[Author’s note: this article was originally published in Chief Executive magazine in October, 2011.]

With spending on digital-related initiatives and activities accounting for 10% or more of all expenses at many companies — and forecast to increase at double-digit rates for the foreseeable future across most industry segments — it’s time for CEOs and boards to give serious consideration to establishing a “Chief Digital Officer” (“CDO”) office or equivalent. The stakes are too high, and the issues too complicated to leave this domain left managed by an informal, undefined, and mostly powerless assemblage of mid-level managers across an enterprise.

The reasons for the current lack of a C-level digital office are many, and it’s worth taking a moment to look in the rearview mirror and understand how we arrived at the current situation:

  • Over the past decade, digital/internet/web – as a category – has undergone massive fluctuations in its perceived and real impact on business. Indeed, there was a time not long ago when digital was considered a fad that would eventually fade to the background.
  • When it comes to talking digital strategy, the elephant in the room that planning teams are loathe to address is how age usually has a big impact on how one thinks about the internet; the simple reality is that most corporate leaders are Baby Boomers who do not incorporate interactive tools into their lives to the same extent as Gen X, Y or Z’ers, so it’s impossible for them to fully appreciate all of the implications that result from digital trends.
  • Digital is pervasive in every nook and cranny of the enterprise and successful digital initiatives – especially at established companies that have been around awhile – require messy, cross-functional collaboration that expose sacred cows and inevitably spark conflict; so, even the seemingly straightforward act of defining a job description for a Chief Digital Officer is problematic in and of itself.

With this cursory background and assumption set established, let’s consider the case for a C-level digital strategy office:

‘Digital’ as a Strategic Imperative
While the internet topics du jour are many — ‘social media’, ‘cloud computing’, ‘big data’, etc. — and capture most of the headlines, the steady drumbeat of digital strategy fundamentals continues to thump, thump, thump in the background, and someone needs to be proactive, accountable, and empowered to make things happen. This is not a quick-hit undertaking: digital strategies take time to establish, refine and make work. When not given the proper attention, implications can be dire and high-profile (see: Borders, Blockbuster, etc.).

The Numbers Make It Mandatory
In every other part of the organization where big dollars are being spent and strategic importance is assigned, a senior person is tasked with oversight. Spend 15 minutes calculating a ballpark estimate for what you’re spending on digital initiatives (marketing, product development, technology), and what areas of the organization are impacted. If spending exceeds 5% of all expenses, and more than three functional areas of significance are involved, then the need for a CDO becomes rather obvious.

No Clear Path To The Inner Circle, But Empowerment Necessary
Most corporate leadership teams are comprised of talented professionals with varied backgrounds that include deep domain experience, management training at top MBA programs, advanced degrees in finance or law, and outstanding business development track records. Credibility has been earned in recognized areas of corporate proficiency. With digital, that’s difficult to demonstrate because of its newness and amorphous or non-existent definition, but somone needs to be given the proverbial ‘seat-at-the-table’ in order to make things happen. Otherwise, it’s unrealistic to have lofty expectations.

Digital May Fit Best in the CMO Office – Or Not
The good news is that digital strategy responsibility is rarely found in the IT function anymore; as shocking as it seems in retrospect, that’s where it resided for many years because IT owned the corporate website server. (Consider this: asking your network administrator to develop a 4-page marketing brochure for a new product launch.) The bad news is that responsibility has been either unceremoniously or informally transitioned over to the marketing group in recent years, which isn’t exactly a bastion of power in many industries. So unless the company in discussion is Coca-Cola or Microsoft – where marketing is a powerful domain – digital won’t get priority treatment.

It Passes The Smell Test
Is ‘digital’ strategically important to the short-, mid-, and long-term success of your business? Yes, unequivocally. Are you spending a lot of money on digital-related activities? Probably. (If not, you should be.) Have you established a formal digital strategy to guide investments and behavior for the next 12/24/36 months? Unlikely. An empowered point person will help on each front.

This Train Has (Quite Possibly, Maybe) Left The Station
Most every major advertising agency has a Chief Digital Officer or equivalent – which means they are selling digital-related services. Ditto for the blue-chip strategy consulting firms, which might call it “digital marketing”, but activity is there and it’s being promoted as a growth area. The City of New York hired a Chief Digital Officer early this year – a 27 year old journalist – to spearhead its interactive efforts. These examples don’t provide irrefutable evidence of the movement, to be sure, but a top executive won’t get much credible pushback to suggesting the creation of a new “VP-Digital Strategy” position, either.

Ten years into the so-called “internet revolution”, the digital marketplace is as vibrant as ever, impacting businesses of all sizes, in every sector and geography. And that’s exciting, interesting, opportunistic – and daunting as all hell.
Even after a decade or more, the marketplace is still struggling to address this powerful and ubiquitous phenomenon in a structured manner. Seizing the moment and sensing opportunity, vendors have scrambled to capitalize, and defined the sector according to terms that suit their strengths – as advertisers, technologists, service companies, and the like.

The harsh reality, however, is that digital doesn’t fit neatly in any existing functional area, and – from an organizational management perspective – requires its own unique category. Because most successful digital programs impact multiple functional areas, and broader digital strategies – without question – cut a swatch across the enterprise. And if only for this reason alone, it’s time to make the move and create a new senior office of responsibility to set strategy and oversee successful digital operations, before it’s too late.

Tim Bourgeois is a digital strategist and partner at East Coast Catalyst, a Boston-based consulting firm that help companies employ digital strategies for growth and competitive advantage. He is also the founder and editor of ChiefDigitalOfficer.net, a global community of senior digital professionals whose responsibilities intersect marketing, technology and innovation. Contact him at tbourgeois (at)eastcoastcatalyst.com or 617-314-6400.