On some level, nearly every company is now a technology company. Transformation has been a defining feature of the past two years for businesses around the world. As leaders rethink and update everything from their back-end operations to product and service offering for customers, it becomes clear that this is not a cut-and-dried process but an ongoing endeavour.
At the centre of it all is the chief technology officer (CTO), who has moved rapidly up the value chain to become indispensable for large organisations globally regardless of business sector. Both the quantity and quality of CTO roles are increasing. In the most advanced companies, the CTO is more R&D-focused than enterprise-focused.
In 2022 globally, Heidrick & Struggles supported the placement of 101 CTOs, up 31 percent from the year before, with 36 percent reporting to CEOs.
A direct reporting line to the CEO has long been a feature of the technology sector but is a new development in areas such as industrial products and financial services. Even more notable is that the transition from CTO to CEO has become more viable, if still relatively uncommon. Companies are seeing a greater share of their profits come from their technology, rather than pure physical goods. Take for example Amazon. The company has been successful in driving substantial profit margins through advertising – surpassing Prime, Prime Video and its other audio and e-book subscriptions. Advertising now stands alongside Amazon Web Services as the company’s top two profit engines. And as this path becomes more viable for organisations across the world, CTOs naturally begin to turn up in broader C-level succession planning.
The role’s own transformation into one of strategic leadership is based on business needs as technology becomes fundamental to an organisation’s success. In the industrial sector among numerous others, software that controls capital equipment has become a primary source of profit.
The CTO has also moved closer to the customer, frequently assuming responsibility for a company’s external technology platform as well as its internal one. Leaders look to the CTO to see through the hype in a new piece of technology, and increasingly, determine how it relates to their market and customers. In this sense, the role of the CTO and chief product officer (CPO) are starting to converge.
Where in sectors such as financial services, human employees were the traditional touchpoint, technology has supplanted them, making the CTO’s role a vital component of the end-user experience. At Jet Blue, an American low-cost airline, the CTO oversees product engineering, integration and data science, supporting the chief digital and technology officer, whose purview includes digital commerce as well as end-to-end technology and venture capital. The organisation is structured to enable seamless movement from innovation to customer-facing deployment.
This is where we see the digital flywheel come into play: better customer engagement leads to stronger data and insights in a virtuous cycle that informs the development of products and services. Some of the best performing organisations in today’s world are those where the CTO collaborates closely with sales and marketing teams to help them understand what they can sell, and how. A close working relationship means that they understand what is on the technology roadmap and what it will mean for their customers.
The most effective CTOs operate as influencers and as well as ‘builders’. On the one hand, they must understand what the more conventional C-suite is trying to achieve, and be able to make the case for investment in technology as a solution, especially when that technology is not well understood by their peers. At the same time, they are responsible for conveying the needs of the business clearly to the technological side of the organisation. This makes strong leadership ability a more critical requirement than ever.
Through Heidrick & Struggles’ research and experience working with senior leaders, leading through innovation is one of the drive factors that differentiate the highest performing individuals. This involves building structures and processes that accelerate new ideas at scale through collaboration and adaptation as opposed to simply leading through vision and influence. CTOs who are able to embody this can easily make a difference that goes beyond the job scope of their current designation.
Businesses and industries are at greatly differing stages as far as CTO assimilation is concerned, but the strategic aspect of the role is sure to continue to become more pronounced. As it does, it will be important to remember that successful transformation only happens when the CTO is fully supported within the organisation and able to work closely with multiple stakeholders as the situation demands.
