Part of the “Digital Finance Transformation” series that provide a framework for CFOs to move forward confidently on the journey toward digital transformation.
Once you have recognized the importance of digital transformation for your company to stay competitive, your job as the CFO is to take the lead, pushing the initiative forward. And implementing a chief digital officer (CDO) is a very useful option.
Taking an advisory role, the CDO enables the CFO to lead the financial department on the journey of digitalization, with the aim of improving the cost structure and the quality of service. At the same time, the CDO is the key person supporting the CFO in the dialogue with the IT department. The CDO works comprehensively in the areas of finance and IT, responsible for the cultural change on the one hand and the connection between these two areas on the other.
What is a chief digital officer?
The CDO is a member of a company’s senior management, responsible for the company’s digital strategy and development, building new digital services and business models that likely did not previously exist. This role is distinct from that of the CIO, who leads the strategic and operational direction of IT with a primary focus on the stable and efficient execution of the current business model.
In today’s environment of major changes in the corporate world, the role of a CDO is more important than ever, and its significance will certainly increase. The CDO needs to build and position a digital team, which helps communicate the new digital strategy to employees.
The CDO’s responsibilities
To begin with, the CDO oversees the development of the digital strategy, which is derived from the corporate strategy, and then ensures that it is implemented and anchored in the corporate culture. That entails monitoring and reviewing the changes occurring during the implementation. In developing new business models, the CDO is responsible for the digitalization and simplification of business processes to improve their efficiency and agility. It is the CDO’s priority to connect the digital and the analog world to achieve a seamless multichannel customer experience.
In large part, the CDO’s approach resembles that of a more business-focused CIO or CTO. The efficient use of the latest digital technologies is the main requirement for development and successful implementation of effective digital business models. In this position, the CDO contributes to the company’s competitiveness and future viability.
How to define and shape the CDO’s role
The CDO can be defined implicitly or explicitly. For smaller enterprises, the implicit definition is mostly the way to go. There, the CDO carries neither the “chief” nor “officer” title as a part of the role. Typically, the CFO also covers another position, commonly that of CIO. In this case, bear in mind that someone taking on this dual role might have challenges in balancing budget and culture and deciding on priorities.
Large companies are more likely to define the role explicitly. There, the CDO often has a team that’s in charge of developing new ideas in the context of the digital strategy and realizing them as prototypes. Another aspect of the CDO’s job is to work with the management team with a view to steering the company toward digitalization. Both of these mandates are important to accelerate the company’s pace in technology adoption.
For very large, complex enterprises, an extension of this explicit definition is a functional CDO for each functional area. In this case, all of the functional CDOs should be aligned on corporate culture and values and agree on the core principles of the consulting, advice, and governance they provide.
The prerequisite for successful CDO
A CDO is relevant for all types of companies, regardless of size or industry. For the successful implementation of a CDO, leadership needs to recognize the importance of digital transformation for the company in general and its financial area in particular. The CDO’s scope will involve fundamentally changing the corporate culture and identity and is crucial to both the finance and IT departments. While the CDO has an essential role, that role still tends to be underrated. But there is no question that its importance will grow in the coming years.