Digitisation is about using technology that enables the business to perform optimally and to shape new opportunities. Nowadays digitisation is everywhere, basically forcing organisations to embrace it. Many organisations, however, are struggling with 'what' this change involves, 'why' it is necessary to respond to it and 'how' to shape it. And many directors wonder to what extent their board is adequately equipped for these developments. A growing number of boards are considering setting up a new position within their board to meet this need: the Chief Digital Officer (CDO).
VALUE AND NEED
In the past, organisations have struggled with where technology should be embedded within the organisation. In traditional organisations, this was resolved by allowing functions between business and IT to coexist. In these organisations, the Chief Information Officer played a prominent role ([Koot15]). In those days IT was seen as a support function, but as IT soon proved to have a much more dominant role in the business models of almost every organisation, the term 'IT' was exchanged for 'digitisation'. However, this did not necessarily mean that the Chief Information Officer grew along with this change.
The growing importance of technology has clearly been going on for a long time. Today, technology is a crucial part of the core business and is central to the (re)design of the business model. Virtually every organisation considers the impact of digitisation on its business model. It has become clear that BigTechs, such as Apple, Amazon, Microsoft, Google, Facebook, Alibaba and Tencent, are potential competitors for parties across many industries ([Pasm18]).
Actually, a large number of digitally driven initiatives are already emerging in many organisations. For this, agile ways of working are being introduced, which enable the organisation to quickly deliver products and services and to respond to changes in the market. The pitfall in doing so, however, is that digitisation remains mainly about solving challenges the organisation faces on a daily basis (see horizon I in Table 1). And although it is important to improve day-to-day performance in the short term, only focusing on the 'Shit of Yesterday' ([Hins17]) is insufficient for realising a true digitisation agenda. Important for the longer term are a focus on ideas and visions on another way of implementing the current working methods (horizon II, Table 1) and shaping new business models (horizon III, Table 1).
Questions the organisation should ask itself are: how can we reach our customers through other channels? How can we change our processes and ways of working to make them simpler and clearer? And how do we create new means of making money by carrying out completely new and different activities outside the current business? It is essential to consider each of these horizons; the ratio of how much attention will be paid to which horizon will differ per organisation. Organisations such as Uber, Booking and Adyen have (re)invented themselves entirely in a 'breakthrough' manner, by breaking open existing markets or creating new ones. Also, more traditional organisations such as De Nederlandsche Bank ([Sijb18]), or energy companies such as Vattenfall ([John18]), are considering what to do about digitisation in the various horizons.
Making the right choices in the adoption of new technologies by the organisation will lead to strategic issues with which management and/or the board of directors often have less affinity or experience. The organisation may be confronted with a new type of competitors, who often operate outside their own traditional market. The originally e-commerce company Amazon is now a formidable competitor for retailers such as Ikea, logistics companies such as PostNL and IT service providers such as IBM.
The new entrants coming from the world of technology are bringing new threats as well. Many excecutives wonder whether they have sufficient competencies within their boards to give direction to these challenges. In boardrooms the call for a new officer to be added to the top of the organisation: the 'Chief Digital Officer‘, is growing louder. A position which, however, should not be confused with the other CDO, the ‘Chief Data Officer’.
CURRENT EMBEDDING OF DIGITISATION IN ORGANISATIONS
Our recent experience shows that there is no unambiguous picture of how digitisation is implemented in an organisation. Many organisations are still looking for the most suitable officer to give shape to digitisation and what position this officer should occupy within the organisation. Roughly speaking, we see a dichotomy in this: the organisations that consider digitisation and digital transformation as the core of their business activities, and the organisations that do not (yet) see this as such. Apart from the strategic importance, the degree of digitisation also partly depends on the industry in which the organisation operates.
For example, many banks, insurers and retailers have embedded digitisation at the top, partly because the market in which they operate is already highly digitised.
Organisations such as Ahold, Delhaize and Ikea have already introduced the position of Chief Digital Officer in their Boards (see (2) in Figure 1). In the financial sector, for example, ABN AMRO has appointed a similar function to the Board: the Chief Innovation & Technology Officer.
Moreover, in the media sector at Talpa, a Chief Technology Officer is responsible for the entire digitisation agenda of radio, television and online. These companies have a major responsibility in shaping the digital transformation, which increases the need for an officer bearing the ultimate responsibility. In a number of cases, the digitisation agenda is allocated to a more extensive group council (Extended Board). This group is usually small in terms of the number of participants, but recognises the importance of digitisation. Does this mean that the Chief Information Officer has been replaced? Not entirely.
