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Management Strategies

10:36 AM
Arjun Sethi, A.T. Kearney
Arjun Sethi, A.T. Kearney

Do Organizations of the Future Really Need a Chief Digital Officer?

Charging a single person with executing a digital strategy for the future could be a step in the wrong direction.

As you struggle with how to respond to digital disruption—the wave of new products, services, philosophies, complexities, and relationships brought about by new digital technologies—you may be tempted to try a new idea. You may be thinking that what you need to meet these new conditions is a role with a new title, such as Chief Digital Officer (CDO). If so, you may be wrong.

The notion of a central management group for innovation —- such as a CDO or Chief Innovation Officer -— has some merit. Such a leadership role can articulate a vision, and a strategy to get there. But once that vision is articulated, is a centralized structure really the best way to achieve it?

Arjun Sethi, A.T. Kearney
Arjun Sethi, A.T. Kearney

Digital failures are often caused by organizational misalignment. And part of the problem is that a centralized team can struggle to drive the day-to-day execution of product innovation. After all, a CDO doesn’t own the products. The CDO owns the vision —- a vision that could quickly become outdated given the speed and unpredictability of these changes.

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Think about it: digital disruption will force a formerly slow, conservative, top-down industry to become more nimble and customer-focused. Should that transformation be managed by new top-down structures, with a single individual charged with changing behaviors throughout the organization?

Or, if you’re promoting a culture of flexible innovation, should you use a more flexible organization? Hub-and-spoke structures can encourage more active co-creation between product teams and customers. You may still want an innovation Center of Excellence to identify, encourage, and disseminate good ideas. But it’s risky to hope that such a Center would generate and incubate those ideas.

A few months ago John Finch, the Chief Information Officer (CIO) of the Bank of England, was quoted in Computerworld as saying the bank didn’t need a CDO to drive digital transformation. You can read the story as a turf battle: is digital transformation the responsibility of CIOs or CDOs? But I think Finch’s more important implications center on where this transformation takes place. Computerworld writes, “He said that he believes that the CIO should be responsible for ‘triggering the innovation debates’ about how this digital transformation takes place, ensuring that the network and technology capacity is available, whilst being aware of the security and compliance requirements.” Triggering debates and ensuring capacity are far different than executing projects.

What would this look like on the ground? Consider the central European bank Zuno. Zuno is a digital-only, low-fee, “alternative” bank (slogan: Less Bank, More Life). It also happens to be a subsidiary of Raiffeisen Bank International, the largest banking group in Austria. Raiffeisen, rather than setting up alternative centralized structures, incubated the smaller Zuno to reach a new market segment.

Banks considering implementing a CDO role should be commended for seeking to respond to change. They understand that digital disruption is happening, and they want their organizations to be ready. But as they consider their path to this uncertain future, they might ponder: how often are such goals achieved with a magic bullet? If you’re trying to solve for your organization’s ability to respond to change, can you really do it by renaming some boxes on the same old organizational charts?

I like to call the current transformation digital disruption because it’s not just technologies that are changing, but relationships. Empowered consumers, big-data startup partners, nimble competitors, new services and revenue streams and marketing vectors—all of these forces are in play. You could try to hire an incredibly talented central figure to stay on top of all of them. But you might be better off fostering a well-coordinated team with responsibilities dispersed to those close to the situation they’re monitoring.

Arjun Sethi is a partner with A.T. Kearney, where he leads the Strategic IT Practice for the Americas. He can be reached at [email protected].

[Budgets and technology specifications are only part of an technology leader's responsibilities. Managing an IT workforce might be the most challenging aspect of any executive's job. Attend the Humans Aren’t Computers: Effective Management Strategies for IT Leaders session at Interop 2014 in Las Vegas, March 31-April 4 to learn new management techniques.

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