Unveiling the Role of Chief Digital Officers in Global Firms

The Art of Digital Transformation: CDO Experiences Robert M Davison Dept of Information Systems, City University of Hong Kong 1

Definitions of Digital Transformation Vial (2019) a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies Wessel et al. (2021) activities leverage digital technology in (re)defining an organization s value proposition, involves the emergence of a new organizational identity 2

Background Digital Transformation (DT) has evolved over the last 20 years There are numerous case studies of both successes and failures There is attention to maturity models from pundits who assert that they know how DT should be conducted There is quite a lot of disagreement about what DT actually is lots of different definitions There is much less attention to the people charged with leading the DT initiative in the organisation, i.e. the Chief Digital Officer. 3

Motivation There is a wealth of research into the nature of DT Models of digital maturity and ecosystems DT impacts on various industries Companies are seeking to identify individuals best- positioned to lead the way into the digital future and engage in DT; Chief Digital Officer (CDO) (Friedrich et al., 2016) (Kane et al., 2017; Mettler & Pinto, 2018; Wilmelius et al., 2021; Kohli and Melville, 2019 ) (Vial, 2019; Volberda et al., 2021; Kraus et al., 2022) 4

Motivation Existing DT research focuses > but often ignores the effect of exogenous shocks : Covid-19 The Russia-Ukraine war Financial crises Disrupted supply chains In future we can expect more shocks like this Climate change Migration patterns Zoonotic diseases < Lesson the people who lead that change and how they do it More on models of organisational change, and the impact on competitiveness 5

Problemati Problematis sation ation Research question: How can a CDO develop the art of digital transformation & transform a global firm? Few investigations & limited understanding of what CDOs do as they navigate the DT journey? We investigate the role of the CDO in leading DT initiatives in GEM, a global events and brand management firm, and SilkyJade, a global software and systems firm. We suggest the critical role of guanxi for the CDO of SilkyJade to build personal relationships that facilitate navigation of the firm s shoals and rapids, with both internal and external transformation taking place. We apply punctuated equilibrium theory (PET) (Gersick, 1991) and suggest that GEM s previously stable, but non- digital state was punctuated by a combination of CDO s DT initiatives and Covid-19, leading to an emerging new equilibrium 6

Chief Digital Officers (CDOs) The first CDOs were hired in about 2010 Today, there are more of them but far fewer than CIOs and CTOs CDOs have a unique (and challenging) responsibility to spearhead the DT initiative in the organisation and to ensure that it is successful CDOs need to be experts with respect to technology, business processes, communication, culture, people Some CDOs do everything, others are specialists in a particular area CDOs are often appointed from a marketing function, but some may have been CTOs before. They may progress to COO or CEO. 7

CDOs Vial (2019) argues that the creation of a CDO position signals the strategic nature of DT for the entire organization Kessel & Graf-Vlachy (2021): CDOs are hired when the firm lacks an individual with digital leadership skills Wade (2020) suggests that the CDO role is doomed to fail: there are too many problems to tackle, too many people to hate the CDO! Parachuted CDOs are particularly at risk if they don t have good internal connections (guanxi) Some scholars suggest that the CDO role is temporary it will fade away when everything is digital 8

Digital Leadership Support from senior management is critical, to the CDO as well C-suite executives must not only endorse DT but also push the implementation personally But, many C-suite executives are not digitally-literate! So the CDO has to convince these senior people first, and hope that they will help him/her to convince lower level managers in their respective fields The CDO is the digital leader-in-chief, but cannot do all the work An isolated CDO will quickly exit the firm due to frustration and a failure to implement change 9

Context Current investments into DT are high USD1.8 trillion in 2022 and still growing at 16.6%. Growth in China is forecast at 18.5%. Studies of DT in China from an IT perspective, or a CDO perspective, are absent. There are CDOs in China, but not much is reported about what they do, what challenges they face and how they deal with them I present small cases of two global firms in the Greater China space SilkyJade a major software developer, HQ in Beijing (Davison et al., 2023) GEM a major brand and events manager, HQ in Hong Kong (Liu et al., 2023) 10

Methods We interviewed the CDO of SilkyJade and the CDO + 5 more senior executives in GEM The data set is very small! We are in the progress of interviewing more people. All interviews were conducted in English and took 1-2 hours We adopted a grounded theory style of analysis, following the principles of Gioia et al. (2013) 11

Case Findings I SilkyJade The CDO was the former Exec VP for Global Business Services. He was an insider who had worked for the firm in senior management roles for 20+ years since its founding His areas of responsibility covered corporate digital strategy, including cloud, data, digital currency, metaverse, and execution, with a focus on the growth strategy not the operational strategy This contrasts with the CIO who is busy with operational responsibilities that involve maintaining networks and processes Our strategic design strategy is to help clients understand DT and how they should perform their transformation 12

Case Findings II: SilkyJade All firms have an established way of doing things. This is interrupted by DT, so there is a need for the CDO to sell the DT concept carefully He has to lead and support the internal DT initiatives, data initiatives and innovation projects, as well as act as the key voice to our clients and the marketplace regarding digital development We want people to understand that we are at the forefront of digital transformation, we are a leading player and we understand the business Clients are interested to know how they can leverage digital. They are already convinced that it is a good idea! 13

Case Findings III: Silky Jade The CDO s responsibilities cover: Develop and evolve corporate digital strategy Guide clients on how to execute Lead the internal innovation with new concepts, best practices, technologies Enhance corporate branding as the voice of the firm for DS, DT and Innovation This is a wide portfolio in essence, he does everything. He also has to look after: Corporate business strategy development Cyber security Corporate social responsibility, digital governance, ethics, etc. 14

