Do Businesses Still Need A Chief Digital Officer?

New research reveals that leading brands are rethinking their hiring strategies.

Any company that’s serious about digital transformation needs a chief digital officer: This has been the mantra of many business leaders, industry analysts, and customer experience specialists for half a decade, prompting organizations around the world to hire a CDO in the hopes of transforming their operations and appealing to a digital audience.

But new research from Adobe, titled “The Evolution of Modern Digital Teams,” in partnership with marketing consultancy Lenati, reveals that leading brands are rethinking their strategies. Instead of hiring separate digital leaders and teams, they are embedding digital expertise across their organizations and driving a cultural shift to complement their investments in new technologies, according to a global survey of 500 digital professionals from multiple industries.

“Mature organizations understand that simply relying on a team to digitize their processes won’t change their fortunes,” said Lisa Sheth, head of digital strategy at Adobe. “They need to transform, which is why they are building digital capabilities and skills across every department, from marketing to IT.”

The Rise—And Fall?—Of CDOs

The rate of CDO hires jumped between 2013 and 2016 but has since been on the decline, according to the research.

Having first experimented with dedicated digital teams, digitally mature businesses are coming to realize this approach is not delivering the comprehensive change they need to become more customer-centric across every department.

“Despite being asked to break down siloes and modernize the way their company operates, digital teams are still treated as a separate entity, especially in less mature businesses,” Sheth said. “Given that context, it’s understandable that digital transformation remains elusive for so many companies.”

The rise of the CDO made sense when it first began. Eager to meet the demands of an online and mobile customer base that craved engaging experiences, brands needed more than traditional marketing and IT experts. They needed a specialized strategist who could reshape existing business models for a digital world, stay on top of changing consumer habits, and help transform their businesses into experience-driven enterprises.

For many businesses—particularly those at the start of their digital transformation journeys—that’s still the case. Today, CDOs lead 38% of digital teams, according to the study. That said, their responsibilities are multiplying as brands race to adapt to all things digital.

That’s certainly the case at Under Armour, which has sharpened its focus by moving from straightforward digital delivery to fully integrated customer experiences. To that end, the sportswear giant recently named former CDO Paul Fipps as its chief experience officer. Fipps now oversees Under Armour’s entire consumer experience and digital strategy.

For her part, Sheth sees other digitally mature organizations following suit, with many hiring digital leaders to fill traditional boardroom positions. “Across industries, titles like CIO, CMO, and even CEO are being taken up by digital experts,” she says. “Meanwhile, CDOs tend to be found in less mature businesses—those that are still playing catch-up with their digital strategies.”

From Digital Patch To Digital Evolution

The truth is, many companies have yet to make headway in their digital transformations, even with a CDO on board. These organizations fall into what the study calls the “Digital Patch” level of maturity. Their main focus is on updating their technology systems and keeping up with their competitors, rather than driving change themselves.

On the other end of the spectrum are leading brands that have reached the “Digital Evolution,” which is the highest level of maturity. These companies understand that digital business models are critical to revenue generation and that no single team can deliver the integrated digital experiences their customers expect.

The starkest difference between the Digital Patch and Digital Evolution approaches has to do with the composition of their digital teams and their place within the organization. Companies in the Digital Patch stage tend to rely on a CDO and a small number of analysts to oversee their digital strategies, providing them with minimal resources and budgetary support. Meanwhile, mature organizations build fully integrated digital teams, complete with CX and marketing specialists, data scientists, and external consultants.

Industries that depend on digital for revenue like retail, technology, and travel and hospitality tend to be the most digitally mature, while highly regulated industries, like healthcare and government, as well as manufacturing, are furthest behind, according to the study. Meanwhile, the financial services industry falls between the two, in what Adobe calls the “Digital Jump” level of digital maturity. Organizations that fall into this category tend to have their digital responsibilities more distributed across teams. As a result, decisions often must be approved by many stakeholders, which leads to slower overall speed in acquisition and innovation.

Fighting For Skills And Budget

The study also examined major barriers for companies on the path to transformation. The No. 1 issue: a lack of digital expertise in today’s job market. Sixty-four percent of respondents said that talent shortages slow down their organizations’ digital transformations more than any other factor.

In addition, business leaders still hesitate to allocate budget to digital initiatives, particularly in less mature organizations. As such, 62% of respondents cited inadequate budget as the primary barrier to their success.

Yet nearly 60% of digital teams said they haven’t been given clear direction, and 55% said they need more strategic leadership.

“You can’t succeed without a clear vision,” Sheth said. “Once leadership and strategy fall into place, it becomes much easier for digital teams to get the people, resources, and support they need to help their businesses evolve. That’s why it’s so important for companies to take an integrated approach to digital, so that everyone has a stake.”

Driving Digital Forward

The fight for digital supremacy is far from over: Expect the playing field of mature organizations to expand as more companies make the jump from digital patch-jobs to true digital evolution. Encouragingly, 81% of digital teams said they think their organizations prioritize their goals, and 82% think they have their boardroom’s respect, according to the report.

“The next step is for business leaders to back this confidence up with investment, both in the right resources for their teams and in the right people to drive change,” Sheth said. “There is no single path to transformation, but by prioritizing digital leadership as a companywide imperative, any brand can put itself in a position to make the leap.”

Download the free report, “ The Evolution Of Modern Digital Teams .”