A Russell Reynolds Associates Series

Leadership for a Changing World. Articles in our Leadership & Talent series address key issues companies face in creating effective talent management strategies—to identify, develop and retain successful leaders and leadership teams.

The Rise of the Chief Digital Officer The challenges and opportunities for businesses in this digital age are enormous. Companies need to be fleet- footed to keep pace with changing technology and consumer behavior. Business strategies now must be seamlessly interwoven with ever-expanding digital strategies that address not only the web but also mobile, social, local and whatever innovation there may be around the corner. To help meet these challenges, companies are increasingly looking for a Chief Digital Officer (CDO) who can oversee the full range of digital strategies and drive change across the organization. In this issue, members of the Consumer and Technology teams at Russell Reynolds Associates look at the rise of Chief Digital Officers and their potential for CEO succession.

What is a CDO, and why does the role matter? Customers are demanding fresh information and the ability to buy wherever, whenever and however they want. The numbers are hard to debate. More than 200 million iPhone and Android smartphones now are in consumers’ hands, and demand shows no sign of abating. Some 41 million apps are downloaded every day, and social networking is expanding on a geometric scale. Consumers are leveraging their digital resources to download information, compare the organization’s online presence. Chief Digital Officer (or, sometimes, prices, find the best products and The last two years have seen the SVP Online) is extremely important search for deals. rise of the Chief Digital Officer, a in driving that growth. In some It’s no surprise then that the senior executive who sits at the sectors, such as traditional media, seniority and caliber of digital talent right hand of the CEO and is seen the CDO often will have been hired that companies are seeking to recruit as instrumental to the future of the to help transform the company as its are on the increase. Traditionally, organization. For many companies, products evolve digitally. digital was positioned as part of especially those in the retail and In both cases, the CDO needs the marketing function within the leisure sectors, digital is the fastest- to be someone who not only business, responsible for driving growing revenue stream, and a has digital acumen but also is a seasoned general manager who challenge in Asia is more about • In March 2011, Apple announced can operate within a large-scale attracting talented executives to it had sold its 100 millionth business and influence effectively join established companies who iPhone. As of July 2011, Google’s across the organization. This is a otherwise might set up their own Android Operating System was relatively new type of leader and digital enterprise. on 130 million devices. one who is hard to find, attract and The sharp rise in demand for • In July 2011, it was reported that retain. The increasing importance CDOs has been matched by an the Apple Retail Store is handling of the role eventually will put CDOs equally sharp rise in the level of 24 million app downloads per day, in the queue for CEO succession. compensation offered. Today’s and the Android Market is handling CDOs will be the executives with the high-quality CDOs command 17 million app downloads a day. operating experience, management double the remuneration levels of • As of September 2011, there were skills, strategic mindset and vision their predecessors, reflecting the more than 800 million users on to lead businesses in an increasingly scarcity of talent and increasing Facebook. On average, Facebook technological future. seniority of the role. Pay and users install over 20 million apps The spike in demand for Chief benefits put the Chief Digital every day. There are more than Digital Officers has been felt Officer on par or above other 350 million active users currently globally. In Europe, the number of executives at Board or sub-Board accessing Facebook through search requests for this role has levels. In Asia, this trend has been mobile devices. risen by almost a third in the last less pronounced. It will take time • In April 2011, it was announced 24 months. The United States has for companies there to escalate the that more than 200 million people seen the same growth in half that digital function to a more senior had signed up on Twitter, while, in time. The increase in Asia is less level—but the continued rise in September 2011, it was revealed consumer Internet and mobile use that there were 100 million active inevitably will drive similar demand. monthly users. We are at the • In 2010, global revenue for the beginning of a What’s driving the virtual goods industry was over new era for social evolution of the CDO? $7 billion, according to Ted Internet innovators Social media and the enabling Sorom, CEO of Risty, a virtual who are re-imagining technologies are fundamentally currency platform. and re-inventing reshaping how consumers behave. a web of people Smarter, quicker and more advanced What does it take to and places, looking mobile telephony brings with it become a CDO? beyond documents a wide range of possibilities for Given the complexities of their role, 1 and web sites. business such as media companies, successful CDOs require a broad blend  — John Doerr; Partner; retailers and information providers. of experiences and competencies. Kleiner Perkins Caufield Services that combine social and & Byers local elements are becoming Experience the norm. All of this is forcing Digital experience, of course, is pronounced, where the position organizations to rethink their market critical but different combinations remains relatively junior, though and customer strategies. Some of skills are emerging among Chief things there are evolving. The staggering statistics: Digital Officers. For example:

