The CDO plays a central role in the digital enterprise and therefore in the future success of the business - any business.
He, or she, must have the abilities of a Renaissance Man (or Woman), possessing many talents or areas of knowledge. The CDO needs to take a multifaceted approach to business, with one eye on the many new IT technologies that are constantly emerging and one eye on how the almost-infinite combination of these technologies can digitally transform a business.
Why? Because digital companies, digital disrupters, base their new digital business models on IT, on software connecting 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. They are now two sides of the same coin.
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 that are typically free of any physical assets such as fleets of vehicles, factories, machineries or goods. It is - through this software platform-only based business model - why they can move so fast, often resulting in exponential growth since the winner takes it all in the digital world.
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 does it with accommodation rentals. Alibaba does it 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 digital disruption is the number one paranoia haunting today’s management teams worldwide.
But digital disruption is just digital innovation in action. It makes the inefficient efficient. It reallocates 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 weapons, a digitalized weapon powered by their own digital software platforms. 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 outsourced 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 in the digital age if you rely on the pre-packaged business logic and models provided by ERP and other relatively static applications. We see that every business is becoming a software business and it is imperative that every enterprise utilizes software to sharpen its own competitive edge.
Developing today’s business strategies therefore requires an in-depth knowledge of the threats, challenges and possibilities presented by digitalization and the IT technologies and software tools available to deal with them. It requires both technology and business acumen to be able to identify which of the many coming and available technologies will have a lasting impact. .
And this is where our Renaissance person, the Chief Digital Officer steps in. Digital strategy has to become corporate strategy.