Maximum c To

8/12/2019 Maximum c To

1/11

Maximizing the CTOs Contribution to Innovation and Growth

1


Roger SmithGroup CTO

Titan Corporation Copyright 2004, Roger Smith

[Note: This paper is an extension of the previous paper, 5 Patterns of the Chief Technology Officer.]

Abstract:

The Chief Technology Officer positionhas been adopted by a wide variety ofindustries that are seeking to leveragetechnology within products and services.The position calls for an operationalexecutive who can make important

strategic decisions that impact thecompetitive position of the company.However, very little research has beendone to define the CTOsresponsibilities, methods of evaluatingthe persons performance, and the skillsthat the person should bring to the office.

In this paper we identify five majorcategories of the CTO position. Theseare labeled the Genius, Administrator,

Director, Executive, and Advocate. Wealso associate each of these categorieswith specific business phases in whichthey can be effectively applied. TheCTO that is best suited for a companyjust emerging from the garage is muchdifferent from the person required toimplement the strategies of a globalleader. Organizations like GE Medical,ALCOA, Federal Express, the Air ForceResearch Laboratory, and Intel all have

unique needs that call for a unique set ofskills and processes.

Emergence of the CTO

The position of Chief TechnologyOfficer is relatively new, emerging fromthe position of R&D laboratory director

in the 1980s.1Therefore, the definitionof what a CTO is and how this personshould contribute to an organizationvaries widely. In some cases, thisvariation is driven by unique businessneeds or by the evolutionary path thatcreated the position within a specificcompany. In other cases, the variation is

a result of a misunderstanding of the roleof the CTO or of simply mimicking therole used in other companies.

When asked what a CTO is, NathanMyhrvold, the former CTO of Microsoftand head of its massive researchorganization, replied, Hell if I know.You know, when Bill [Gates] and I werediscussing my taking this job, at onepoint he said, Okay, what are the great

examples of successful CTO's. Afterabout five minutes we decided that, well,there must be some, but we didn't haveon the tip of our tongues exactly whowas a great CTO, because many of thepeople who actually were great CTO'sdidn't have that title, and at least some ofthe people who have that title arguablyaren't great at it. My job at Microsoft isto worry about technology in the future.If you want to have a great future you

have to start thinking about it in thepresent, because when the future's hereyou won't have the time.2

Though the position is new, it is beingwidely used in many different industries.A Google search on the term ChiefTechnology Officer returns 392,000


2/11


2

hits, most of which are corporateannouncements of the appointment of anew CTO. These announcements spanthe breadth of industries, including

IT, computer, and research

organizations like SAS, Intel, andthe Fraunhofer Institute; Heavy production companies like

Siemens, ALCOA, andChevronTexaco;

Service providers like FederalExpress, National Association ofConvenience Stores, and HewittAssociates;

Government agencies like theCIA, Air Force Research

Laboratory, and the City ofWashington D.C.Clearly each of these industries has avery different business model, customerbase, internal structure, and culture. It isunlikely, if not impossible, for onedefinition to meet the needs of all ofthese organizations.

Given such a large number of CTOs inservice, we would expect a solidfoundation of journal, magazine, andtrade book publications on the subject.Surprisingly, what we actually foundfrom an archival database search on theterm and its three-letter abbreviationwere fewer than 20 published journalarticles in the last 10 years.3 It is nowonder that the position is poorlyunderstood and unevenly applied. CTOsare not publishing their activities andacademics are not researching theposition.

With such a vague idea of what a CTOshould do, one would expect manypeople in the position to be winging itand their superiors to be evaluating thembased on trial-and-error. CTOs mustdefine for themselves what they should

do, and their bosses must largely acceptthat definition without a basis forcomparison and evaluation. In thisarticle we will examine some of theprototypical forms of the CTO and their

roles at various junctures in thecorporate lifecycle. The goal is toidentify the most effective style of CTOfor a company at a specific stage in theirdevelopment.

CTO Categories, Skills, and Focus

The CTO position is occupied by peoplewith diverse backgrounds, as is commonto other executive positions like the

CEO, COO, and CIO. Since the CTOposition is often confused orinterchangeable with the CIO position,and since both are relatively new to theexecutive ranks, it should be no surprisethat the skill and background of the CTOis at least as diverse as that found in theCIO position.

