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What It Takes to Become CDO

October 13, 2014 by Andreas Schmitz

The Chief Digital Officer (CDO) will play an important role in the digital transformation of companies. An Information Officer would not do this role justice, predicts Sebastian Saxe, manager and new CDO of the Hamburg Port Authority (HPA).

Having already booked the trip to San Francisco and Silicon Valley, Sebastian Saxe will be jetting off to the U.S. in October to catch up on the newest developments. For the very first time, he will be embarking on this journey in the role of both Chief Information Officer (CIO) and Chief Digital Officer (CDO). During his stay in the country that gave rise to this new position, he will have ample opportunity to rub shoulders with fellow digital strategists from Google, Apple, and Facebook.

But Saxe and his travelling companion, Hamburg’s Senator for Economic Affairs Frank Horch, are on a mission of their own: They want to learn more about intelligent traffic management systems. Will it ultimately be intelligent traffic light circuitry or smart cars that shape the cityscapes of the future?

“It’s a CDO’s responsibility to question how technology can benefit the business” – Saxe

Saxe already dealt with similar questions a few years ago when he was involved in a project aimed at utilizing the spatially limited Port of Hamburg more effectively. The goal of the smartPORT logistics project was and still is to optimize the flow of traffic in and around the port, and to increase the port’s overall efficiency.

“We neither can, nor want, to expand the port indefinitely. Its area is limited, so we have to find ways of using this space more efficiently,” says Saxe: “Information technology is an invaluable tool here – it makes perfect optimization possible.”

Saxe has already received inquiries about the project from cities including Dubai, Rotterdam, and the South Korean port city Busan. This project, more than anything else, marked Saxe’s transformation from CIO to CDO: “The conventional role of a CIO involves managing IT strategy, architectures, network topologies, and IT budget,” explains Saxe,” whereas a CDO asks the deeper question of how this technology can benefit the business.”

It’s great to have various transmitters collect data in the port area, he says, but it’s even better to bring together all this information through a portal and make it available to any who may be interested.

"A CDO will evaluate trends in innovation and apply them in ways that benefit the entire company," says Sebastian Saxe, CIO, CDO, and Services Manager of the Hamburg Port Authority (HPA).

“A CDO will evaluate trends in innovation and apply them in ways that benefit the entire company,” says Sebastian Saxe, CIO, CDO, and Services Manager of the Hamburg Port Authority (HPA).

A recent study by consulting firm Accenture describes the responsibilities of a CDO: A CDO should be able to (1) develop a digital vision, (2) place customer experience at the center of this vision, (3) kick off customer-oriented projects, and (4) apply appropriate marketing models.

According to global recruiting agency Russel Reynolds, a CDO’s affinity for digital developments and, ideally, their solid experience in management, may in the future even qualify him or her as a potential candidate for the office of CEO.

According to the white paper: “CDOs are in a position to use their operational experience, managerial skills, strategic focus, and vision to take on leadership tasks in an increasingly technical society.”

Next wave of transformation is imminent

Saxe doesn’t let the hype surrounding his new job title get to him. To him, it’s an imminent transformation of culture that unfolds in stages. “CDOs have to act as cultural evangelists, recognize trends, and be able to both understand and convey their impact.”

Saxe sees deficits in CIOs where the last requirement is concerned: “CIOs are frequently too entrenched in their own lingo.” He believes a CIO will take an important, but ultimately subordinate role in the process of digitalization.

“We are on the cusp of the next transformational wave. The digital world is already exerting a huge influence on our communication behavior, but Industry 4.0, the exploitation of Big Data, and e-learning are still in the early stages,” he predicts. “An ‘information’ officer will not be able to address this challenge adequately: Entire business areas need to be transformed,” he continues.

Those aspiring to make the move from general management to a CDO position also tend to be inadequately prepared to deal with the challenges it presents, he says, because they often lack the affinity for digital business this new role requires.

Four core tasks of the Chief Digital Officer

Saxe currently identifies four tasks that CDOs should fulfill within their company:

  1. Have an understanding of IT systems and processes.
  2. Be able to recognize transfer potentials for the digital opportunities presented by business and production processes.
  3. Be capable of initiating and evaluating business cases.
  4. Be able to speak the lingo of CIOs.

In 2013 – nine years after Jason Hirschhorn became probably the world’s first CDO – the American CDO Club predicted that companies around the globe would have more than 1,000 CDOs working for them by the end of that year, more than twice as many as the year before. And a recent report by Gartner states that in 2014, 68% of all active CDOs are employed by U.S. companies, where they are well-compensated with an annual salary of between €185,000 and €375,000. Gartner estimates that in 2015, one in four globally active companies will have a CDO in their ranks.

Which managerial level will ultimately have the best shot at filling this coveted post? Roles in general will change and come to be redefined.

“If, in the future, IT is primarily sourced from the cloud, it will no longer be the CIO’s task to support IT and ensure that it’s fully functional. If IT innovation is to be driven forward, it will no longer be enough to just monitor IT innovation. “A CDO will evaluate trends in innovation and apply them in ways that benefit the entire company,” says Saxe.

Which managers have what it takes to become Chief Digital Officer?

According to Accenture, in some instances Chief Marketing Officers (CMO) already command more company budget allocated to information management projects than CIOs. It is still uncertain, however, whether a CMO can leverage his specialist niche sufficiently to do his new role as CDO justice.

“A company thrives when the CEO recognizes the range of dimensions the business spans, understands both the market and processes, and last but not least, brings intrinsic commitment to the company,” says Saxe. He sees marketing managers in today’s companies as too entrenched in their métiers to take on the function of CDO, calls them “too one-dimensional.”

A CEO is also unlikely to possess the strength of vision required for digital projects from the get-go. Therefore, we will likely see a division of role responsibilities between the CIO and the new CDO first.

All affinity considerations aside, however, it’s important to remember that the human “component” remains as the quintessential aspect in making a digital transformation possible. Toward the end of the ‘90s, when Saxe was still working for Dataport, the data centers of Germany’s individual federal states were merged. And despite the mere 120 kilometers separating Hamburg and Kiel across neighboring states, the differences in organizational culture turned out to be far greater than any differences in technical approach. “You have to understand the people, as well as the processes.”

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