As digital technologies evolve and change the business landscape, the chief digital officer (CDO) is playing a central role in the future success of many enterprises.
A CDO must have a multifaceted approach to business, keeping one eye on emerging technologies and the other on how these innovations can help them create a digital business as quickly as possible.
Organisations across the finance, education and government sectors – the likes of ANZ, Macquarie Bank, the University of Newcastle, Auckland University and City of Brisbane – have been quick to hire CDOs to support their transformation projects.
Why? Because truly digital companies base their new business models on IT – and specifically on software – to connect the digital and physical worlds. Therefore, if software is the pivot between the digital and the physical, the CDO is the pivot between IT and business.
Based on software, digital companies can create enhanced or totally new business models which offer completely new digital customer experiences. We have seen this with the new born digital enterprises; digital natives that are typically free of any physical assets such as fleets of vehicles, factories, machinery or goods.
It is because of this software-based business model, they can move so fast, often resulting in exponential growth.
When digital challengers attack a market segment, they drive a wedge between the existing companies and their customers and provide a completely new way of customer interaction based on digital technology. Uber does it with taxi services, Airbnb with accommodation rentals, and Alibaba with millions of manufacturing and retail businesses.
The threat of being reduced to a device or physical asset provider for the pure digital players is there for every traditional company in any industry and is why technology-led market disruption is the number one paranoia haunting today’s management teams worldwide.
Put simply, what successful companies are doing here is making the inefficient efficient. These companies are reallocating resources, at a macro and enterprise level, to where they can make the biggest bang. And innovation is open to everyone.
It is not a natural law that the new ‘digital-only’ challengers can hijack the customer relationships of traditional companies. The asset-rich can also fight back with the same technology weapons. Suitably armed, they can fearlessly face today’s challenges.
To survive, traditional businesses need to develop their in-house IT infrastructure and software development capabilities. They have to turn the clock back to before they outsource their competitive advantages and take a new path.
It starts at the top – innovation through software is the only game in town at the moment – and the CDO has to focus on bolstering enterprise innovation capabilities through agile in-house data analysis, software development and software architecture ‘know-how’ in his enterprise.
It is just not possible to survive if your organisation relies on pre-packaged business logic and models provided by ERP and other relatively static applications. Every business is becoming a software business and it is imperative that software is used to sharpen a competitive edge.
Developing business strategies therefore requires an in-depth knowledge of the threats, challenges and possibilities presented by the tools available to deal with them.
To identify which of the many coming and available technologies will have a lasting impact requires both technology and business acumen. This is where the CDO steps in. Every executive board needs this expertise because digital strategy has to become corporate strategy.
Mike Saxton is senior vice president, Asia Pacific & Japan at Software AG.