In studying the backgrounds,responsibilities, and missions of anumber of CTOs we identified severaldistinct categories of CTO (Figure 1).These categories are driven by uniquestages in business evolution and by theneeds of specific industries. Clearly

Figure 1. CTO Categories, Skills,

and Focus


3/11


3

separating these categories andassociating them with a business phaseor industry, sheds considerable light onreferences to the CTO in the trade pressand corporate statements.

Genius

We are in the midst of technologyrevolutions in computers, informationservices, biotechnology,nanotechnology, medical products, andpharmaceuticals. The seeds of theseindustries are often traced back to a fewinnovators with the personal drive,talent, and opportunity to explore the

unknown. People like Steve Wozniak ofApple Computer and Sergey Brin ofGoogle have become the ThomasEdisons of this generation. Theydemonstrate the power of an ideachampioned and largely matured bysingle person. These are the archetypesof the Genius CTO category.

When a company, technology, orindustry is in its formative stages, theCTO is often a technical genius aboutwhom larger-than-life legends will betold by later generations. He or she (192of the first 200 CTOs returned by aGoogle search are men) may be pullingtogether a number of available conceptsand products in a new way, as Wozniakdid with the first Apple computer. Orthe CTO may be commercializing a newtechnology that has emerged from auniversity or commercial laboratory, asSergey Brin did with the Google searchengine.4

The Genius CTO is usually skilled atcreating something new, possessingvision and confidence, and exploiting aunique opportunity. This ability or skillis essential to a company that is

emerging from the garage or presentingits concepts before a panel of venturecapitalists. Some technologies can beformed and matured largely through theefforts of a single exceptional person.

When this is possible, the Genius CTO isthe type of person that an emergingcompany needs.

However, the Genius CTO may havepoor skills for managing teams ofpeople, administering processes acrossan organization, or working withexecutives on a long-term strategy. LikeWinston Churchill, their skills may beessential at a critical point in history, but

they are not necessarily the best personto fill the position once the crisis is overand the company has moved on to largerproblems, processes, and structures.

Administrator

In many cases, the CTO must defend theorganizations budgets fromoverspending on technology products,services, and project labor. The CTOmust be prepared to negotiate withoutside vendors and service providers toinsure that the company is receiving theresources it needs, but is not overpayingfor these. Government offices that relyon technology-based products andservices to create new products for civil,military, and intelligence applicationsfall into this category. Without such aperson, the government buyers and usersof technology are not in a position toeffectively separate marketing claims fortechnical facts. The office then findsitself at the mercy of the vendorrepresentatives and their claims for theirproducts.

Jeffery Pound, the CTO of the Air ForceResearch Laboratory, is one example of


4/11


4

the Administrator CTO. Pound has beeninvolved in two major endeavors alongthese lines. The first was a deal in whichhe negotiated a favorable licensingagreement with Microsoft that saved

AFRL $9.6 million in fees. Equippedwith an understanding of thelaboratorys technical needs, Pound wasable to identify the type and number ofproducts that were essential andeliminate wasted licenses. He has alsobeen working with vendors anddevelopers to identify new ways toincrease the security of the labsnetworks without seriously impactingtheir performance.5 These projects

require an appreciation andunderstanding of both the technicalaspects and the financial impacts oftechnical issues in the laboratory.

Director

As a company grows large enough tosustain and benefit from a research anddevelopment laboratory, future CTOscan emerge from that organization. Heor she may be a leading scientist orresearcher who has shown a talent fororganization, handling exceptionalpeople, and visioning the future. If sucha person is willing to give up direct,hands-on research in order to create anenvironment in which others are enabledto do outstanding and valuable work,then they may become the Director ofR&D and a future CTO. In somecompanies the title CTO is a directsubstitute for Director of R&D. Theorganizational implications behind thisare that the labs must make a directcontribution to the companys financialperformance and competitive position.To encourage, enable, or enforce this,the Director is pulled into the executiveranks and retitled the CTO. In other

companies, the CTO is an additionalposition designed to bridge the gapbetween the companys strategies and itsresearch activities.

