September 2014
This article originally appeared in HR Tech Outlook.
Large corporate enterprises are under enormous pressure from customers and investors to transform themselves into something more interesting and valuable than they are today.
Every industry vertical – from retail and telecom to energy and media – is being disintermediated by nimble up-and-comers through the application of new business models and technology. And there’s been a lot of talk in the press and the board room about large companies driving dramatic “transformations” in order to stay relevant and compete in the global markets. Many in the media have referred to this as “going digital,” but what does that really mean? Going digital can mean many things to many people. To me, it can mean two very distinct things, which in and of itself creates confusion. I define it as either creating a new digital channel, or, evolving a company’s business model through the implementation of technology and or process change.
Some companies see going digital as adding a new channel to an existing business model. The retail channel is the most obvious case study here, given that we are all consumers. In order to compete in the world of Amazon.com, incumbent retailers have gone external for talent to help them bring e-commerce channels to market. Companies like Walmart.com, for example, have created entirely new companies with the goal of making sure the mothership does not impede innovation.
“Going Digital” as a Transformational Tool
The more revolutionary definition of “going digital” is what I affectionately refer to as “doing digital for the brave.” It’s when an organization embarks on a company-wide initiative that leverages technology to drive cross-channel transformational change. Typically led by a Chief Digital or Chief Transformation Officer, companies will pursue a digital transformation path in an effort to:
1) Increase revenue
2) Decrease cost
3) Remove friction from internal systems, and/or
4) Enable a new or enhance an existing end user consumption model.
This last point is the big payoff for companies. It is the one that really allows a company to “break the chains” of an existing business model that is dragging its products or services into commoditization and obscurity. But it also comes with the biggest risk.
If you are a company that has decided to take the plunge and go the digital transformation route, good for you. You are now on your way to the land of milk and honey. But beware of the landmines that lie ahead. One of the most fatal mistakes occurs the minute you hire an executive search firm to find your Chief Digital Officer.
Executive Search’s Dirty Little Secret
Many firms specialize in recruiting Chief Digital Officers – my firm included. Those in our industry fight hand over fist to win these opportunities, especially if it’s for a major public company. And because the incentive to win the search supersedes all else, most executive search firms take the project without determining if a Chief Digital Officer hire even makes sense for the company.
In the interest of hitting a revenue target, executive search firms will sidestep the true diligence stage and avoid asking the really hard questions that will determine the type of Chief Digital Officer that will take a company where it needs to go. Or worse yet, they fill the request for a Chief Digital Officer without qualifying whether the hiring company truly needs one at all.
When I am asked to do a Chief Digital Officer search, I will not take the project on until I have spent a significant amount of time with the company trying to figure out what problem they are trying to solve. By doing so, I am able to uncover the following:
→ You don’t need a Chief Digital Officer.
The main role of a CIO – yes, Chief Information Officer – is to create a frictionless consumption model for products and services, both internally and externally. If you have achieved this outcome, pat yourself on the back and skip hiring a Chief Digital Officer. You are already a digitally inclined organization (whether or not you can spell digital.) But if you have a CIO that is only about keeping the lights on, then you really don’t even have a CIO – you have a VP of IT. And if that’s the case, then you are really in trouble. So hiring a Chief Digital Officer in this case is probably a good option for you.
→ You have a Chief Digital Officer, but don’t know it.
So often, I find that a company already has someone to lead a digital transformation, but this individual is buried within marketing or strategy. 30 minutes in front of a white board, and I am generally able to find this person and save a company from paying me a hefty search fee.
→ You’re hiring a Chief Digital Officer because it’s trendy.
You have not fully hashed out the problem you are trying to solve. Many CEOs look at industry leaders and when they see that a perceived “hot” company has a Chief Digital Officer, they say “I want one of those.” This could be perhaps the worst reason to start a search for a Chief Digital Officer. Unfortunately, I see this all the time.
A Client Case Study
Like many incumbents, one of our Fortune 10 clients is facing pressure from companies like Netflix and Apple. Eighteen months ago, this client approached SPMB to help them find an executive to evolve their consumption model to better compete with pure play digital media players. Upon fully dissecting the underlying problem, my team along with the client’s management team, concluded that a Chief Digital Officer would not be an appropriate way to solve this meaty problem. In fact, in the end, it would take two executives with dramatically different core competencies to solve this problem – one a product executive, and another an IT executive to build out an infrastructure to allow for the consumption of the products developed by the CPO.
Had we put a Chief Digital Officer on top of the existing organization, this person would be destined to fail. So when this happens in other companies, is it the candidate’s fault that was hired to be the Chief Digital Officer? No. Is it the company’s fault that wants to digitally transform itself? Not really. They are just trying to do the right thing to move the business forward. Instead, I blame the executive search firm on the front end, who prioritizes winning the business over asking the tough questions which may result in a company solving its own problem. When that happens, the candidate and the company lose, while the executive search firm collects its healthy retainer fee and moves on to its next victim. And at a macro level, the Chief Digital Officer function gets a bad name, and the baby is thrown out with the bathwater.
The End of the Chief Digital Officer?
If the current hiring trend by executive search firms continues, Chief Digital Officers will become the scapegoats for failed digital transformation initiatives and could very well be removed from the IT staffing structure altogether.
If I could offer up one take away to companies pursuing digital transformation, it would be this – slow down and take stock of what you really need. Just because company A has a Chief Digital Officer doesn’t mean you need one too. And if you find an executive search firm that says “yes” to filling your Chief Digital Officer request before pausing to ask you the tough questions, you should run in the opposite direction. It may be the most cost-saving sprint you’ll ever do.
