Key takeaways

  • The role of chief digital officer in the world’s largest companies is on the rise.
  • Business are maturing in their digital strategies, appointing leaders to shape holistic business-wide strategies.
  • The path to digital success is clearer, but CDOs still face challenges.

Great news CDOs, you are not alone! The latest instalment of the Chief Digital Officer (CDO) Study by PwC’s Strategy& has shown a significant rise in the number of digital leaders appointed around the globe.

According to the research, which analysed 2,500 of the world’s largest businesses, companies employing a CDO has risen from just 6% in 2015 to 19% in 2016. In fact, in some parts of the world, such as Europe, the Middle East and Africa (EMEA), this number actually doubles, with a gratifying 38% employing a CDO. North America, at second place in the study, follows with 23%.

When it comes to specific countries, France is leading the pack in the EMEA region, with 62% of companies having a CDO, and in the Asia-Pacific region, 40% of Australian companies.

CDO Study 2016

 

This positive growth indicates companies are starting to take digital more seriously, acquiring an advanced skill set to lead the way to digital maturity.

This focus on digital leadership seems to be a relatively recent shift, however, with 60% of all CDOs in the study – defined as those executives, regardless of title, who have the task of putting their company’s digital mission into practice – hired during 2015 and 2016. Compared with another of PwC’s recent studies, the 2017 Global Digital IQ Survey, the findings show great digital beginnings but some rocky weather still to overcome.

Getting serious
about digital transformation

The CDO Study also highlights a shifting background in those in digital leadership roles. Compared to 2015 findings, there has been a significant increase in the number of chief digital officers coming from technology backgrounds, up to 32% in 2016 from 14% in 2015.

Marketing, sales and customer service as a CDO background has become less popular, ceding 14% of its market share. While a marketing/sales background still accounts for the majority of CDO expertise on the whole, the gap is narrowing with the technology set. In fact, in situations where a chief digital officer is considered part of the C-suite (around 40% of those surveyed), technological expertise has become the dominant background.

CDO Study 2016

The reason for this change is found in a company’s need (or desire) for digital change. Those getting started with their digital journey tend to focus on smaller activities, often limited to individual business units or with isolated goals in mind, such as improving customer-facing interaction, say the study’s authors. In these cases, marketing, sales and customer service executives often possess the knowledge and drive to needed to accomplish the change.

When it comes to a larger or more holistic approach to digital transformation, however, businesses require an “executive with a strong background in technology as well as experience in navigating the often fraught political and governance issues involved in approving major technology investments and implementing the new systems”.¹

Put frankly, merging new technology with old may require a strong history of technological implementation that marketing and sales executives are unlikely to have.

A long-lasting tech legacy
proves influential

This expertise is of particular importance when it comes to negotiating the landscape of legacy systems – and few industries have more to overcome in this area than the financial powerhouses of insurance and banking. So it’s perhaps not a surprise that in this year’s study, it is companies in the financial services that have some of the highest ratios of CDOs.

Insurance led the pack in 2016, with 35% of companies in the industry employing a CDO. Banking, in third place after the communications/media/entertainment sector (who have long known the force of, and benefit from, digital innovation) has a ratio of 27% of companies with a chief digital officer in place. Of note, financial and utilities institutions were also those that did the majority of their hiring of CDO roles during 2015 and 2016.

CDO study

Challenges ahead
for CDOs

While the number and background of chief digital officers in the 2016 survey shows positive movement in the importance of digital transformation for large business, the journey is far from over. The CDO Study notes that CDOs encounter a range of key obstacles in executing a digital strategy.

Legacy technology may be overcome with a stronger technological background, but other challenges such as corralling fledgling digital initiatives throughout a business into a cohesive strategy, filling digital talent gaps and overcoming change-resistance in organisational cultures are no small feats.

Moreover, as Digital IQ indicates, while companies have come a long way from the days where digital = IT, the measurement of an organisation’s abilities to harness and profit from technology has actually decreased in recent years. According to Digital IQ, “enterprises aren’t so much falling behind as struggling to keep up with accelerating standards”.

The research also shows that even when a CDO is in a business, it doesn’t necessarily mean the role has the required seniority or responsibilities to enact a digital strategy, with much of the thought leadership and budget falling to the CEO and CIO.

What can we take
from the rise of the CDO?

The increase in chief digital officers and their growing technological expertise shows a willingness to mature digital strategies, particularly in industries that have been able to resist digital change thus far. Future change, however, may be hampered by the reality of where and how the CDO operates within current C-suite or business models.

Despite the obstacles, the increasing importance of the CDO indicates that business is dedicated to embracing digital transformation on a larger scale. This can only be seen as encouraging.

Contributor

John Riccio

John is PwC’s ASEANZ Digital Services lead partner.

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