The Illusion of the Chief Digital Officer

In a previous post, we discussed the role of Chief Digital Officers at industrial companies. These brave leaders are often tasked with digitizing their supply chains and driving connected product strategies. Those two initiatives alone are massive undertakings, but large industrials are increasingly appointing Chief Digital Officers to digitize every function in the business. This is a bad approach – the Grand Unified Corporate Digital Strategy is doomed to fail.

This notion is similar to IT trying to push technology to the business that the business doesn’t want (or necessarily need). It’s the classic “technology looking for a problem”. Not surprisingly, many Chief Digital Officers at industrials have IT or innovation backgrounds, and know very little about the specific environments they are trying to digitize.

IT as a corporate function makes sense when it’s for the sake of shared services, consolidating common infrastructure, architecture, and applications across the business. IT is an annoyance when it starts trying to push lines of business to deploy technologies that don’t make sense for them. In some cases, visionary IT leaders can help drive revenue increases and cost savings directly into the business unit P&Ls – but these examples are the exception and not the rule.

Officers appointed to drive “digital transformation” across the entire business can be even more grandiose than their IT counterparts. I had a conversation last week with a Chief Digital Officer at a pharma manufacturer – he is tasked with driving digital strategy across every function in the business including IT, marketing, sales, finance, manufacturing, procurement, logistics, HR, product strategy, etc. This guy has a pure IT background, and he has been at this company for less than a year…

This is a bad idea! The Grand Unified Corporate Digital Strategy is doomed to fail. The omnipotent Chief Digital Officer doesn’t make sense.

Instead, individual functions and lines of business should appoint their own digital leaders who are grounded with an understanding of the environments they aim to digitize. And they should not be reporting to corporate Chief Digital Officers – they should instead be reporting to functional leaders or line of business leaders. They should be reporting to people who understand the business objectives for those groups.

Someone with a manufacturing background should be charged with leading the digital manufacturing strategy, not someone who spent 20 years in IT and has never been on the shop floor.

I have a friend at GE whose title is “CIO, Manufacturing”. He has a genuine cross-functional background with deep expertise in both IT and manufacturing. Shell has CIOs responsible for specific segments of their industrial operations – again, people with cross-functional backgrounds who report into business unit leadership, and not to corporate tech leaders. Appointing digital leaders should be analogous.

There is about to be a massive wave of digital hires/appointments across the world’s industrial enterprises – and the vast majority of those people will lack the subject matter expertise and operational experience to drive revenue increases and cost reductions. Companies will waste an incredible amount of money doing this. Digital is the most important thing to get right over the next 10 years, so it needs to be rooted intrinsically across the org chart, not just shouted from an ivory tower. A decentralized digital transformation strategy is best. As Bruce Lee once said, “the best Chief Digital Officer is no Chief Digital Officer”.