Case Findings IV: SilkyJade A key role for the CDO is to drive change internally and externally Internally transform operational efficiency to respond to market needs Externally sell our internal practices as a solution for our clients The CDO must also be sensitive to the competition and the changing legal environment Internal university to train, learn, explore, innovate But there are problems because people don t like change If the CEO is on board, its easier at the top, but lower level managers resist They don t want to lose their power and independence and secrets So a lot of communication, persuasion, negotiation, guanxi is needed 15

Evolutionary Journey GEM I: Punctuating the Equilibrium Before 2018: 2019-2022: 2018: GEM was not technologically advanced Hired the CDO in January A Two-Phase Approach to Digital Transformation PET: PET: Human punctuation initiated 2019: Onboarded the new CTO Implemented basic infrastructural changes to fix pressing technological problems Digital cultural environment was prepared a stable, but dysfunctional equilibrium Culture Change & Buy Culture Change & Buy- -In In 16

Evolutionary Journey GEM II: Standardizing a New Equilibrium End of 2019, COVID-19 outbreak: 2020 2022: CDO & CTO completed realignment of technologies Realizing global adoption of digital technology in GEM CDO prepared the ground for DT, persuading employees and managers to accept new cultural norms and process standards Roll Out Roll Out Employees who might have resisted changes fiercely had no choice but to accept PET: Environmental Punctuation Initiated 17

Evolutionary Journey GEM III: Populating and Extending the New Equilibrium 2023: 2022 onwards Reorganise all IS under a single technology stack and a common interface Enhancing HR processes (onboarding time reduced from 14 days to 1) Automating financial reporting more effective, efficient, accurate A new project management system A new data analytics platform Is the end of the DT journey in sight yet?! Nominated for CDO of the year award in 2023 18

Discussion The two stories are somewhat different At SilkyJade, the CDO plays a more strategic role At GEM, the CDO is more operational Yet there are similarities Both CDOs have a wide portfolio of responsibilities Both CDOs experienced resistance SilkyJade s CDO is an industry veteran, close to retirement GEM s CDO is much younger, with the energy and passion to continue the fight! With 5 years in the position, she has far exceeded Wade s (2020) prediction of short tenure. 19

Discussion The work of a CDO will be aided by cooperation from people in all positions. They can make his/her life easier or harder. CDOs and their firms are also affected by exogenous shocks Diseases, wars, economic crises, supply chain disruptions, even technology changes like generative AI CDOs must be flexible and adapt to the infinite variety of circumstances, unpredictable things that can happen 20

Theoretically, motivated by PET Two agents: The CDO (Human) Covid-19 (Environment) In recent existed research, the punctuations have human origins We identified an environmental punctuation in GEM Recognising these origins is important theoretically because it enables us to extend PET by allowing for the inclusion of punctuating events that transcend human origins 21

The longer The longer- -term (5 years) term (5 years) success of the GEM CDO is success of the GEM CDO is NOTABLE NOTABLE Ingenuity Persistence CDOs tenure rarely exceeds 2.5 years Wade (2020) Top management support Critical partnership with CTO GEM CDO s success is due to several key factors: Ability to listen to end-users 22

Longer Longer- -term (5 years) success of the CDO: term (5 years) success of the CDO: factors: factors: Deliver technology- Significant With the unflagging based outcomes to improvements were support of GEM s exec. meet staff needs and only realised early in board, the CDO enhance their work her third year, which persuaded colleagues life quality coincided with the to accept the changes outbreak of Covid-19 to the digital culture step-by-step 23

Theory - Guanxi At SilkyJade in particular, we found abundant evidence of why the CDO must cultivate guanxi with a myriad of internal and external stakeholders Almost every activity that he is involved in requires communication, negotiation, persuasion There is always the potential for resistance, from different people and for different reasons The CDO is probably no one s best friend! Without guanxi, tactful and persuasive conversation, and much patience, the CDO s task is impossible. Guanxi Components Ganqing Huibao Hexie Jiaoqing Mianzi Renqing Xinyong 24

Contributions: Contributions: 1. Academic Implications 2. Practical Implications We investigated DT through the lens of a human (the CDO) There is no One-size fits all DT Strategy: Be persistent and keep trying We discovered an environmental agent that extends PET Embrace resistance: there are many hidden insights that can explain why people resist or reject change: be open-minded and learn how to listen to their real needs Guanxi is essential because the CDO must be well-connected with many internal and external stakeholders 25

Limitations and Future Ideas Our small population size makes it unrealistic to ground a new theory We need more data from more people But seeing DT as a punctuated equilibrium phenomenon may give us clues as to how it can be theorised Meanwhile, what about guanxi is it just part of the environment or can we theorise it? A theory may describe what happens, or it may predict what can happen if some antecedents exist We can identify critical success and failure factors or drivers of DT We can predict if the CDO will win or lose 26

Conclusions DT is not going away! There is no end to the journey! Firms will keep trying to transform their internal processes and it will be painful! CDOs have a critical role to play they can make or break the DT Each CDO is different, each organisation is different, yet there are commonalities that we can identify Internal CDOs may have an easier task than externally-hired CDOs All CDOs need to be excellent communicators at all levels and disciplines. They must also be excellent listeners and have excellent guanxi inside and outside the organisation. 27

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