The Role & Value Of An Interim Chief Digital Officer (CDO) In PE / VC-Backed Businesses – Interview

This interview was conducted in late 2015 by James Wheeler of EIM, and is reproduced with his kind permission. Digital transformation is the most critical issue facing business today. We are all using clever IT and smartphones and most of us use social media. We all consume data and our actions generate further data. But few of us understand the significant opportunities digital offers on tap for developing our top line performance and conversely protecting what we have already got. Enter the Chief Digital Officer…

Gartner recently surveyed 2,339 CIOs across 77 countries and found that 51%  are concerned that emergence of digital is coming faster than they can cope with and 42 % don’t feel that they have the talent needed to face this challenge.

MIT Sloan Management Review and Capgemini Consulting took a different approach and surveyed a broader selection of executives. Of the 1,559 surveyed, 78% believe that successful digital transformation is critical to their business over the next two years but only 20% felt their business is doing enough to drive it.

James Leighton Davis is an Interim and Consulting Digital Transformation Specialist with over 20 years’ experience in B2C, B2B and D2C businesses. He has particular expertise in leading digital transformation projects in Private Equity-held investments, and has worked across many sectors including retail, financial services, higher education, resources and property. James Wheeler of EIM sat him down to explain the contribution of the Chief Digital Officer (‘CDO’) in today’s alert businesses.

Q. Can we start by asking you to explain the scope of your most recent interim projects and in particular how private equity investors have successfully utilised your experience to improve portfolio businesses’ performance?

Most recently I’ve led digital transformation projects – in both marketing and product development – for businesses owned by a number of top tier PE and VC firms. Over the last 12 months I’ve been fortunate enough to work across a range of sectors – financial services, education, retail – and have generally been brought in with a mandate to develop target operating models, drive change and transform bottom line performance – fast!

Q. Can you summarise the role and influence of the CDO in digital transformation projects?

Yes, quite often the CDO is described as some sort of chief marketing technologist, but I don’t think that’s quite right. It’s a role that’s emerged mostly because of the part digital now plays in our lives. But it’s also an effective solution to the turf war (at worst) and the confusion (at best) we often see between the CMO and CIO over ownership of digital.

I believe an effective CDO is above all an innovator and instigator. He adds value by considering digital assets – both inside and outside the firm – through the lens of commercial objectives, and uses this raw material to invent solutions to business problems. At this stage of its evolution it’s not necessarily a BAU role – once a product or service has been innovated it can be handed over to Marketing, or IT, or whatever. But it’s a vital role if a company really wishes to compete effectively in today’s market.

One good example of the value this can add is from when I was working in the mining sector. The assets were a number of standalone Big Data products – geological, land tenure, company and financial market information – available internally or from a number of different suppliers. The commercial objective was to add value to our customers and strengthen retention. We combined these data sets within a single online interface and created what is now one of the world’s largest competitive intelligence tools for the resources sector. Simple, effective, innovative, transformational. These are the elements that mean you’re successful as a CDO.

Q. You talk about optimising ‘Big Data’. How do you grasp it, reconfigure it and realise its power?

It’s always fascinating listening to people speaking about Big Data. They get so excited about it. But they always remind me of a child at Christmas. They’re excited about the prospect of presents, but actually have no idea what they’re going to get. It’s the promise of what might be that’s so exciting. Big Data is a bit like that.

In and of itself Big Data offers no value at all – the value lies in what you can do with parts of it. Or by combining a few different parts of it. Or by combining a few parts of it, and then flipping it on its head. And that’s the most important thing to note. Tell me your problem or goal, and I guarantee there is data available to you that will help us innovate a solution. The data might be inside or outside your company. It might be free or exorbitantly expensive. It will almost certainly only be available in a form that is incompatible for use without significant massaging to get it to talk to your own systems, but it’ll be there. 

One of the simplest ways of illustrating this – to those either old enough or young enough to know what I’m going on about – is by mentioning the 80s TV shows MacGyver and the A-Team. I’m sure you remember how they would innovate a solution to whatever problem they faced using whatever was available to them? That’s how a good CDO harnesses the power of digital. First you need to understand your problem. Then you need to see what’s available to you. And then you need to innovate. And the fact that the solution might be held together with chewing gum and duct tape doesn’t really matter. Yes, you may need to expend a lot of resource just holding the thing together, but if it’s solving your problem cost-effectively, that’s probably OK. 

This, of course, is not entirely popular with IT – who are generally the ones who have to hold the thing together. But a good relationship between the CDO and CIO can solve a lot of these problems.

Q. Gartner has found that internal owners of IT cannot cope. Is this simply a communications issue or is it something more complex?

I don’t necessarily believe that IT owners can’t cope – I think it’s more to do with the fact that, generally, what success looks like to the CDO is very different to the CIO.

To be successful digitally you need to keep up with the pace of evolution in the digital world, and this is very hard to do unless you have a really flexible IT infrastructure and one that can plug and play multiple products and services from many different sources. This is quite different from what would traditionally be considered a robust approach to IT. IT departments often expend great effort buying into a product suite supplied by a single vendor, for example, or a particular technology for very sensible cost-and-resourcing reasons. But this does create a constraint to flexibility. Flexible doesn’t always sit well with your average IT department with its profound resource constraints and need to tightly control and prioritise its workload. 

