Saturday, February 16, 2008

Daddy, What Does a Chief Technology Officer Do?

My daughter asked me to explain my job for her class’s career day. I did some research, and made some interesting discoveries. There are a surprising number of jobs that carry this title. I’ve seen openings for a “CTO” whose responsibilities include maintaining servers and managing the help desk. One firm had a CTO that was chartered to run a group of developers. So, what should a CTO do, and when does a company actually need one?

Let’s begin by talking about what a CTO should not do. The CTO should not manage developers. The head of development spends his or her time working to keep the development team on track against a set of product plans. Inside the development organization, this Director attends to staffing, training, workload and productivity metrics, budget, and scheduling. Working with the customer organizations, the Director keeps up to date on shifting priorities, changes in product requirements, and new potential opportunities that the developers may need to supply. This is a full time job. The performance plan for the Director of Development is quite simple: Deliver high quality programs that meet or exceed customer requirements on time and within budget.

A CTO should not manage a hardware team or an infrastructure group. The CTO might have a lab (for test purposes, not production or QA). But the CTO does not own a production facility and should not be measured against that criterion. Functional strategies (productivity, headcount, floor space, training, power and cooling, etc.) should rest with a COO; the CTO is a research and ad tech discipline in the strategic planning domain.

The Chief Technology Officer matches new technological capabilities with business needs, and documents that match so the business can decide whether to use the new technology or not. The CTO is not an advocate, but a strategic planner and thinker. A business that sells information technology uses the CTO to articulate how the new technology can address business needs for its prospects. So the CTO needs to understand his firm’s capabilities and something of the business processes of his firm’s target market. A business that uses information technology needs its CTO to select potentially useful new technologies for use in its internal business processes. This CTO should understand a good deal about a broad range of new technologies and must have a deep sense of the business’s core processes and goals. The CTO should not be an advocate, but must be unbiased. The CTO needs to understand the abstract potential that a new technology might offer, and must know the underlying architecture of the firm’s business processes.

The CTO must have a high degree of professional integrity – there will be times when the CTO will be the only person that the senior leadership team can turn to for an unbiased and well-grounded assessment of a potentially valuable new technology. A vendor CTO whose primary function is outbound marketing does a disservice to the vendor for whom he or she works. A user CTO whose bias is towards always trying new things adds no value to the firm looking for a sustainable, cost-effective competitive edge.

Consider how firms today confront Web 2.0 – the combination of blogs, wikis, and social networking technologies sprouting up. A user organization that wants to interact with consumers may already be all in. Coca-Cola runs over 500 web sites for consumers, and sponsors videos on YouTube; even IBM has space on Second Life. Other firms may shy away from the uncontrolled side of these technologies. Publicly-traded firms and others facing regulatory scrutiny may fear the consequences of an unguarded comment on a quasi-official channel, and rather than manage that risk they opt to deny employees the ability to participate at all. Of course, this draconian measure does not work; employees can blog under another name, or contribute to a wiki pseudonymously. The CTO would have looked at the potential strengths and liabilities of each medium and present the firm a view of the potential benefits (closer interaction with customers and partners), costs (incremental IT investment, potential lost productivity on other tasks by bloggers), and risks (uncensored commentary reaching the public). The CTO’s performance plan is simple: to evaluate for the executive leadership team potentially useful new technologies – showing how they might fit in specific business processes to the firm’s benefit.

Could that job be done today by another function within the organization? The IT project office might render an opinion about investing in Web 2.0, but that could be characterized as self-serving. The marketing department might argue that Web 2.0 will give them a competitive edge, but that could be marginalized as just the goofy marketing guys wanting more toys to play with. Without a CTO, these organizations might choose to spend money covertly to test the technology, potentially placing the organization in jeopardy. The CTO alone must offer an unbiased, insightful analysis of the potential of the new technology.

How does the CTO improve? A good CTO isn’t just lucky, although never underestimate the value of good luck. Rather, a good CTO describes the environment in which the new technology may fit, and then defines how that fit might occur. If the projection is correct, the CTO celebrates. But if it’s wrong, the CTO has solid documentation to review. By using that documentation, the CTO can learn which element of the current environment he missed or mis-characterized, or what step in the chain of reasoning was flawed. Through this process of self-evaluation and learning, a good CTO gets better over time.

Some companies need a CTO more than others. Firms that tend to adopt leading edge technology not only need a CTO to understand the capabilities on offer (most vendors of leading edge tools don’t know what they are actually for), but they need other processes to manage that raucous environment. The firm’s purchasing department needs to understand how to negotiate with start-ups. The firm’s development team must be able to integrate primitive, early-stage technologies. The firm’s operations area may have to cope with poorly documented, unstable products. But the benefit could include being the first to open and capture a new market.

Companies that deal with established major vendors will spend much less time and effort dealing with these teething pains. But, they will have to wait. Microsoft’s Internet Explorer was years behind Netscape. Some of firms that jumped on Netscape early established dominance over their target market – eBay and, for instance. In both of those company’s cases, the CTO was the CEO. Sam Walton’s vision of a frictionless supply chain drove Wal-Mart’s very early use of e-commerce (predating the term by a decade or more) with its suppliers. Middle of the pack firms don’t leverage their CTO much, they use him for insurance, not strategic planning.

Lagging companies adopt technology after the market figures out its parameters. These firms try to grab a bit of profit by squeezing in under the dominant player’s margins – selling hardware more cheaply than Dell, or audit services at lower rates than the Big Four. Picking up nickels in front of a steam-roller is a dangerous game. Larger vendors will always be willing to sacrifice a few margin points to protect market share, so a successful laggard risks extinction. Trailing-edge firms don’t need a CTO; they need a sharp financial team.

So my daughter got more than she expected, and her class got a peek at how the various functions in a strong, self-aware corporation align with the firm’s goals and vision. How does your firm use its CTO? How might it?

1 comment:

Cass Surek said...

Thank you for the comprehensive view on what a CTO does. I have also seen a variaty of duties attributed to a CTO, but always had an understanding of it being a strategic position, rather than focussed on operational management.
I believe that SMEs, due to financial constraints, settle for a CTO with hybrid responsbilities that also include CIO duties. Regards, Cassiano Surek