At organisations such as Rabobank, in addition to the Chief Transformation Officer (see (3) in Figure 1), there is also a Chief Information Officer who supervises ICT developments. In this way, the digitisation policy has been separated from the more traditional ICT responsibilities. Or, as is often the case, the Chief Information Officer's duties have been expanded to include digitisation issues, such as at Achmea (see (4) in Figure 1).
In some sectors, digitisation is the responsibility of the Business Units. As a result, digitisation appears to have a less prominent role, as is the case with Heineken, for example, where digitisation is delegated to the various country units (see (5) in Figure 1). The advantage of this is, of course, that in these organisations digitisation is established close to the business. However, this set-up does require the Board to monitor whether digitisation is sufficiently included in the strategy of the various BUs.
Digitisation can also be allocated to a staff department, as is the case at Erasmus MC (see (6) in Figure 1). This is often combined with another function, such as ICT, Finance or Marketing. In such cases, however, there is a danger that digitisation will mainly play a supporting role. Usually it is just the incremental problems (horizon I) that are tackled. In some situations, digitisation is combined with innovation. In doing so, organisations basically try to focus on 'breakthrough' ideas.
Finally, extra attention can temporarily be paid to digitisation by setting up a programme structure. In such cases, an official is temporarily appointed to speed up and shape digitisation. At one of Vattenfall's business units, for example, a Digital Officer has been appointed for a period of two years (see (7) in Figure 1).
Not only are there differences in the way digitisation is positioned within organisations, in practice also a large number of different job titles are being used. Common names are: Chief Digital Officer, Chief Technology Officer, Chief Information Officer and Chief Data Officer (see Table 2). In a number of cases, the name partly depends on the combination with other functions, such as innovation, marketing or strategy.
FOCUS ON PEOPLE
Due to the unpredictability of technological developments, their impact on the organisation and the speed at which they occur, it is difficult to determine what skills a Chief Digital Officer should have for the longer term. A logical consequence of this is that the set of skills of both the other employees and the Chief Digital Officer is not static, but will develop rapidly., This is, however, not the most important aspect. As the uncertainty will only increase as technology advances at a faster pace, it is the Chief Digital Officer's job to help employees embrace this uncertainty by finding ways of working that are better suited. So the focus is not on technology, but on people.
The Chief Digital Officer can motivate his or her employees and encourage them to think outside the box. For example, Google grants its employees four hours a week to develop ideas they have come up with themselves. This creates ideas that go beyond improvements to the operating model and lead to new, disruptive business models. In addition, GV (Google Ventures) was founded: an investment branch that invests independently from the parent company in emerging (small) external organisations. With this, Google hopes to be able to attract knowledge and creativity from outside the organisation, and thus achieve significant breakthroughs more quickly. In addition, the Chief Digital Officer expresses in an authentic way that making mistakes benefits the creation process, and is therefore embraced. It is important that in doing so, the Chief Digital Officer sets the bandwidths within which mistakes are acceptable. This way of working together creates a culture in which the fear of making mistakes gives way to the courage to come up with new initiatives that accelerate the development of the digital transformation.
The speed in making the right choices is crucial for the agility of the organisation. Therefore, the Chief Digital Officer will have to let go of certain control measures. Instead, the focus will be on selecting the right people, who the Chief Digital Officer trusts to make their own decisions .When a decision turns out not to be the most optimal choice, adjustments can be made much faster or initiatives can be stopped. In this way, the responsibility is effectively set at a lower level in the organisation, which leads to more involvement of the employees. Subsequently, it is the task of the Chief Digital Officer to maintain the right focus. And as the teams make their own choices and decisions, the Chief Digital Officer is expected to act as a standard-bearer, both inside and outside the organisation. The Chief Digital Officer is able to make requests within the organisation that are to be honored, but also to denounce daily routines. As a result, he or she may come across as annoying or irritating, but, ideally, is also seen as a visionary. Which implies that the Chief Digital Officer at times has to be extra patient for the organisation to catch up. Outside the organisation, he or she communicates what interesting innovations their teams are coming up with, and what value they bring to customers and society.