Pat Gelsinger, the first CTO of IntelCorporation, is an excellent example ofthis category. Gelsinger lead Intel Labs,Intel Research, and the Intel ArchitectureGroup. He is extremely well versed inthe technical aspects of Intels products.He is focused on the leveraging researchand laboratory work into profitableproducts for the company. To quotefrom the Gelsingers Intel bio, As CTO,he coordinates Intel's longer-term

research efforts and helps ensureconsistency from Intel's emergingcomputing, networking andcommunications products andtechnologies.

6

Nathan Myhrvold also exhibited theDirector CTO style when he createdMicrosoft Research. He recognized thatthe worlds leading software developerneeded to pioneer new technologies tobe integrated into its world-dominatingproducts. It needed collaborativerelationships with academic researchersand a conduit for engaging those peopleon problems of interest to Microsoft.The result was a world-classorganization that is now investigatingspeech and vision interfaces, machinetranslation, spam filtering, new Internettechnologies, multimedia and dozens ofother technologies that will become partof their future products.

In creating and managing such aresearch lab, the CTO must be able toseparate ideas with great potential fromthose that are challenging and exciting,but lack the ability to become orcontribute to great products. The actual


5/11


5

Director of R&D will be more focusedon sponsoring important researchprojects, while the CTO matchesresearch ideas with the strategic plans ofthe company and its broader capabilities

to move a new technology into themarketplace. He must consider whethergreat technology can be manufacturedefficiently, priced competitively,delivered to the customer, and whether itwill be a product that a customer willembrace.

Executive

Large corporations that use technology

as a key component of their products orservices have been the most aggressiveat applying the CTO to their innovationprocess. Companies like GE Medical,ALCOA, Corning, ChevronTexaco, andIBM have all become known for theiruse of a CTO to assist in guidingstrategic decisions and managing theinnovation process. The Executive CTOis a businessperson who measuresinnovation, research, andexperimentation by the contribution itmakes the companys revenues andfuture competitive advantage.

This persons background may be just asscientific and research focused as theR&D Director described earlier, but theircurrent focus and purpose are different.They are an integrated part of theexecutive staff and are relied upon justas the CFO, COO, and CIO are to assistin directing and managing the business.

Dr. Malcolm ONeill, CTO of LockheedMartin, is an excellent example of theExecutive CTO. He is responsible forthe companys research projects, but isalso directly tied to the companysengineering, program management, and

mission execution.7 His role includesconsideration of operations beyond theresearch labs. He must foster theexchange of ideas and technologybetween the research, manufacturing,

service, and contracting operations of a130,000 employee global company.

Advocate

Rob Carter, CTO of FedEx, has receivednumerous awards from the ITcommunity for transforming the ITinfrastructure of the worlds leadingovernight shipper. Carter and FedExrealized that over 70% of their customers

used electronic transactions in shippingpackages. They recognized thatimproving the IT experience for thecustomers could drastically improve theefficiency, profitability, and marketshare of the company. Thisimplementation also made dramaticcontributions to FedExs expansion intointernational markets.

8

Carter represents the Advocate CTOwho is generally focused on thecustomers experience of and interfaceswith the company. This type of CTO ismost often found in retail and servicebusinesses, to include governmentorganizations. These CTOs do notusually direct the creation of technology,but rather select and combine the bestproducts for their specific businesscapabilities.

President Bushs plan to make allgovernment services availableelectronically and to create an electronicconduit between every governmentoffice and their constituents, haschallenged government CIOs and CTOsto build a modern, customer-centriccomputer infrastructure. Together, these


6/11


6

two executives must identify, evaluate,deploy, and maintain IT systems thatmeet their customers needs.

Organizations of this type may assign

these responsibilities to the CIO since heor she has traditionally been the acquirerand integrator of IT technologies. Thispractice has contributed to the blurringof the responsibilities of the CIO andCTO. Most writers maintain that theCIO should be focused on the internal ITneeds of the organization, while theCTO should be focused on technology asit applies to products, customers,revenues, and competitive positioning in

the market.

9

When the technologyinvolved is strictly IT, it is feasible forthis work to be combined with the CIOstraditional internal IT work. However,for companies when the technology ispharmacological research, new rocketfuels, and computer chip manufacturing,this combination would not even beconsidered.

