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chief digital officer

New C-Suite Member: Chief Digital Officer

More than a quarter of the world’s population owns a smartphone. In 2014, global mobile data traffic reached 2.5 billion gigabytes per month, a figure that is 30 times as large as all the traffic on the Internet for the full year 2000. No wonder global companies are moving rapidly to reshape their businesses to meet this new level of connectivity. One way they are doing so is by appointing a new kind of executive, the chief digital officer (CDO). The CDO’s mandate: to equip companies for the digital future. This executive has the dual task of developing an all-inclusive digital experience for customers and the internal capabilities needed to support that experience — while simultaneously managing the considerable investment required. The emergence of the new role to lead the organization’s digital efforts may in part be a reaction to the chronically weak relationships between CIOs and CMOs, which we’ve observed over the last few years.

The number of companies that have hired CDOs remains small — just 6% globally, according to the results of the inaugural Strategy& study of digital leadership at 1,500 of the world’s largest companies. But the number is growing rapidly. Of the 86 CDOs we found, 31 were appointed in 2015. The sectors where the highest proportion of companies have CDOs are travel and tourism, with 31%; entertainment, media, and communications companies, with 13%; and food and beverage companies, with 11%. At the other end of the spectrum, only 1% of mining and metals companies had a CDO; just 2% of those in the automotive, machinery and engineering sectors did; and only 3% in technology and electronics did. One is also more likely to see CDOs in European companies than in their U.S. or Asian counterparts, and CDOs are more likely to appear in large companies than small ones. We suspect that in many cases where a CDO has not been appointed, it is because the related responsibilities are already distributed among other top management roles and are entrenched in all aspects of the company’s culture.

In the past, traditional CIOs and CTOs were focused primarily on their companies’ IT, managing employee desktops and enterprise-wide ERP and CRM systems. The CDO role, although it varies from one company to another, is far more comprehensive. Besides customer experience, the development of digital features in new products and services and the relevant operational changes, the CDO may oversee changes in technical infrastructure and innovations in data collection and analysis. The CDO must also be an agent of cultural change, championing the digital transformation throughout the company and linking it to the development of the distinctive capabilities that form the basis of a company’s strategy.

Here are glimpses of chief digital officers (or people in similar roles) at four major companies, and the ways in which they meet the challenge of digital transformation:

–Jessica Federer is head of digital development at Bayer. “The data piece is actually the easiest,” she says. “Data is data. It’s the people piece that’s the challenge. So we focus first on the people in the organization, and how we connect across synergies, across silos, over platforms and data.”

Soon after she was appointed, Federer created a digital council consisting of the CIOs and CMOs of the relevant divisions at Bayer. Their task was to look at potential synergies. She also fostered a huge network of people involved in some aspect of digital transformation, to which she gave the acronym NERD (Network for Enterprise Readiness and Digital). “They bring together digital marketing with digital product supply with digital R&D,” Federer says. “We used to do this in silos, but now we do it by sharing information.”

–At Renault, CDO Patrick Hoffstetter is creating a centralized digital transformation organization, which he calls the Digital Factory. This is not a literal factory, but a metaphorical center for people throughout the company who already work on digital projects and another group working at about 65 outside suppliers. The factory is the nexus of communications about the digital strategy, and the place where resources and experts come to design the transition to what Hoffstetter calls “the connected employee.” The changes put into place at the Digital Factory will affect how people work, what they expect from the company and what tools they are given.

Balancing the timetable for this complex shift is a key part of the CDO’s role. “One reason most operations in digital strategy and transformation are focused on sales and marketing is that these functions have a direct, quite short-term impact on the business,” Hoffstetter says. “Whereas when it comes to the evolution of internal processes, internal social networks, acceleration of collaborative tools and internal training, it’s much harder to show any payback, and it takes a lot longer.”

–Corinne Avelines, CDO of the decorative paints division of the Dutch chemical company AkzoNobel, says broad support is critical: “Commitment at the top management level to innovation and digitization has made my job considerably easier,” she says. “Senior support is key to ensuring commitment to digital at the company, especially one of this size.”

At the same time, she says, overall strategy must always drive decisions about how and what to digitize. “Gaining a competitive advantage in a fast-digitizing age is a challenge, so CDOs must understand their company’s current position and future strategy — what will make an impact on providing value to the customer — and focus on that. Worry about the other things later.”