Despite the benefits mentioned above, employees may feel that their jobs are threatened by digitisation. This can lead to resistance to change. The idea may be that as long as the employee does not cooperate, the digitisation will not be successful, and therefore his job will be safe for the time being. It is the task of the Chief Digital Officer to prove just the opposite. He or she does this by constantly conveying and emphasising that digitisation offers opportunities for innovation and for making work more attractive. Another advantage is that the knowledge and skills of the employees are updated, which makes them more valuable for the job market of the future.
LEADERSHIP STYLES OF THE CHIEF DIGITAL OFFICER
In order for digitisation to be carried out successfully, it is not only necessary to decide on the structure and title of the position, but it is at least as important to discuss the competencies and leadership styles such a leader needs (see Figure 2).
Many organisations start with a leader who helps them shape their ideas ([Viae17]). Some organizations do this on the basis of their competencies, to give employees the opportunity to embrace digitisation and choose a visionary leader (Visionary). This outlines the vision and mission, and ensures a clear focus and commitment throughout the organisation. In addition, he or she determines the applicability of new ideas from the organisation, and identifies which competencies are needed for their implementation. Other organisations rather opt for transforming ideas into opportunities in the market, with an entrepreneurial leader (Vigilant). This leader’s strength is understanding the business models that are most relevant for the organisation in the near future. He or she is aware of digital threats and opportunities for the organisation.
As soon as the organisation enters a phase in which the concrete implementation of the ideas is required, an architect (Vested) leadership style is desired. This leader formalises the frameworks and draws up (architectural) principles. He or she also looks at the external environment to determine whether by entering into certain partnerships the digitisation growth can be accelerated, and whether the product or service can be enhanced as a result. This leadership style also includes the selection and prioritisation of all initiatives.
Having ideas is crucial, of course, but the correct implementation of these ideas is also an essential condition for success. This requires a leader who is predisposed to focus on making the ideas concrete, as well as realising them faster, better and cheaper in an agile way. This implementer (Voyager) ensures that the digital roadmap is implemented, and facilitates the teams in their collaboration and creative process, in order to arrive at the best solutions with a fail-fast, start-up mentality.
Obviously, the above-mentioned leadership styles have been formulated as 'extremes'. In practice, organisations are usually looking for people who have a combination of these styles, and who apply them at different points in the digitisation journey.
It will be clear that due to the speed with which new technological developments follow one another, new types of leaders are needed, with different leadership styles and new competencies. The Chief Digital Officer is the officer spotting new technologies that are relevant to his or her organisation. And not just that: he or she needs to know where this technology can be put to use for the organisation. The Chief Digital Officer is able to convince the rest of the organisation's leaders why these technologies in particular are relevant, and dares to make serious investments in those technologies. In this way, the Chief Digital Officer gives shape to his or her vision and to the associated digital transformation.
Most importantly, however, is the fact that the Chief Digital Officer enables his or her employees to optimally accelerate this digital transformation. He or she knows how to position employees with the right technological skills in the right places within the organisation. In doing so, he or she gives the employees a lot of freedom by enabling them to make their own decisions in a controlled environment, where making mistakes is not seen as failure, but rather as a learning process that is of value for the course of the transformation. This means that the actual positioning of the role as an official function is of secondary importance and differs greatly per organisation, industry and the degree of strategic value of digitisation. In each and every such case, it is vital for the organisation that someone is appointed who is responsible for the digital transformation and who focuses on what digital developments should be embraced.
For any further queries please contact Daan Jalving.
[Dijk18] A. van Dijk et al., Organize for digital – the CIO/CDO relationship, Deloitte.com, 2018.
[Hins17] P. Hinssen, The day after tomorrow, Lannoo Campus: Amsterdam, 2017.
[John18] A.Johsonetal., How to build a strategy in a Digital World, Compact 2018/2, https://www.compact.nl/articles/ how-to-build-a-strategy-in-a-digital-world/.
[Koot15] W.J.D. Koot, E.J. Mutsaers en I.E. Veen, Het demand- supply model voorbij!?, Compact 2015/1, https://www. compact.nl/articles/het-demand-supplymodel-voorbij/.
[Pasm18] J. Pasman, R. Fijneman en K. Kuperus, Unlocking the value of the platform economy. Mastering the good, the bad and the ugly, Dutch Transformation Forum, 2018.
[Schw16] K. Schwab, The Fourth Industrial Revolution: what it means, how to respond, www.weforum.org, 2016.
[Sijb18] J. Sijbranden en F. Elderson, Visie op Toezicht 2018–2022, De Nederlandsche Bank, 2018.
[Viae17] S. Viaene, What Digital Leadership Does, The European Business Review, 2017.