Void

Finally, there are the companies thatintentionally decide that they do notneed a CTO. Many of these have stablesustaining businesses that incorporatevery little new technology and do soonly after the industry has alreadydefined a stable solution. However,companies that are leading change innon-technical businesses are probablyencountering issues for which a CTOwould be very useful.

One could argue that a grocery chaindoes not need a CTO to improve sales ofproduce, meats, and canned goods. But,in-store computerization and automationargue otherwise. The Point of Sale(POS) terminals in most grocery stores

are advanced computing systems. Tothe degree that they collect accuratedata, manage inventory, and allow astore to predict future sales, these POSsystems can be seen as part of the CIOs

mission. But, when they are specificallydesigned to improve the speed at whichcustomers are served or the systems arestrategically located to provideinformation in the aisles, they arebecoming an application of technologyaimed at the customer. Recognizing thatservice lines form at the deli counter,Stop and Shop grocery has installedtablet PCs in the aisles to allowcustomers to place deli orders to be

picked up later in their shopping trip.These types of systems are competitivetools just as fresh produce, baked goods,and meats are. They allow the store todifferentiate itself from competitors,attracting additional revenue.Computerized control of lighting,refrigeration, in-store advertising, bakeryand deli cooking systems, and a host ofothers are part of the stores competitiveadvantage.

10 These represent a domain

of the business for which a CTO can beused to identify the best solutions andimplement them in the most efficientmanner. Some of these responsibilitiescan be handled by the CIO, as has beendone in other industries. But that is amisfit of function and mission.Reaching in-store customers andconvincing them that the store should betheir shopping site of choice requires adifferent focus, mindset, and talent basefrom those traditionally found in theCIOs organization.

The CTO and associated staff are notnecessary for every business. But theyare probably not being used in manybusinesses that could benefit from theircontributions. Just as modern


7/11


7

corporations have developed the needfor a CFO, and more recently a CIO, thecontinued evolution of business,technology, and society will broaden theindustrial base for which a CTO is

needed.

Matching the CTO to the Business

Phase

Like all other positions, the skill setneeded for the CTO varies based on thetype of business, industry, and maturityof the company. The person who wasperfect for leading the company duringits early phases may be completely

wrong for the same position when thecompany is trying to organize innovationacross multiple locations, in differentlines of business, and with a largeremployee base. The types of CTOs wehave described can be found incompanies at all stages of their lifecycle.But, there are noticeable relationshipsbetween the type of CTO selected andthe phase that a business has reached inits evolution (Figure 2).

Emergence

The Genius is most likely to hold theCTO position when the company is just

emerging. He or she may be one of theoriginal founders and may have beenresponsible for the key technologies orproducts that made the company a viablebusiness. Such has been the case within

many dot.com and IT companies inrecent years. The Genius CTO earned aplace in the executive ranks, but was notequipped or inclined to take a role inmanagement, accounting, marketing, orproduction. But, his or her enthusiasmfor the product or service provides theenergy and motivation that make thecompany a unique place to work or thatmotivates the staff to work extendedhours without immediate financial

reward.

The Genius CTO will share in strategicdecisions and the financial rewardsafforded to the CEO, CFO, COO, andCIO of the business. The position placestechnical innovation on an equal footingwith other business functions in guidingthe company and influencing itsdirection from the very beginning.

Stabilization

After a company has successfullyemerged, it will find that some of the adhoc and chaotic processes for creatingnew technology and products do notextend well to larger groups. As morepeople are added to the company, thereis a much greater diversity incapabilities, perspective, andunderstanding of the mission. As thisoccurs, the technical leader andvisionary will find it necessary to applymore time and energy toward unifyingpeople and projects. The Genius mayfind it difficult to shift his or herattention from purely technical tasks,toward management andcommunication. This leads to the need

Figure 2. Matching the CTO to theBusiness Phase


8/11


8

for a more Administrative CTO thatexcels at working within a diverseenvironment of people, organizationalstructures, and business issues.

Since most companies do not remain inthe emerging category, this transition isinevitable within the professional life ofthe original Genius CTO. When thisoccurs, the CTO must either change hisoperating approach or find a way toshare responsibility with a moreadministratively skilled partner. TheGenius CTO may gravitate toward thehead of a small R&D center within thecompany, if such a unit exists. The

Genius CTO may also become aDirector of Product Innovation orsome similar role. Other companiesanoint the CTO as a Fellow, create aChief Innovation Officer, or establisheda small research team for the person tolead. Each of these requires great tack onthe part of the company and humility onthe part of the founding CTO.

