Structuring the Digital Team

As business models in every industry have become increasingly tech enabled, companies have shi�ed focus from a centralizedapproach focused on digital to a hybrid model that facilitates end-to-end collaboration and connectivity among functions andbusiness units.

© Copyright 2018 Russell Reynolds Associates. All rights reserved.

Digital Pulse 2018: Organizational Structure

In the past, digital transformation focused on adding new digital capabilities to help organizations capitalize on mobile, social and big data. Today, technology-enabled disruption is compelling companies in all industries to think and act more like technology companies. Incremental, front-end changes are no longer enough—the new business ecosystem demands the rethinking of most companies’ strategies from end to end.  A shi� in organizational approach to digital over the past five years indicates that companies have become increasingly aware that they must eliminate structural barriers to realize the opportunities presented by technology enablement. In the fourth annual Digital Pulse, Russell Reynolds Associates surveyed 1,300+ senior executives to learn how digital is transforming talent and leadership needs in organizations around the world.

Brief Summary of Respondents

The Evolution of the Digital Organizational Structure

Comparing the Digital Structures: Vision and Leadership

Originally marketing’s purview, ownership of the digital vision and strategy increasingly belongs to technology leaders. Andwhile more than 80% of companies now have a unique digital leadership position, only 10% say this person is responsible forse�ing the full strategy—CEOs continue to play a critical role.

The digital organizational models differ in three key areas: se�ing the strategy and vision, the reporting structure of digital leadership and the presence of digital leadership.

Fewer than one third of respondents reported that their organizations are structured effectively to capitalize on theopportunities presented by digital. Additionally, there has been a steady increase in the percentage of respondents whoperceive structural concerns (and intrinsically linked cultural challenges) to be the foremost barriers to transformation.

Placing the Digital Strategy at the Heart of the Business

DECENTRALIZED

Digital capability is embeddedsolely in functions and/or market

and/or lines of business

CENTRALIZED

A single leader with hard-lineresponsibility for all digital activity

HYBRID

DigitalExperience

A centralized group, but with somedigital capabilities embedded in

the wider organization

DigitalExperience

DigitalDepartment

DigitalDepartment

Changing Prevalence of the Three Digital Team Structures (over 5 years)

Who Is Responsible for Se�ing the Digital Vision and Strategy?Only predominant answers included

Reporting Lines for Digital Leaders

Job title Industry

26%38%38%

57%

22%16%

13%22%

50%44%

41%29%

2018

2017

2015

2014

Centralized

Hybrid

Decentralized

Comparing the Digital Structures: Functional Ownership of Digital and Technology Initiatives

CIO/CTO

2014 2015 2017 2018

Structural Barriers to Building an Effective Digital Business

Digital vision andstrategy are set by:

Percentage withouta digital leader:

Percentage of digital leaders reporting to the CEO:

The Path Forward

DigitalExperience

In 2018, 55% of leaders identifiedorganizational inertia, understoodas functional departments beingtoo fixed in their ways, as asignificant barrier to becoming aneffective digital business.

Fewer than a third of leaders respondedthat their business is aligned on itsvarious digital capabilities, and nearlyhalf identified absence of a coordinateddigital strategy as a significant barrier.Not having a single leader of the digitalagenda is increasingly becoming seenas a barrier.

In 2018, just over half of leaders sawboth lack of digital skills/expertiseand ineffective crossfunctionalcollaboration as significant barriers.

