In recent months, the Global Center for Digital Business Transformation (DBT) observed a flurry of appointments for a new senior leadership position: the Chief Transformation Officer (CTO).
What is the Chief Transformation Officer?
Not to be confused with the Chief Technology Officer, the CTO’s most common mandate is to harness organizational change to drive new growth. Both luxury retailer Neiman Marcus and logistics group UPS appointed their first-ever CTOs this past November, with mandates to commercialize new ideas, spearhead growth initiatives, and facilitate change management. Another US retailer, JC Penney, followed in January this year by appointing its first CTO – responsible for developing the company’s strategic initiatives as it aims to overhaul its 116-year-old business.
While such positions are not entirely new, digital transformation leadership positions are growing due to the acceleration of digital disruption across all industries. According to DBT Center research, more than 75 percent of executives now believe that the impact of disruption on their industries is major or transformative, compared to only 27 percent in 2015. Our data shows that the pace of digital disruption is rapidly accelerating, and executives are feeling its impact more acutely.
Are CTO appointments an appropriate response?
The CTO role is particularly effective within the context of large and mid-sized companies as a synergy creator.
If the CTO role is strongly supported by the highest levels of business and vested with the responsibility to mobilize organizational resources and enable connections, we believe the CTO can be instrumental in driving fundamental transformational change. Given the highly complex structures of mature organizations, the CTO role is particularly effective within the context of large and mid-sized companies as a synergy creator.
Large and mid-sized companies currently face two challenges amid disruptive competition. The first is that they are saddled with cost structures and value chains from an earlier era. These structures and value chains prevent them from competing effectively.
The second challenge stems from an organization’s level of organizational entanglement – which can lead to unintended consequences that are often the bane of transformation programs. As one executive learned the hard way: “You wouldn’t think that making a simple change, pulling this lever here, would make 10 other things explode behind me.”
This is where the CTO, as a synergy creator, can be instrumental.
The role facilitates a connected approach to transformation, taking into account the highly networked nature of organizations. The CTO takes traditional organizational resources such as people, data, and infrastructure and puts them together in a cross-functional way to encourage them to embrace a networked model for execution. It is an approach that considers important elements such as a company’s go-to-market model, how it engages stakeholders, and how it is organized. It mobilizes resources to achieve the company’s aims in a holistic way.