Innovation and invention often loses out to the day-to-day business of keeping the lights on. A good CDO helps bridge this gap. Our job is to lead the charge of innovation and invention, and develop the business cases that drive product development and change. But we can’t do this without the support of IT – it’s very important to develop a great working relationship with IT and foster mutual recognition and respect for what each other brings to the party. It really is a symbiotic relationship.

Q. We see from the MIT research mentioned above that senior management doesn’t understand the scale of the value of digital and its benefits. How do you confront this and persuade them to engage?

This isn’t really reflective of my own experience. I find that senior management DO understand that digital offers significant value, and at scale, and they DO appreciate that it’s something they need to get a grasp on – to either gain competitive advantage, or to make sure they don’t lose ground against their competitors. The question in their mind is more about the how than the why. HOW do we do this? And HOW much benefit will it give us?

Generally I find senior management extremely receptive to the prospect of someone coming in who can answer these questions for them. The appetite is normally there, so it really is a case of developing a sound strategy, working out how it can be done, and building the effective business case.

Of course my particular experience of corporate leaders and their private equity backers generally leans towards those who are already ‘believers’. But I’d find it hard to believe that someone who has achieved a position in the C-suite, or beyond, is blind to the potential of digital. They’re just not clear, yet, on what to do about it. And of course that’s where I come in.

Q. How do you handle historic under investment in digital with the costs of new investment and the compulsion for quick wins when you start a new project?

The real beauty in leading digital transformation initiatives is that you can ALWAYS build credibility fast. There’s always low-hanging fruit, and this early credibility is extremely useful when laying the groundwork for additional investment. In part this stems from historical under investment, but I’d argue more from general complacency, or a lack of understanding within the business, or sheer inability to keep up with the pace of change.

In fact, I have yet to undertake a project where I was not able to drive real value within the first few weeks – even if it’s as simple as optimising return on media investment or adjusting a process to realise greater efficiency. And it’s a lot easier to say to a client that if they invest x you can deliver y when you have already driven a 40% improvement in performance!

Typically I find that while PE owners are very focused on cutting waste across the board, they are equally focused on where they can invest to add value. They have a natural hunger to invest effectively. And the thing with digital is, they already know that this will be one area in which to invest – so the battle’s half won. All you need to do now is work out the specifics and scope out a robust plan – the easy stuff, right?

Equally, in a purely cost-focused environment, you’re able to identify areas where digital investment can drive efficiency savings really quickly. Digital innovation is often the catalyst for business process re-engineering and transformation, and all the cost efficiencies that drives.

Overall though, I think that if a company has had the foresight to bring in someone like me into an interim CDO position, they have already committed the seed investment, and they’re now looking to me to bring them options for further investment. Under this scenario, securing the investment itself is not the biggest hurdle. With one recent PE client, for example, the success we achieved in the first three months of an assignment resulted in a redeployment of ~80% of the marketing budget behind digital initiatives (from around 20%) AND an overall increase of over 50% in budget – a resounding testimonial to the power of digital and the impact of the CDO.

Q. Having won the battle on cost how do you ensure the future value add?

A company that’s dipping its toe into the waters of digital transformation for the first time has made a fundamental leap in terms of where it’s seeking to invest. And once they’ve experienced the value – at scale and at pace – offered by digital, you can guarantee they’ll be back for more!

This, to me, is the real value-add. It’s the mental and cultural step-change towards strategic and tactical digital investment. Once this type of investment becomes embedded in the company, it’s safe to say that they will increasingly look to digital to solve all of their woes – from growing market share to entering new markets. Combine this appetite and investment with the innovation and invention I mentioned earlier, and you have a powerful tool at your disposal.

Q. Is it fair to say that a successful CDO should probably not be a permanent executive role?

At the present time I don’t think it’s necessary for firms to commit to the addition of another member of the C-suite. As I mentioned earlier, we’re still at the frontier of digital, and a good CDO is someone who can break down a problem and use available assets to innovate a digital solution. This can then be handed over to BAU teams for ongoing ownership. As time moves on I suspect we’ll see the CMO role adopting a more digital-first focus – particularly if product and proposition development is part of their mandate – but currently there are not that many candidates at the right stage of their careers with sufficient expertise in digital. 20 years ago I was lucky enough to be working in a sector at the forefront of digital adoption, and where I was the obvious person to take responsibility for ‘doing something’ with the internet. Let’s not forget that nowadays about 40% of the world’s population has an internet connection. Back in 1995 it was less than 1%. So I count myself very lucky to have been innovating, adapting and learning in this space for 20 years now. But the real value I think I add for my clients is the experience and lessons learned over a wide range of varied projects.
Things change so much and so fast in the digital space that if you stay with one firm or addressing one problem too long – for example as in a permanent role – you’ll miss the broad experience that is the value you offer in the CDO role.

 

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