Expansion

As the company expands and becomes amajor player in the industry, it may finditself with a number of competingcandidates for the CTO position. TheAdministrator and Genius CTOs that hadpreviously filled the position will still beavailable. But, a Director of R&D andan engineering executive can emerge aspotential competitors for the CTOposition.

An Administrator CTO may recognizethat the resources dedicated to newproducts have grown significantly.From this perspective, the CTO roleseems to call for additional managementand organization. Therefore it is naturalfor the Administrator CTO to oppose

releasing the position and argue thatadministrative and organizationalexpertises are needed now more thanever.

The Director of R&D may perceive thatinnovations from the laboratory arehaving a significant impact on thecompanys new products and the abilityto generate profits or maintain acompetitive advantage. This perspectivecalls for more attention to research andan executive role for someone intimatelyfamiliar with and successful in thatdomain.

If technology forms a strong connectionbetween the company and its customers,as in the case of FedEx described earlier,a representative of those customers mayargue that the CTO position needs to befocused on improving the customerexperience. Hence, the Advocate CTObecomes another competitor for theposition.

Just as there was competition for theCTO position as the company movedfrom Emergence to Stabilization, it willface even more competition for theposition as Stabilization gives way toExpansion. The selection of the CTOwill lie with the CEO and an ExecutiveCommittee. They will have to decidewhich direction holds the most promise.Ideally, their decision will be based onan analysis of the future prospects of thecompany and the most profitable aspectsof their chosen market.

Dominance

Companies like GE, IBM, Microsoft,and Siemens have arrived at a position inwhich they dominate multiple markets.Their focus is no longer on growing their


9/11


9

traditional market because they havealready achieved a dominating position -such as Microsofts practical monopolyof the desktop operating environment.Instead, these companies look for ways

to either create new markets or leveragetheir expertise into adjacent markets.

Creating new markets often requires astrong contribution from the R&D labsto provide a differentiated capabilityupon which to build. In this case, adominant company will rely upon theDirector CTO to elicit innovation fromresearchers that can be turned intoproducts. The motivation is less science

and technology for its own sake, andmore science and technology as thelinchpin of a new product or service.Microsoft exhibited this approach whenthey determined to move into thevideogame console market. They had noexpertise in developing hardware; mostof their previous products were software.They began from scratch to create a newkind of gaming console that couldcompete against industry leadersNintendo and Sony, and redefine thegame console at the same time. Thisbattle is still raging, but Microsoft hasbeen instrumental in dislodgingNintendo from their second placeposition. They are still struggling for anadvantage over Sonys Playstation,which possesses the strongest list ofgame titles, largest installed base, andmost productive game studios.

IBM on the other hand, has seen thestrong demand for e-business servicesand has leveraged their expertise in bothhardware and service support to becomea major IT consultant and solutionprovider. Their WebSphere productsand services have made them a strongcompetitor against more established IT

consultants like Accenture andPricewaterhouseCoopers (PwC). IBMrecognized that computers, software, andthe Internet were creating a strongconnection between customers and

major companies, however Accentureand PwC had traditionally focused oninternal IT projects. Therefore, IBMmoved into the new business area beforethe consulting companies couldcompletely dominate it. Now that IBMhas purchased PwC it can leverage thestrengths of both companies against theremaining IT consulting firms.

The CTO of a dominant company must

be involved in strategies to move intonew markets or to adapt and invadeadjacent markets. The Genius andAdministrator CTOs do not usuallypossess the best perspective andexperience-base necessary to work inthis area. It requires someone withtechnical expertise who is also used toworking hand-in-hand at the CEO, COO,and CFO level on very large, sometimeslong-term, strategies. The CTO will berequired to provide a perspective ontechnology that is targeted at achieving acompetitive advantage and generatingattractive profits. Specific technicaldetails of products and components arenot useful at this level. Neither are theskills of managing teams, overseeingproduction, and optimizing schedules themost effective capabilities for the CTOof a dominant company. Thesecompanies need a CTO who seestechnology as a means of achieving alarger business objective.

