbents have for years come under increasing pressure from new, innovative competitors, who utilise digital innovation to prize customers away from the legacy practices of long-term market incumbents. Many large companies have subsequently prioritised the cultivation of CDOs as a means of protecting their prior market dominance.

Companies in the financial services and consumer-focused industries have the highest digital leader ratios, with 35% of insurance companies having CDOs in some capacity. 27% of both banking and consumer product companies have taken the same precautions to insulate themselves from digital disruption in their respective markets.

Consumer-facing industries lead the way

According to Mathias Herzog, Strategy& co-author and partner with PwC US, one of the most daunting challenges for any digital leader, “is how to develop new digital applications at the same time as they’re dealing with legacy IT systems that have been vital to a company’s operation for years. As this becomes more and more apparent, we should continue to see a growing number of executives with the technical expertise necessary to navigate a company’s multi-faceted digital assets.”

Taking the helm of a holistic digital strategy means different things for different companies. While some look externally for digital leaders, others engage existing leadership and a diverse group of stakeholders to help manage the transition. Knowing how to work within these constraints while simultaneously maintaining the operational agility needed to move digitalisation efforts forward will be key for any incumbent digital leader.

“The CDO’s role, by definition, is transformational,” stated Olaf Acker, co-author and Digital Services leader with PwC Strategy& Germany. “This means anyone assuming the role has to balance the old technologies with the new, technical expertise with an understanding of internal organisational mechanisms, and a vision for a company’s future that also aligns with its longstanding mission.”

Growth in importance

The findings come on the heels of a previous study by PwC study into digital leadership, which found that more than a third of the UK's largest companies have now appointed a dedicated leader to drive digital transformation in their business. In line with the global trend highlighted by Strategy&, PwC researchers found that UK companies had also boosted the importance of the CDO role.

However, while UK insurance companies were again found to be the most likely to have digital leadership in place, that is where the similarities ended. Digital leaders in the UK were found to be less likely to have a technology background, at 29%, compared to their international counterparts on 41% in that study. Meanwhile, nearly half (48%) had a background in marketing, sales or customer service, suggesting that British businesses are yet to adopt a more holistic approach toward digitalisation.

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