What’s the Role of CTOs In Digital Transformation?

Today, most Chief Technology Officers (CTOs) agree that their role has become twofold, embracing both technical and managerial skills. Looking at the technical standpoint, a company’s CTO is the tech visionary leader within a realm other C-level executives do not have easy access to.

That is why CTOs are also required to be able to foresee future technological changes in order to anticipate the needs a company might have, and to embrace transformation rather than succumb to it. 

An experienced Chief Technical Officer is constantly monitoring technological trends and takes quatifiable actions, including testing before adoption. Being an ICT expert is mandatory, of course, and includes a broad range of expertise in an ever-growing sector, which today includes cloud computing, DevOps, and artificial intelligence, with who knows what to come tomorrow!

Navigating the ocean of possibilities: the CTO as a business cartographer

Considering the managerial tasks required to become a CTO, today’s Chief Technology Officer is a key guide for all main stakeholders. If you are a CTO, think of your business environment as a map on which the land of Technology and the land of Business are separated by the sea of teams and the ocean of partners.

Your role is to map this world and give your C-level peers the right coordinates so that they can successfully reach the land of Business with their ships. 

With this map, you should be able to locate all positions, determine currents and speeds, follow the North Star, and provide everyone on board with a handbook of good practices!

A good CTO manages all of this on a day-by-day basis in order to respond promptly to small changes. A CTO must also be able to deal with catastrophes as they are a part of the ever-changing landscape of technology. An adaptive mindset is key, as well as the ability to make shifts in management. 

At times, you will be asked to figure out entirely new paradigms to come up with brand-new solutions. If we stick to the metaphor of the map, when new technologies arise and take their place, it is as if a new continent has emerged from the sea, forcing you to map new routes for your ship.

A good CTO should employ a mix of imagination and actual forecasting in predicting such changes. The imagination is used as an exercise, to figure out what might change in the map and how to adapt to it.

Forecasting is more complex, as it requires the CTO to monitor the industry situation as a whole at all times as well as using intuition developed from experience.

The Butterfly Effect: non-linear process shaping

A CTO’s normal job is to reroute processes in order to improve outcomes or adapt to changes and challenges. Their actions will impact directly on the company’s business goals and organization. This is known as the linear effect – if you plot change vs. effect on a two-dimensional graph, you get a straight line.

Nevertheless, there are instances where geographical transformation occurs without any warning. This is known as the butterfly effect. In the realm of chaos theory, the term ‘butterfly effect’ describes the occurrence of a very small change in a given state that may result in big changes in a later state for no foreseeable reason. 

A CTO who is prepared to overcome the unforeseeable is commonly referred to as a card shuffler.

The great card shuffler: here comes the Digital Transformation

Digital Transformation is a marketing catchphrase that describes a period in which many technological changes occur at the same time, although at different speeds and rates of acceleration, and where such changes interact with and influence each other. 

If you thought this is something that we are only now going through, you’d be wrong – the term was used for the first time almost 30 years ago, at the dawn of the commercial internet era, in 1993. 

Many things have happened since then and the outcomes are so various and intricate that they can only be described as a series of butterfly effects. If you plot the equation describing this effect on a two-dimensional plane, the resulting graph is obviously non-linear.

This apparently everlasting digital transformation has changed all the rules of the game, sometimes at different paces, but always generating collateral effects of unpredictable size. That is to say, disruption.

During any especially rapid phase of digital transformation, the CTO’s mapping and re-routing abilities are stretched to their limits.

Thinking out of the box becomes quintessential to providing prompt and effective measures to companies and their customers. Sometimes it can be a simple matter of re-shuffling the cards at your disposal, adapting previous experiences or known technologies to the new scenario.

The importance of the digital transformation journey within today’s business strategies is so high that it has been suggested that the acronym CTO should in fact stand for ‘Chief Transformation Officer’.

The user champion: tracking the customer base

All changes in technology have a domino effect on the entire company. Each domino represents key thresholds in the quest to prevent the competition from taking over: a delay to any specific service can hinder the entire flux of operations.

At the end of this domino stands the user/customer card. As a CTO you are required to know how your company’s customer base is evolving, and to make the best choices to respond swiftly to that evolution. 