Absence of a coordinateddigital strategy

Organization inertia

No single head of digital

Lack of digital skill/expertiseIneffective crossfunctionalcollaboration

26%

N/A N/A

42%47%

55%

18%25% 25%

35%39%

50%49% 51%52%

24%31%

35%40%

48%

2014 2015 2017 2018 2014 20142015 2017 2018 2015 2017 2018

CDO

CMO

CEO 34%

27%

14%

7%

39%

20%

14%

6%

40%

13%

14%

10%

42%

19%

9%

10%

8%report to the

CMO

11%report to the

CIO/CTO

60%report to the

CEO

40% CEO23% CIO/CTO13% CDO10% CMO

55% 5%

38% CEO19% CIO/CTO13% CDO9% CMO

62% 11%

50% CEO17% CIO/CTO11% CDO4% CMO

65% 25%

Centralized

Hybrid

Decentralized

OrganizationalInertia

Clarity ofStrategy

Skill &Alignment

Gaps

Create a unifying strategy and vision for your tech-enabled

organization

Assess your current digitalorganizational structure

Encourage collaboration todrive innovation and

transformation

Considerations

� Is there a clear understanding of currentdigital and technology initiatives acrossthe organization and how they areintegral to the overall strategy?

� Do parts of your organization resistadopting new digital and tech initiatives?How can you persuade everyone to buyin?

Considerations Considerations

� How can you break down functional silosto ensure critical collaboration in thedevelopment and execution of the digitalvision and strategy?

� Are your functional leaders aligned alonga unified, forward-looking vision?

� Which leader/team in the organization isbest positioned to develop a digitalstrategy and vision that will allow you totake full advantage of digital andtechnology opportunities and propel youbeyond your competitors?

� Do you need to create a new team,restructure or upskill in order to find thesolution?

IT Digital Marketing Business Unit

DigitalMarketing

ArtificialIntelligence

Cybersecurity

Back-endTechnology

DigitalP&L

Labs &Innovation

ProductManagement

Marketing Digital

DigitalStrategy

Data &Analytics

Digital ProgramManagement

Ecosystems/Partnerships/Ventures

ITBusiness

Unit

There is a great deal of variation when it comes to what is defined as a digital capability, but ownership of thefollowing capabilities most commonly falls into these categories:

Respondents indicated that the digital capabilities most likely to be owned, at least in part, by a business unitwere those which were more nebulous. However, these are also the capabilities most likely to require cross-functional collaboration, and additional ownership varies by structure. Data & analytics, digital strategy anddigital program management are the functions most likely to have divided ownership.

45%

23%

32%C-Suite Executive

Senior Executive(SVP, EVP, etc.)

Junior Executive(VP, Executive Director, etc.)

Company size Location

Consumer

1–249

250–999 1,000–4,999 5,000–10,000 10,000+

Industrial Technology

Financial Healthcare Non Profit

26%

24%

22% 18%

17% 11% 6%

15%10%

33%

18%11%

Asia Pacific

8%

Latin America& Caribbean

2%

8%34%

Africa &Middle East

Eastern &Northern EuropeWestern

Europe37%

NorthAmerica

0% 20% 40% 60% 80% 100% 120% 140% 160%

0% 20% 40% 60% 80% 100% 120% 140% 160%

0% 20% 40% 60% 80% 100% 120% 140% 160%

The least reliant on business units to drive digital capabilities, organizations with centralized digital models consistentlyrely on IT as much and, in some instances, more than their digital team.

Hybrid organizations are expectedly matrixed—nearly every capability is owned in significant part by a business unit but thesecompanies continue to rely on a centralized digital function for their digital strategy and for digital program management anddata & analytics.

Business units, of course, have significant ownership in decentralized models, but IT is also responsible for data & analytics and digital program management in more than a third of organizations—and marketing continues to play a role in the digital strategy.

Digital Strategy

Labs & Innovation

Ecosystems/Partnerships/Ventures

Product Management

Digital Program Management

Data & Analytics

Digital P&L

Digital Strategy

Labs and Innovation

Ecosystems/Partnerships/Ventures

Product Management

Digital Program Management

Data & Analytics

Digital P&L

Digital Strategy

Labs and Innovation

Ecosystems/Partnerships/Ventures

Product Management

Digital Program Management

Data & Analytics

Digital P&L

Hybrid

Decentralized

Centralized