Conclusion

Twenty years is a very short period inwhich to evolve a new executive


10/11


10

position. In this time we have seen therapid emergence and adoption of boththe CIO and CTO positions. The urgentneed for information systems andcommon ways of applying them have

driven the maturation process for theCIO much faster than that of the CTO.Since the role of the CTO is much moredependent upon the type and phase ofthe business, it is difficult to set acommon definition for the position. We

have identified several commoncategories of CTOs as they are found inmajor industries and have discussed thealignment of these categories withspecific business phases. These

categories and alignments are notexhaustive, but they are very useful inguiding new CTOs and assisting them inanticipating conflicts and changes thatwill arise in the position.

What is the CTOs Role?

Genius CTO: The greatest CTOs that I know are the ones that take architecture

seriously. Architecture guides the constraints and shows whats important and whatisnt. It bridges the creativity of the engineer to something that can achieve a highimpact for the company.

Greg Papadopoulos, CTO, Sun Microsystems

Director CTO:The CTO nurtures and cultivates new ideas and innovation in both thetechnologies and the processes by which we build and design large complex aerospacesystems. The CTO must focus the enterprise or company so it can be responsive to newtechnology and capitalize on it.

David Whelan, CTO, Boeing Space and Communications

Administrator CTO:Every basic business process must work. That takes 80 percentof our time replacing awful, ugly work process. Each one of the agencies must operatein an efficient way.

Suzanne Peck, CTO, District of Columbia

Executive CTO: The CTOs key tasks are not those of lab director writ large but,rather, of a technical businessperson deeply involved in shaping and implementingoverall corporate strategy.

W.W. Lewis, Sloan Management Review

Advocate CTO:You get a B- to C+ grade as a CTO if you solve problems as they

come along. If you want an A or a B, you have to teach your people how to preventthose problems in the first place.Craig Humphreys, CTO, H-E-B


11/11


11

References

1. Parker, D.P. (2002). The changingrole of the Chief Technology Officer.D.P. Parker and Associates web site.http://www.dpparker.com/article_cto

_role.html.2. Brockman, J. (not dated). NathanMyhrvold: The Chef. Digerati website.

3. Smith, Roger. (July-August, 2003).The Chief Technology Officer:Strategic Responsibilities andRelationships. Research-Technology Management.

4. Boorstein, J. and Watson, N.(September 15, 2003). 40 Under 40:

Young, Powerful, and Changing theWorld. Fortune Magazine.5. Jones, J. (June 19, 2000). Air Force

CTO flies high with IT strategy.ITWorld Online.http://www.itworld.com/.

6. Intel Corp. (not dated). IntelExecutive Bio: Patrick P. Gelsinger.Intel web site.

7. National Academies. (not dated).Aeronautics and Space EngineeringBoard: Dr. Malcolm R. ONeill.National Academies web site.

8. Gotcher, R. (May 17, 2000). RobCarter: FedExs CTO, is a truetechnology innovator. IT WorldOnline.

9. Spiers, D. (July 5, 2001). CTOs:Technologys easy Its the peoplepart thats hard to master.Business2.0.

10. Patton, S. (October 15, 2002). FoodFight.CIO Magazine.

11. Lewis, W.W., & Lawrence, H.L.(1990). A new mission for corporatetechnology. Sloan Management

Review, 31(4).12. Hari, P. (November 10, 2003). WeUse a Distributed R&D Model.Businessworld Online.

13. Cloyd, G.G. (January 28, 2004).Formula for Success. Proctor &Gamble web site.

14. IT World Staff. (December 4, 2000).CTO plays key role in investmentstrategy. IT World Online.

15. Leon, Mark. (April 14, 2001). CTO

of CIA matches technology tomission.IT World Online.16. Smith, R. (2004). 5 Patterns of the

Chief Technology Officer.CTOnet.org.

Author Biography:

ROGER SMITH is a Vice President andGroup CTO with Titan Corporation, a $2billion defense systems developer. Hehas led technology innovation forsoftware and computer systems formilitary training and command systems.His efforts to better understand the roleof the CTO and to improve his ownperformance resulted in the creation ofCTOnet.org to foster the exchange ofprofessional knowledge among CTOs.He holds degrees in management,business administration, computerscience, statistics, and mathematics.

Maximum c To

Documents

Transcript of Maximum c To