–Visa CDO Chris Curtin says that he has learned to participate actively in the creation of the overall business strategy — and lead the process when necessary. “I not only think that the best CDOs are reflective of the business,” he says, “I think that in many respects they are the business.” To that end, he believes that CDOs should “forget about digital. Forget about new media. The business objective has to permeate the thinking and the strategies and the go-to-market approach of the CDO and his and her team. Never make the means the end. A million followers on Twitter is just a means. The end is the business goal.”

The CDOs interviewed for this study all emphasized the importance of working closely with every function of the business. Being part of top management gives them a critical strategic perspective, but they must also be given the power and support they need from functional groups. Otherwise, they may find themselves with a seat at the table but without the strategic and operational input that the digital transformation needs.

Ultimately, the goal of every CDO is to ingrain the digital agenda so deeply and efficiently that it will become a way of life for everyone and every function in the organization, and a priority for every member of its C-suite. Sooner or later, companies may get to a point where a transformation isn’t necessary, because it has already happened. Digital technology will be so well-integrated that it won’t be a separate issue anymore. It will simply be part of the way people work, and the CDO will move to some new type of challenge.

This article was written by:

  • Roman Friedrich, a leading practitioner with Strategy&, PwC’s strategy consulting business, and a partner with PwC Germany. He is based in Düsseldorf and Stockholm.
  • Pierre Péladeau, a thought leader on digital strategy with Strategy& and a  partner with PwC France, based in Paris.
  • Kai Mueller, a specialist with Strategy& and a senior research and knowledge manager with PwC Germany, based in Berlin.

How to Captivate Customers (Part 3)

ITL Editor-in-Chief Paul Carroll recently hosted a webinar on “Captivating Customers With All-Channel Experiences,” featuring experts from Capgemini and Salesforce.com and the former chief customer experience officer at AIG. To view or listen to the webinar, click here. For the slides, click here

In almost all cases, to provide experiences that captivate customers, insurers must modify their legacy technology infrastructure.

Some insurers are building an overlay, taking an innovative approach to the technology that customers touch, but that isn’t enough. Insurers need to take a broader look and make sure that new customer technology integrates effectively with back-end systems such as claims, policy administration, billing and enterprise resources planning (ERP). That way, all parts of the enterprise are driving toward providing the desired customer experience.

These changes will make agents more satisfied and efficient. The changes will also help captivate customers, who want to deal with all parts of the insurance process as one seamless operation. That means both upgrading the technology for agents and incorporating them tightly into the insurer’s systems.

Cloud solutions have proven to deliver capabilities insurers need faster and with less business disruption than traditional, on-premises alternatives. The result is lower total cost of ownership and significantly reduced project risk. Such an approach lets insurers remain firmly focused on the customer. Insurers can focus on designing the customer journey and experience rather than be burdened by the design, build, test and deployment of the technology.

To get there from here, insurers need to integrate the interactions among employees, customers and agents and among social networks, internal systems and business processes. The result needs to support any device, use unified business logic and provide access to data. There needs to be a consistent customer experience across all channels (self-service, agents and call centers).

Exhibit 3 provides a sample of the necessary components (in this case, on a Salesforce platform):

  • Customer Interaction Hub, which provides ease of use and information accessibility
  • Platform, which provides multi-device capabilities
  • Service Cloud, which helps agents track the history of customers and policies and engage regularly with customers
  • A cloud-based contact center telephony system. The system (in this case, Odigo) must provide services such as intelligent call routing, natural language recognition, mobile channel integration, biometrics or voice-based authentication, multi-site routing and management dashboards. The platform must allow customers to originate a transaction in one channel and take it forward in another, such as self-service.
  • Document signature software, to allow customers to sign quotes and policies online
  • Integration with popular insurance software packages for policy quotes, binding, claims


When developing for a multi-channel experience, it’s crucial to do lots of A/B testing – changing one variable at a time for a sample of customers, seeing how they react and incorporating those changes that produce better results. It’s also important to actually watch customers to see how they navigate a process – where they stop, where they start up again, where they get sidetracked, where they get confused. We’ve watched customers many times, and the results can be surprising enough to at least require considerable tinkering.

For example, with three releases each year, Salesforce has delivered 47 major releases since its inception. Each release is informed by learning from how users behave, adopt and use Salesforce’s features. As a result, more than 1,700 features have been sourced directly from Salesforce’s customer community. In insurance, Salesforce learns from more than 2,500 insurance customers. These continuing improvements happen in an agile fashion, and follow an iterative cycle of release, learn and improve.