Don’t embark on a route that leads deeper into technology just for the sake of it. Instead, follow where technology leads you. The starting point is always the user base. 

The role of the CTO includes continuous monitoring of user expectations. Analysing structured statistical data and intercepting unstructured comments helps understand what the best modifications to apply to the product or service are.

The CTO must share this information with the relevant teams and, if needs be, with other C-level executives. At the end of the day, the CTO is in charge of overall outcomes.

Speak the same language: defining digital revenue

The transition towards a fully digital business model changes the dictionary used inside the company. To manage a company well, the CFO and CTO have to share the same terminology and make sure that these terms and their meanings for the company are correctly communicated to everyone. 

According to Gartner research dated 2019, both have to make sure that everyone is speaking the same language, as digital business processes and units cannot be confined in silos. The survey showed that 62% of business leaders look at digital revenue as a whole category, regardless of whether it can be measured in detail.

As the study suggests, business partners should be able to measure the impact of IT spending and be offered a clear business case for maintaining funding for digital initiatives.

A young start-up is likely to be built by young people who have a broader knowledge of digital systems and are experienced enough to distinguish between their many nuances. Defining a common digital dictionary is often more difficult in traditional businesses, where the first step is to define the value of the digital transformation and its modified processes.

Even once the digital revenue is recognized, definitions may vary. According to Gartner, these are the four most frequent descriptions:

• Digital products/services sold or delivered online (32%)
• Digital products/services sold or delivered offline (25%)
• Non-digital products sold online (24%)
• Sales made as a result of digital marketing campaigns (19%).

Needless to say, the CTO is ultimately responsible for the alignment of all definitions and related communications.

The CFO and digital KPIs

At the same time, a CTO needs to strategically guide the other C-level executives. The CFO and the CIO, perhaps the most important individuals in this scenario, are not used to taking different paths during continuous, non-linear changes. It’s not the nature of their activities. 

In order to adjust to the necessary changes, the CFO needs the CTO’s support to track the data that can help motivate new approaches and strategies for the company. This demonstrates how important it is to adopt the correct digital KPIs to improve processes, while also keeping track of any variation in turnover as a result of digital technology expenditures. 

Setting those KPIs is not as straightforward as one might think. There is no predefined standard to follow as technology keeps changing all the time. The CTO has the delicate task of enabling the CFO to use the new business strategy indicators whenever necessary.

In so doing, the CTO is likely to need all their diplomatic capabilities not to antagonise the CFO. It may seem an odd piece of advice, but it’s really just common sense: the CTO role is subordinate with a lower salary than the CFO’s, and may be considered more replaceable than other C-levels. 

The CTO is also the most accountable C-level executive, as their decisions can affect the company positively or negatively. Expect the CFO to compare the revenues coming from technical decisions with those coming from the traditional accounting revenue streams. 

To conquer the resistance of the CFO demands a fine-tuned strategy that can demonstrate the value of technical decisions in alignment with the new digital KPIs. It’s up to you to find the most effective KPIs for your company and to demonstrate the benefits deriving from them.

For example, a business initiative doesn’t necessarily have to be fully digitalized to create value from the technology spending associated with it. This means that more factors will have to be accounted for when measuring the results. A partial digitalization within a single line of product or service can also be productive for other lines of revenue, whether the end product is digital or not.

A CTO’s duties: a short recap

The role of the CTO varies considerably in relation to the size of the company they work for, and its area of business. Digital transformation is not the rule per se but it should be adopted where it will be most useful and effective in terms of measurable results.

That is why a CTO must seamlessly follow digital trends, anticipate technological changes and adapt to crises.

As a CTO, you must be accountable for the actions taken by your company, while helping other C-level executives to understand and adapt to them. A common dictionary and a consistent set of KPIs are the foundations for this. Correctly describing the relationship between the company’s activity and the revenue streams related to digital transformation is another central point to bear in mind. 

In particular, when digital transformation sets in, the re-mapping of the business’ strategy depends on your ability to make the CFO truly understand and financially embrace the digital changes that you intend to implement.