1 Top Mobile Internet Trends Presentation, February 2011

2 • E-commerce and transactional new channels and business models, chart the right course and make expertise. The focus here is on as well as innovative products and agile alterations when needed. driving traffic, conversion and services. The CDO also must be • Executing for results. Strategic revenue. Often referred to as SVP tech savvy; though knowing how to insight must be coupled with a Online, these CDOs are sought code may or may not be required, strong execution orientation and an after by companies involved in the ability to manage developers ability to deliver results despite the e-commerce, such as e-tailers and ask the right questions is a complex and fluid environment. and manufacturers that move to minimum requirement. • Building relationships and using direct sales. These CDOs require Importantly, the CDO is not only influence. In today’s climate, the change management capabilities a digital guru but also a seasoned culture and practices within a and the ability to manage general manager. He or she should business can change as quickly channel conflicts. as those in the external market. • Online marketing and social Chief Digital Officers, therefore, media expertise. Here the Demand for must be able to build relationships emphasis is on driving brand CDOs is far greater across all levels and functions of the awareness, brand activation than supply. organization—from the Board down and consumer engagement. This is fueling to the front line—and effectively These CDOs are sought after by an increasingly manage conflict. consumer-branded goods and competitive • Leadership . CDOs must in turn services companies and require war for talent. be able to recruit top talent and to skills relating to new personalized/ lead large and (sometimes) globally localized communications as have experience running a P&L. The distributed teams. opposed to mass communications. role frequently is transformational so • Demonstrating cultural sensitivity. • Transformative product and change management experience is This is particularly important, as technology capabilities (i.e., important, either in turnaround or fast- those skilled in new digital tools analog to digital). These CDOs are growth situations. In addition, as many may view the world differently from sought after by traditional media companies increasingly have global others in more traditional parts of companies and require change customers and employees, international the business. management capabilities that can experience is key. Therefore, CDOs impact the whole company. will need to appreciate that adoption Where can effective CDOs of technologies across a business’ be found? More generally, CDO jurisdictions will vary. In other words, There is a wide range of challenges candidates should be familiar with one size does not fit all. for those recruiting Chief Digital web, mobile and social media— Officers. One of the most significant and possibly local as well. They Competencies issues is that demand is far greater should be able to plan and execute As with any senior leadership position, than supply in all areas of the world. long-term strategy around driving a range of competencies is required: This creates retention issues among customer awareness, engagement, • Setting strategy. With the digital the best staff, fueling an increasingly experience and monetization. When landscape evolving so quickly, competitive war for talent. it comes to innovation, candidates CDOs need to have excellent After two decades of the should have experience developing strategic skills, with the ability to Internet, there is a reasonable cadre