The race to become a leading insurer that is able to attract, satisfy and retain customers is in full motion. Those insurers that can blend traditional channels and digital channels in a seamless way will lead the race, creating clear competitive advantage with the capabilities in place to capitalize on market disruption over the coming years.

The first two articles in this series are here and here. For the white paper from which these articles are adapted, click here.

The New Year Calls for a New CIO

As we get rolling in 2015, enterprises continue to approach a technology tipping point. According to our Digital IQ survey, 35% to 50% of technology spending is outside of the CIO’s budget. This data raises the question: Is it possible for CIOs to continue to influence how the enterprise is leveraging technology?

The short answer is yes, but CIOs need to transform their approach to leadership. The New Year calls for a new CIO.

The top-down days of technology leadership are over. Budgets, standards, procurement and governance…these concepts of control have been central to the CIO’s playbook, but they are increasingly ineffective as CIOs lose the ability to dictate how technology dollars are spent. Rather than instituting rules, CIOs must inspire executives across the enterprise to follow their lead. The measure of a successful CIO is shifting from how well the IT department functions to whether the entire enterprise has the ability to both drive and deflect digital disruption.

If CIOs are the Pied Piper, the music is the “art of the possible.” Through a bold vision combined with deep listening, CIOs must guide the organization in maximizing technology’s full potential. The old C-I-O stood for Control, Infrastructure and Organization. The new C-I-O stands for Catalyst, Integration and Outside-in. Let me explain.

From Control to Catalyst or Consultant or Communicator

The CIO has no choice but to shift from one who controls technology spending to a catalyst who sparks action. The best way to persuade the enterprise to push the boundaries of technology is to build relationships and introduce big ideas through demos, prototypes and market intelligence. CIOs need to use demos to show the enterprise how business goals can be accomplished through the hands-on exploration of emerging technology.

From Infrastructure to Integration

Shadow IT has led to siloed systems such as SaaS and cloud applications that have to be integrated so businesses can get the most value out of them. Gluing together best-of-breed solutions isn’t new for CIOs. Integration was a critical skill set as we used middleware to stitch together customer relationship management (CRM) and enterprise resource planning (ERP) systems with legacy platforms. But integrating legacy systems with digital is different, given new vendors, technologies and sourcing models. CIOs need to take a hard look at their team’s integration skills and partnerships to make sure they are up to speed.

From Organization to Outside-in

In the past, we haven’t looked very far for inspiration to innovate. Most corporations have a history of learning about new technologies by tapping a few trusted vendors, attending a conference or two and reading a handful of trade publications. For the most part, organizations have turned their gazes inward toward their own organizations for innovation ideas. In the age of digital, where new technologies are plentiful, CIOs need to lead the charge of outside-in innovation, looking outside to communities such as makers, universities, open source, contests, crowd funding sites and global innovation hubs for inspiration.

The role of the CIO is undergoing a seismic shift, and it’s creating a great deal of uncertainty and angst. Change is difficult, but it’s also exciting as it leads us to discover strengths and interests that we didn’t even know we had. It’s incredible what we can achieve when the future is on the line, as it is now. For CIOs to come out on the other side of this haze, they need to make themselves “tomorrow ready” by reshaping their roles today.

How to Innovate Under Obamacare

Now that the implementation of the Affordable Care Act (ACA) is well underway, opportunities for insurance product innovations are emerging.

The ACA, or Obamacare, has been accelerating the changes that have been occurring in the last decade in how healthcare is delivered. A large portion of this change has manifested itself in the consolidation of healthcare institutions, physician medical practices and the employment of physicians by hospitals. As a result, the ACA is contributing to blurring lines that have separated those providing, managing and coordinating care. All those changes create opportunities for innovative carriers to thrive over the next decade.

As an example, look at the trend of hospitals and hospital systems directly employing physicians, which Obamacare is encouraging, to seek greater efficiency and lower costs. Healthcare organizations are adding physicians, either by hiring them or by purchasing practices that employ them, and this shift has substantially increased demand for a seldom-used feature of a product known as the extended reporting period (ERP).

