Organizations are increasingly adopting digital transformation strategies, as it’s becoming urgent for many industries to deploy digital technologies and competencies outside the IT department. CIOs need to keep cost down and maintain a reliable infrastructure, all while facing pressure from business leaders who increasingly believe they have the authority to acquire digital services through third parties without CIO intervention. The shift from business continuity to business agility and speed has caught many CIOs offguard, and now they are playing catch-up to integrate new business solutions instead of driving them.
The chief digital officer (CDO) role is being introduced by many leading organizations across industries to facilitate the strategic business model implications of digital transformation. CDOs address a variety of responsibilities, resources, and expectations that have traditionally been the remit of the CIO – from the promotion of the use of digital media to the creation of new digital products, services, and customer engagement models. Some mature CDOs even run entire digital business units with significant revenue targets. We also are seeing other new and existing C-suite roles infringing on the CIO’s traditional remit: the chief data officer (CDA), chief marketing officer (CMO), and chief technology officer (CTO) are beginning to step forward on the innovation side, positioning various digital functions more closely to the business and outside the realm of IT.
According to a recent quote in the Financial Times from a CDO working for a large U.K.-based enterprise, “the IT guys are the people who get the blame for everything.” This puts the finger on where it hurts most: CIOs who are late in anticipating change are losing control over the IT environment but are still the first to blame when things go wrong.
However, for most CIOs the challenge is not necessarily a battle for relevance, but one of understanding the convergence and maturation of existing roles in the enterprise. Some CIOs will choose to either manage this change by coordinating these types of roles into existence (to act), or to adapt to them as the business moves first (to react). For instance, in IDC’s Worldwide IT Industry 2016 Predictions presentation, we recommend that CIOs establish a CDO (or CDA) whose “role will involve overseeing data pipelines in, data pipelines out (identification, syndication, and monetization of internal data), and, importantly, corporate governance of both.” However, when the CIO is faced with another C-suite counterpart who claims this responsibility, such as a CMO, it will be necessary to coordinate efforts and work as a partner to guide the technology choices.
IDC believes that the CIO’s responsibility in digital transformation is twofold: working with internal stakeholders to manage business-internal changes (e.g., creating digital products) and anticipating how external changes will drive business innovation. To do this, CIOs should shift their focus from operations and service brokering to a focus on partnership, innovation, and new, digitally enabled products and services. At IDC we call this “Leadership in 3 Dimensions” (L3D), which is a framework that enables CIOs to be directly involved in every phase of the digital transformation of an organization, from innovation to service delivery, with a special focus on IT’s ability to manage the transition from one to the other. To do this, CIOs should focus on the following:
- Innovate within a cross-functional partnership to create digital innovations. Deutsche Bahn is a great example of a traditional enterprise that has established an innovation lab (known as the “d.lab”) by partnering with creative partners, business functions, and IT.
- Integrate new technology platforms into stable business services. Volkswagen, for instance, is moving to OpenStack Private Cloud as its global standard to drive agile software innovation for business and consumer application across the entire organization.
- Incorporate new skills, techniques, and culture into the fabric of the IT organization. As an example of this, a leading European airline recently decided to move its CTO back from a market and external function to managing the infrastructure team, which allows the IT department to source new talent who will help drive digital transformation of the broader organization.
We believe that CIOs who remain operational will find themselves further marginalized over the next three years. To remain relevant, they must shift their focus to transformation and innovation, incorporating those innovations into their infrastructures. We recommend that CIOs start by working with business partners to identify where innovations are likely to emerge, what form they’ll take, and what kind of IT team will be needed to support them. From there CIOs can start defining a digital vision for the company and raise awareness among the senior leadership team. During this phase it will be important to have assessed the cost of creating islands of innovation. Using IDC’s L3D framework, CIOs can establish operational excellence and standardization in digital transformation.
To understand the maturity of the organization as it relates to digital transformation, we recommend that CIOs leverage IDC’s MaturityScape Snapshot to help identify the key areas to focus on.