3 of mid-level digital managers from or marketing. As a result, while who might not fit the cultural norm product, technology or marketing these executives bring tremendous of the business, companies also will backgrounds. However, there are functional expertise, they often have to move very quickly when relatively few senior general managers lack the broader leadership and they find and meet talent that has influencing skills that are needed potential. The current state of supply for these more senior general and demand almost guarantees that CDOs who management positions. other opportunities will be available demonstrate their For some companies, particularly to talented candidates. ability to manage those with more traditional structures change and and career paths, it can be a challenge What does the future transform their to integrate digital talent who will hold for the CDO? businesses almost push the boundaries but may lack the In many cases, the CDO will be certainly will maturity needed to function effectively the senior executive handling the lead the way at Board or sub-Board levels. For fastest growing revenue streams in the rise of CEOs, such appointments require within the business or will be the the Digital CEO. an element of risk taking and may executive holding the keys to the include implementing and explaining company’s future—placing him strategies that go far beyond the or her squarely in line to replace or people who have worked across traditional business model. In many the CEO. CDOs who demonstrate functions or have had extensive Board cases, CEOs will need to adapt to their ability to manage change and experience. Many candidates have having a key member of the inner transform their businesses almost acquired their skills in small, nimble circle who is far younger and has certainly will lead the way in the start-up type environments, making a significantly different business rise of the Digital CEO. them culturally unsuitable for large, background from the rest of the group. structured, matrixed corporates. On the candidate side, those Indeed, many of those who work in looking to move into Chief Digital Authors digital want to remain in pure-play Officer positions may be reluctant Rhys Grossman co-leads arenas. To attract these candidates, to join established organizations, the firm’s Internet and Media companies must rethink how they viewing them as old fashioned. Many Practice. Based in London, he structure responsibilities. candidates come from cutting-edge, advises clients on search and Perhaps not surprisingly, the entrepreneurial organizations where assessment across the digital greatest supply of candidates is executives can have a clear and media, ecommerce, broadcasting in the United States. However, immediate impact, and candidates and publishing sectors. demand in this region is equally often desire those same attributes in intense, such that finding the right their next employer. They also want Jana Rich co-leads the firm’s talent in the United States remains compensation packages (particularly Internet and Media practice. challenging. Another issue, as many equity) highly geared to success, Based in San Francisco, she European and Asian companies which may test the compensation specializes in recruiting senior note, is that technology executives bands of traditional companies. level executives for clients in from the United States often grow Not only must organizations have the internet, ecommerce, media up in a particular silo, such as sales an open mind to hiring candidates and entertainment industries.

4

Leadership for a Changing World. In today’s global business environment, success is driven by the talent, vision and leadership capabilities of senior executives. Russell Reynolds Associates is a leading global executive search and assessment firm with more than 300 consultants based in 40 offices worldwide. Our consultants work closely with public and private organizations to assess and recruit senior executives and board members to drive long-term growth and success. Our in-depth knowledge of major industries and of our clients’ specific business challenges, combined with our understanding of who and what make an effective leader, ensures that our clients secure the best leadership teams for the ongoing success of their businesses. www.russellreynolds.com

