Why Chief Digital Officers fail so often - and how you can do better
Introduction: Digitization - a necessity rather than an option
The role of the Chief Digital Officer (CDO) is complex and can vary depending on the industry, company size and the specific goals of the digital transformation. There are a variety of definitions, but they all have a common core. Often, the CDO is described as an executive who oversees the digital transformation of an organization to drive growth. They act as "change agents" or "digital evangelists" whose job it is to create new value through the strategic use of digital technologies and platforms.
However, despite their critical role, many CDOs fail in their first year of operation. What is striking is that it is hardly technological problems, but mainly organizational, cultural and strategic barriers that prevent them from succeeding. Why do CDOs fail so often and what can you do about it?
Structural challenges
Unclear definition of roles and lack of mandate
Many companies appoint a Chief Digital Officer without defining clear objectives and responsibilities. A major factor that can contribute to the failure of CDOs is an unclear role definition and lack of sufficient authority. If the CDO's responsibilities and sphere of influence are not clearly defined, this leads to confusion within the organization. This makes it difficult for the CDO to set priorities and measure the success of their initiatives. There is also the potential for conflict and inefficiencies due to overlap with other leadership positions. This quickly leads to confusion and frustration.
Lack of authority and low hierarchical position
A CDO's position in the company hierarchy is crucial to their ability to assert themselves. A Chief Digital Officer can only act effectively as part of the management team with real decision-making powers. Despite this, many CDOs are only given limited authority - talented candidates therefore often aspire to classic C-level positions.
Lack of resources and insufficient support
Finally, the support of top management is crucial to the success of a CDO. The active engagement and support of the CEO and other executives is essential. It is important that executives share and actively promote the CDO's digital vision. Without the full support of top management, the CDO lacks the necessary legitimacy and backing to overcome resistance within the company and successfully drive the digital transformation forward.
Without sufficient financial and human resources, the role of the CDO becomes a waste of time. A lack of support from the very top prevents successful digital transformations.
Cultural resistance
Resistance to change
Change often triggers considerable resistance in companies. Established departments in particular see their position threatened and react passively or actively against change. Effective change management and transparent communication of change processes are essential here.
A common form of resistance is the rejection of new technologies and processes by employees who may be tied to their usual processes or feel threatened by the new technologies. Clinging to established ways of working and the pronounced silo mentality in many organizations can also hinder the acceptance of digital initiatives. In addition, the fear of job loss or changes in responsibilities can lead to a negative attitude towards digital transformation among some employees.
Exaggerated expectations
Expectations of Chief Digital Officers are often unrealistically high. They are sometimes seen as "digital magicians" who are supposed to transform the company in record time. This pressure of expectation encourages short-term, unsustainable initiatives and leads to frustration and disappointment in the long term.
Overconfidence and the Dunning-Kruger effect
The Dunning-Kruger effect describes the tendency to misjudge one's own abilities. Particularly in the complex digital field, overestimating oneself can lead to serious misjudgements and costly mistakes.
Strategic mistakes
Outsourcing instead of integrating digital expertise
Digitalization must not be viewed in isolation or completely outsourced, but must be a core component of the corporate strategy. By establishing a CDO position, there is a risk that responsibility will be delegated without the necessary integration into all business areas taking place. Digitalization should not be treated as an isolated project, but as a comprehensive transformation that affects all aspects of the company.
Uncoordinated approach and too many pilot projects
Many companies get lost in numerous, uncoordinated pilot projects that usually fail. This leads to a waste of resources and a lack of strategic orientation. The CDO is faced with the difficult task of coordinating and prioritizing these initiatives in a meaningful way. This lack of focus leads to a waste of resources and prevents the digital transformation from being approached systematically and strategically.
Too great a burden for individuals
The role of the CDO is often burdened with too much responsibility. No single person can manage all aspects of digitalization alone. Instead, a successful CDO must take on a coordinating and strategically steering role. The digital strategy must be closely integrated into the overarching business strategy. The CDO should be involved in the development of the business strategy at an early stage and there should be regular communication and collaboration with other managers.
Successful failure: How to learn from mistakes
Successful failure is an important part of the learning process and makes all the difference. Learning from mistakes allows you to gain new experiences and improve your skills. It is important not to shy away from mistakes, but to see them as an opportunity to learn.
A key aspect of overcoming mistakes is self-reflection. You should ask yourself what you did wrong and how you can do it better. This reflection helps you to learn from mistakes and continuously improve your own skills. Companies that encourage their employees to engage in self-reflection and continuous learning create a culture of continuous improvement and innovation.
Solution approaches and success factors
Precise role definition before casting
Companies must formulate clear expectations of the CDO role and ensure that the scope of duties and responsibilities are clearly defined. This also includes assigning the necessary authority to make decisions and drive change.
Selecting the right candidates
In addition to technical expertise, a CDO should have excellent communication, persuasion and leadership skills. Personality and cultural competence are just as important as technical know-how.
Alternative structures such as digital boards
Instead of isolated CDO roles, a digital board that promotes cross-departmental collaboration and integrates digital skills more broadly could be useful. Alternatively, the following is suggested: "A successful CDO is also a CEO." This emphasizes that digitalization must be a matter for the boss.
Conclusion: Digital success requires clear leadership
The challenges of digital transformation are manifold, but rarely lie in the technical area. The success of a CDO depends largely on a clear role description, sufficient authority, adequate resources and cultural acceptance.
Companies should see the digital transformation as a joint task. Only through the integration of digital skills at all levels and a clear strategic focus can digitalization succeed in the long term.
Background: The failure of the Chief Digital Officer - examined from a scientific perspective
According to the study by Professor Michael Wade of IMD, 21% of large companies have a CDO, whose average tenure of 31 months is shorter than other C-suite positions
The most important facts from the paper:
21% of large public companies have a Chief Digital Officer (CDO).
The average tenure of a CDO is only 31 months - shorter than other C-suite positions.
Many CDOs fail, not because of incompetence, but because they act in a misguided role.
The five phases of the CDO
Phase 1: The Chief Digital Officer
The CDO is hired with great enthusiasm, usually from outside the company (over 70%), and is given extensive responsibilities for the digital transformation. Expectations are high as the position is created to coordinate digital activities and develop a strategy.
Phase 2: The Chief Dazzling Officer
In this phase, the CDO becomes a "dazzler" who gives impressive presentations on digital disruption at company events. He becomes the face of digital transformation, speaking at industry conferences and in the media. The business units and other C-level executives show public support.
Phase 3: The Chief Disconnected Officer
The initial euphoria fades and the CDO becomes increasingly isolated. The complexity of the transformation becomes clearer and attempts to consolidate digital projects are interpreted as interference. Business units withdraw their support, meetings are postponed or canceled.
Phase 4: The Chief Depressed Officer
The CDO becomes increasingly frustrated because, despite some successes, nobody listens anymore. The transformation does not deliver the expected results, the team is downsized or integrated into other functions such as IT. Key executives distance themselves and parallel digital projects emerge outside the CDO's sphere of influence.
Phase 5: The Chief Departed Officer
Finally, the CDO leaves the company1. The team is disbanded, some employees are transferred, many leave the company. The organization carries on as if nothing had happened.
According to the study, CDOs fail not because they are unqualified or unmotivated, but because they are doomed to fail from the start. PwC found that a third of CDOs left their positions in 2018.