An ERP endorsement, as part of what is known as a claims made product, addresses medical incidents that have occurred during the period of a policy that is about to expire but that are not yet known or made as a claim. Using ERP coverage can help insulate a new employer from any lingering medical incidents that occurred before it employed the physician but that become claims during his time with the new employer. Claims of malpractice can take months or even years to surface and then resolve, and a facility employing a new physician wants to be sure it isn’t inheriting a host of problems. The ERP carries an additional premium that is sometimes 250% of the expiring annual premium.

Historically, ERP was largely purchased by physicians as a last resort – if they were leaving a claims made carrier, and the new carrier wouldn’t honor the prior carrier’s retroactive date (the date after which any medical incident must take place to potentially be covered under a policy). This situation requiring the purchase of ERP was relatively infrequent, and pricing the risk was a challenge, because exposure can be carried for an unlimited time under an ERP. Typically, the physician’s only option was to buy it from her incumbent carrier, which is generally required to offer an ERP endorsement. Few carriers developed a separate ERP product to compete with the incumbent carrier’s endorsement approach, so there was little competition.

In 2012, though, there was an opportunity to provide a competitive stand-alone ERP policy. The ACA was accelerating consolidation in the industry and boosting interest in purchasing ERP. At the same time, ERP pricing was still based on the hard market that began in the late 1990s even though claims frequency was showing an unprecedented decline in more recent years. In other words, premiums were substantially more than adequate for the risk. For quick-acting carriers, there was a chance to offer a stand-alone policy at generally a better price, but one that was still adequate in a small but rapidly expanding market.

This also opened up the opportunity to innovate on product features, including providing options of different limits, various levels of risk-sharing and a variety of durations for the ERP.

The market welcomed these pricing and innovations.

Here is an example of how the ERP issues play out:

A physician enters into an employment contract with a hospital, coming out of private practice. She may have done most or all of her work at that very same hospital, and, as part of standard guidelines for credentials in most states, she needed to provide proof of insurance of at least $1 million/$3 million to maintain privileges there while working as an independent contractor.

Options for the prospective hospital employer are:

  1. Ask the physician to obtain a quote from her existing insurance carrier for an ERP. That amount could become part of negotiations about her compensation.
  2. Assume the exposure for the physician’s prior acts as part of the hospital’s self-insured retention, its captive insurance program or its balance-sheet obligations. After all, the physician practiced at this hospital almost exclusively, and the hospital may consider that it has the exposure to the physician’s incurred but not yet reported liability obligations anyway.

Under option 1, there can only be one quote for the ERP, because there is only one existing insurance carrier. If the carrier provides ERP coverage, it is increasing the time period within which claims can be brought under its policy, which increases uncertainty and requires, in the actuarial vernacular, “risk load” or “rate load” (defined as rate needed to account for the potential adverse claims fluctuation inherent in the extended time frame for claim reporting) or, from the perspective of a cynic, increases the fat, the fudge or the cushion, which creates an opportunity in option 2. Given that ERP rates are based on historical losses and that claims frequency has declined, it’s a good bet that – with the added risk load and without the challenge of competition – the quote may be, as an actuary or a lawyer might say, “disproportionate to the risk.” Moreover, with the existing carrier, there oftentimes are no options for a deductible that has a different (lower) limit or shorter duration as a means of lowering the cost to the physician and her new employer.

Option 2 introduces a wrinkle: When a hospital grants a physician privileges as an independent contractor, the hospital potentially has a stronger defense than when it employs the physician. If the physician’s prior acts as an independent contractor are covered under the hospital’s insurance program, the lines between independent contractor and employee blur, and the hospital may become more vulnerable.

Additionally, the hospital’s coverage would not generally provide a specific individual limit for the physician, meaning the hospital exposes its entire tower of insurance to a claim against the physician. With an ERP covering the period before she became an employee, a $1 million policy might suffice, and the hospital could maintain its defense against claims for her time as an independent contractor.

There is an opportunity for stand-alone ERP policies to provide a third option – one that can carry a better price than in Option 1 and that allows for the opportunity to provide a better defense against claims than Option 2.

ERP is just one of many opportunities to innovate that ACA will provide. There could be, for example:

–A blurring of the lines between different aspects of healthcare and of health insurance products.

–An explosion in the power of telemedicine – and for new thinking about coverage.

–A need to be far more careful about data breaches and other cyber issues – perhaps even leading to a decision to confiscate physicians’ phones.

My colleagues and I will tackle these and other topics in subsequent articles.