Americas Minneapolis/St. Paul Mumbai Frankfurt 225 South Sixth Street, Suite 2550 Unit 9(A), Grand Hyatt Plaza OpernTurm Minneapolis, MN 55402-3900 Santacruz (East) Bockenheimer Landstr. 2-4 Atlanta United States of America Mumbai 400 055 60306 Frankfurt 1180 Peachtree St., NE Tel: +1-612-332-6966 India Germany Suite 2250 Tel: +91-22-6733-2222 Tel: +49-69-75-60-90-0 Atlanta, GA 30309-3521 New York United States of America 200 Park Avenue New Delhi Hamburg Tel: +1-404-577-3000 Suite 2300 203, Eros Corporate Tower Stadthausbrücke New York, NY 10166-0002 Nehru Place 1-3/Fleethof Boston United States of America New Delhi 110 019 20355 Hamburg One Federal Street, 25th Floor Tel: +1-212-351-2000 India Germany Boston, MA 02110-1007 Tel: +91-11-4603-4600 Tel: +49-40-480-661-0 United States of America San Francisco Tel: +1-617-523-1111 101 California Street Shanghai London Suite 2900 Room 4504, Jin Mao Tower Almack House Buenos Aires San Francisco, CA 94111-5829 88 Century Avenue 28 King Street Buenos Aires Plaza United States of America Pudong, Shanghai 200121 London SW1Y 6QW Manuela Sáenz 323 Tel: +1-415-352-3300 China United Kingdom Seventh Floor, Suites 14 and 15 Tel: +86-21-6163-0888 Tel: +44-20-7839-7788 C1107CBP Buenos Aires São Paulo Argentina Edifício Eldorado Business Tower Singapore Madrid Tel: +54-11-4118-8900 Av. Nações Unidas, 8501 2 Shenton Way Calle Miguel Angel, 11 11º Andar #08-01 SGX Centre 1 Seventh Floor Calgary 05425-070 São Paulo - SP Singapore 068804 28010 Madrid Suncor Energy Centre, West Tower Brazil Singapore Spain #3000, 150-6th Avenue, S.W. Tel: +55-11-3566-2400 Tel: +65-6225-1811 Tel: +34-91-319-7100 Calgary, AB T2P 3Y7 Canada Stamford Sydney Milan Tel: +1-403-538-1972 301 Tresser Boulevard Level 40, Aurora Place Via Mascheroni, 5 Suite 1210 88 Phillip Street 20123 Milan Chicago Stamford, CT 06901-3250 Sydney NSW 2000 Italy 155 North Wacker Drive United States of America Australia Tel: +39-02-430-0151 Suite 4100 Tel: +1-203-905-3341 Tel: +61-2-9258-3100 Chicago, IL 60606-1732 Munich United States of America Toronto Tokyo Maximilianstraße 12-14 Tel: +1-312-993-9696 Scotia Plaza, Suite 3410 Izumi Garden Tower 14F 80539 München 40 King Street West 1-6-1 Roppongi Germany Dallas Toronto, ON Minato-ku, Tokyo 106-6014 Tel: +49-89-24-89-81-3 8401 N. Central Expressway M5H 3Y2 Japan Suite 650 Canada Tel: +81-3-5114-3700 Paris Dallas, TX 75225-4404 Tel: +1-416-364-3355 7, Place Vendôme United States of America 75001 Paris Tel: +1-214-220-2033 Washington, D.C. France 1701 Pennsylvania Avenue, NW Europe Tel: +33-1-49-26-13-00 Houston Suite 400 600 Travis Street, Suite 2200 Washington, D.C. 20006-5810 Stockholm Houston, TX 77002-2901 ­United States of America Amsterdam Hamngatan 27 United States of America Tel: +1-202-654-7800 World Trade Center SE-111 47 Stockholm Tel: +1-713-754-5995 Tower H, 18th Floor Sweden Zuidplein 148 Tel: +46-8-545-074-40 Los Angeles 1077 XV Amsterdam 11100 Santa Monica Blvd. Asia/Pacific The Netherlands Warsaw Suite 350 Tel: +31-20-305-7630 Belvedere Plaza Los Angeles, CA 90025-3384 ul. Belwederska 23 United States of America Beijing Barcelona 00-761 Warsaw Tel: +1-310-775-8940 Unit 3422 China World Tower 1 Edificio Prisma Poland No. 1 Jian Guo Men Wai Avenue Avda. Diagonal, 613, 2˚A Tel: +48-22-851-68-38 Menlo Park Beijing 100004 08028 Barcelona 2500 Sand Hill Road China Spain Zürich Suite 105 Tel: +86-10-6535-1188 Tel: +34-93-494-9400 Löwenstrasse 28 Menlo Park, CA 94025-7015 CH-8001 Zurich United States of America Hong Kong Brussels Switzerland Tel: +1-650-233-2400 Room 1801, Alexandra House Boulevard St.-Michel 27 Tel: +41-44-447-30-30 18 Chater Road Central B-1040 Brussels Mexico City Hong Kong Belgium Torre Reforma China Tel: +32-2-743-12-20 Paseo de la Reforma Tel: +852-2523-9123 115-1502 Copenhagen Lomas de Chapultepec Melbourne Kongens Nytorv 3 México 11000, D.F. Level 51, Rialto Towers DK-1050 Copenhagen K México 525 Collins Street Denmark Tel: +52-55-5249-5130 Melbourne VIC 3000 Tel: +45-33-69-23-20 Australia Tel: +61-3-9603-1300

©2012 Russell Reynolds Associates, Inc. Russell Reynolds is a trademark of Russell Reynolds Associates, Inc. 1LDCDO