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A chief digital officer (CDO) is charged with helping an enterprise use digital information and advanced technologies, such as the cloud, artificial intelligence (AI), machine learning, automation, IoT, mobile and social media, to create business value.

For traditional businesses, thriving in the digital arena often requires converting from an analog to a data-centric business model. This shift, widely referred to as digital transformation, can entail major changes to an enterprise's technology architecture, business processes, products, roles, job descriptions and corporate culture that can span several years. Strategic leadership and change management capabilities are, therefore, important elements of the CDO role.

The chief digital officer is a relatively new leadership role. The title first appeared on corporate organizational charts around 2010. By then, smartphones and tablets were enabling anytime, anywhere computing. E-commerce giant Amazon and other digitally native retailers were setting new customer expectations for online shopping and creating a market for digital goods, such as video on demand. Companies recognized they needed digital strategies to connect to tech-savvy consumers, enable employees and defend against digital disruption.

In 2012, consultancy Gartner proclaimed the chief digital officer position would "prove to be the most exciting strategic role in the decade ahead." Their prediction  has become reality.

digital transformation, everything you need to know

Digital transformation is the incorporation of computer-based technologies into an organization's products, processes and strategies. Organizations undertake digital transformation to better engage and serve their workforce and customers, and thus, improve their ability to compete. In challenging economic times, operational efficiency and cost optimization can also become important transformation objectives.

Often large in scope, a digital transformation initiative can require an examination and reinvention of all facets of an organization, starting with strategy, subsequently from supply chains and workflows, to employee skill sets and org charts, to customer interactions and value proposition to stakeholders.

Successful digital transformations asks for a holistic approach

Digital technologies and processes enable organizations to adeptly respond to customer demands in the present and as demands evolve. Digital transformation also builds the infrastructure and skills required for taking advantage of fast-evolving technologies that could confer a competitive advantage.

A digital transformation strategy positions organizations to survive and thrive in a future where technology is the critical economic driver.

But transformation requires cultural adjustment as well as technology adoption. Business leaders must build agile organizations able to deal with change and uncertainty as permanent fixtures of corporate life. In doing so, they'll be better equipped to navigate rapidly emerging developments such as the latest generation of artificial intelligence (AI). AI is poised to have an enormous influence on the methods and goals of digital transformation.

Importance of digital transformation

The digitization of society started in the late 20th century and underwent rapid acceleration in the first two decades of the 21st century, spurring a growing need for digital transformation across industries.

Indeed, many organizations believe they must either adapt to the changing market forces driven by digitalization or face extinction. According to an IDC report, 82% of organizations believe they "must invest in digital transformation or be left behind." The 2023 Insight Intelligent Technology Report, commissioned by integrator Insight Enterprises, polled 1,000 senior business executives. Nearly half of those respondents cited the ability to keep pace with technological innovation as one of the greatest threats they face over the next 12 months.

The urgency of innovation is exemplified in the oft-cited case of Blockbuster LLC, which, in the early 2000s, was a global entity with video rental stores throughout the United States and around the world. But its presence and relevance precipitously declined from about 2005 onward, as Netflix and others harnessed emerging technologies and capitalized on the consumer appetite for on-demand entertainment delivered via highly profitable streaming video services. The power of digital technologies to disrupt is also evident in the rise of Amazon from online bookseller to an electronic commerce (e-commerce) juggernaut that redefined the retail industry.

More recent examples of digital disruptions include the emergence of fintech companies challenging traditional financial institutions and fast fashion retailers using AI to overtake long-established apparel providers.

The danger of market leaders being displaced and disrupted is expected to continue, as emerging technologies enable new business models, more engaging customer experiences, novel products and services, and other innovations.

As a result, enterprises are boosting their spending on digital transformation. Grand View Research forecastedthe worldwide market to reach $4.6 trillion by 2030, expanding at a 26.7% compound annual growth rate.

digital transformation drivers

Digital transformation emerged more than a decade ago as an antidote to digital disrupters. The threat of disruption continues to drive today's initiatives. But several other factors can also inspire organizations to roll out digital technology to change important processes or revamp entire business models.

Those include the traditional business virtues of reducing waste and eliminating redundant processes. Enterprise Strategy Group's "2023 Technology Spending Intentions Survey" identified operational efficiency as the top driver for digital transformation initiatives. More than half of the 700-plus IT professionals that TechTarget's Enterprise Strategy Group surveyed cited that factor.

Customer-facing initiatives are also ripe for digital innovation. Organizations are motivated to transform customer experience (CX), through modernizing contact centers and launching new digital offerings for buyers. The ability to create data-driven products and services ranked second on the list of digital transformation drivers, according to the Enterprise Strategy Group survey. Providing a better and more differentiated CX placed third.

digital transformation goals

The drivers behind digital transformation point an organization toward a key goal or goals. The actual objectives, however, will depend on what business leaders consider the proper scope of an initiative and the resources at their disposal.

For example, an organization could focus strictly on the goal of transforming a business process, eliminating redundant activities or automating manual hand-offs to prevent data-entry errors. A revamped business process, enabled by digital technologies, increases productivity and business velocity. This type of transformation harkens back to the business process reengineering projects of the 1990s.

A step up from business process transformation, business model transformation seeks to reinvent a segment of a business or, potentially, the entire operation. The transition from a brick-and-mortar company to a digital business provides one example of wide-ranging transformation. Initiatives at this scale will require more funding and a wider range of skill sets.

An enterprise may also seek a middle path, selecting and transforming related processes within a particular business concern such as CX. Other types of transformation include domain transformation and cultural transformation, with the latter goal featuring in nearly all initiatives.

benefits of digital transformation

Digital leaders that reach their transformation goals stand to gain several advantages. The core digital transformation benefits -- all interrelated and interdependent -- include:

  • Increased efficiency and productivity.
  • Better resource management.
  • More resiliency.
  • Greater agility.
  • Improved customer engagement and personalization.
  • Increased responsiveness to market demands.
  • IT modernization.
  • Greater innovation.
  • Faster time to market with new products and services.
  • Increased revenue.
  • Continued relevancy.

Overall, digital transformation enables organizations to succeed in this digital age: For businesses, that success means higher revenue and bigger profits. Other types of organizations, such as nonprofit institutions and government agencies, can better meet the needs of stakeholders or improve citizen services.

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chief digital officer, cdo