What role should the CTO play in the digital transformation process?

The CTO is key to any digital operation within a company, but can become paramount for the entire business strategy when transformation is required.

Table Of Contents

• Navigating the ocean of possibilities: the CTO as a business cartographer
• The Butterfly Effect: non-linear process shaping
• The great card shuffler: here comes the Digital Transformation
• The user champion: tracking the customer base
• Speak the same language: defining digital revenue
• The CFO and the digital KPIs
• A CTO’s duties: a short recap

Today, most CTOs agree that their role has become twofold, embracing both technical and managerial skills. Looking at the technical standpoint, s/he is the tech visionary leader within a realm other C-levels have no easy access to. That is why CTOs are required to be also capable of foreseeing future technological changes to anticipate the needs a company might have to embrace transformation rather than succumb to it.

An experienced CTO is constantly monitoring technological trends and takes measurable actions, including testing before adoption. Being an ICT expert is mandatory, of course, and it includes a list of expertise in an ever growing scenario, which today includes cloud computing, DevOps, and artificial intelligence, and tomorrow only God knows what.

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

Looking at her/his managerial tasks, today the CTO is a leading guide for all main stakeholders. If you are a CTO, think of your business environment as a map where 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 all C-level the right coordinates to reach the business land with their ships.

In 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. S/he must also be able to face 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 pace is as if a new continent has emerged from the sea, forcing you to map new routes for your ship.

A good CTO should expect the new geography in a mix of imagination and actual forecasting. Using the imagination is like an exercise in which s/he tries to figure out what might change in the map and how to adapt to it. Forecasting is instead more complex as it requires the CTO to monitor the entire scenario all the time as well as use his/her intuition based on experience.

The Butterfly Effect: non-linear process shaping

As it appears, the normal job for a CTO is to reroute process in order to improve outcome or to adapt to changes and catastrophes. His/her actions will reflect directly on the company’s business and organization. This is called linear effect, because if you plot it on a two-dimensional graph (change vs. effect), you get a straight line.

Nevertheless, there are instances where geographical transformation occurs without any warning. It’s the butterfly effects. In the realm of the theory of chaos, the butterfly effect is a very small change occurring in a given state that can 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 changes occur at the same time, although at different speeds and accelerations, and where such changes interact and influence.

If you think this is something that we are going through now, you are wrong, the term was used for the first time almost 30 years ago, at the dawn of the commercial era of the internet, 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 been changing all the rules of the game, sometimes at different paces, but always generating collateral effects of unpredictable size. Disruption, that is. During any big phase of the digital transformation, the CTO’s mapping and re-routing abilities are stretched to their limits.

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

The relevance of the digital transformation within today’s businesses is so high that it has been suggested that the CTO acronym should rather stand for “Chief Transformation Officer”.

The user champion: tracking the customer base

All changes in technology have a domino effect on the entire company. All domino cards represent key thresholds to stop the competition from taking over: a delay of any given service can hinder the entire flux of operations.

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

Don’t embark on the route of deeper technology just for the sake of it. Go instead where technology leads you. The starting point is always the user base.

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

The CTO must share the information with the dedicated teams and, if need be, with the C-level executives. S/he is in charge of the overall outcomes.

Speak the same language: defining digital revenue

The transition towards a full digital business changes the dictionary used inside the company. To manage a company correctly, the CFO and the CTO have to share the same terminology and then make sure that it is correctly communicated to everyone.

According to a Gartner research dated 2019, both have to make sure that everyone is speaking the same language as digital business units cannot be confined into 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 probably made 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 normally more difficult with traditional business, 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, four are the 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 that the CTO is the ultimate responsible for the alignment of all definitions and the related communications.

The CFO and the digital KPIs

At the same time, there is a need to strategically guide all other C-level executives. The CFO and the CIO, to name the most important ones, are not used to taking different paths during continuous, non-linear changes. It’s not within 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 proves how important it is to adopt the correct digital KPIs to improve processes while keeping track of any variation of the 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 to enable the CFO to use the new business indicators, whenever necessary.

In doing so, as a CTO you will have to use your diplomatic capabilities sometimes not to go against the CFO. It’s an odd piece of advice, you might think, but it’s just common sense: your role is subordinate and your salary is lower than the CFO’s, and you can be considered more replaceable than other C-levels.

You are also the most accountable for as your decisions can affect the company either way. So expect the CFO to compare the revenues coming from your technical decision with those coming from the traditional accounting revenue streams.

In order to win the resistance of the CFO you need a fine-tuned strategy that can demonstrate the value of your decisions according to new digital KPIs. It’s up to you to find the most effective KPIs for your company and to prove the benefits deriving from them.

Just to make an example, a business initiative doesn’t have to be fully digitalized to create value from the technology spending associated with it. So, more factors will have to be accounted for when measuring the results. Also, a partial digitalization within a single line of product or service can 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 s/he works for, and to its area of business. Digital transformation is not the rule per se but it should be adopted where most useful and effective in terms of measurable results. That is why you have to seamlessly follow digital trends, anticipate technological changes and adapt to crisis

As a CTO, you must take accountable actions for your company, while helping other C-levels understand and adapt to them. A common dictionary and a consistent set of KPIs are the foundations to do this, as well as to correctly describe the relationship between the company’s activity and the revenue streams related to digital transformation.

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 implementations that you intend to push forward.

You can read the orginal version of this article at Codemotion.com, where you will find more related contents. https://www.codemotion.com/magazine/dev-hub/cto/what-role-should-the-cto-play-in-the-digital-transformation-process/