The Newest Member of The Consumer C-Suite: The Chief Transformation Officer

Consumer preferences continue to change, straining already tight margins and stranding companies that have not shifted effectively to digital and multi-channel sales and marketing. Supply chain problems and geopolitical turbulence are spurring regionalization, testing even the nimblest company’s ability to respond quickly.

To address these challenges effectively, CPG and retail companies have had to reconsider their approach to transformation. These companies approach transformation holistically and with an eye toward the long term so that they don’t have to come up with a “flavor of the month” change program every couple of years. They build new capabilities that are not just functional but rather foundational—involving the whole organization rather than creating more directives from the top.

This is where the CTO comes in. A growing number of CPG and retail company CEOs are turning to a CTO as a vital member of the executive team to lead a holistic transformation rather than relying exclusively on existing structures and roles.

The number of CTOs in CPG and retail companies is growing, but the scope of the role itself remains inconsistently defined. Some CTOs are tasked with specific and relatively targeted financial mandates (for instance, to reduce supply chain costs by 200 basis points). Others are given broader goals tied more closely to corporate strategy—for instance, to help the company achieve 10 to 12 percent growth over the next three years, or to shift the business toward a direct-to-consumer model. Finally, others are asked to achieve culture- and capability-oriented goals, such as breaking down silos between functions or increasing digital adoption across the company. Some, in fact, are asked to take on many of these challenges simultaneously.

And indeed, our survey of transformation leaders themselves revealed some of these common challenges. At the top of their list was the problem of competing priorities within the company, followed by a lack of authority to make changes and a lack of motivation within teams. They saw boosting organizational involvement in the transformation and elevating their authority as crucial ways to have more impact

The most successful CTOs benefit from strong and sustained organizational support so they can drive true transformation. This support most frequently manifests itself in five ways.

Unwavering support from the CEO

CTOs are most successful when they are positioned as a peer to the top team and C-suite, operating with the full backing of the CEO in words and deeds. Successful CTOs often point to a CEO who is willing to engage and make the tough calls (including turning others away if they try to make an end run around the CTO).

License to engage all employees

Transformations are far more likely to succeed when a significant percentage of employees meaningfully participate in driving the change (for instance, by owning an initiative). CTOs must have the mandate to mobilize the broader organization. A CTO’s direct team can be small, but its organizational footprint should be large.

A well-oiled ‘execution engine’

The transformation office—and the new operating speed that goes with it—is central to the CTO’s ability to deliver real and lasting change.

A robust incentive program

Companies that implement financial incentives tied directly to transformation outcomes achieved almost a fivefold increase in total shareholder returns. One CTO referred to himself as “the chief bonus officer.” However, the most successful transformations typically deploy a mix of financial and nonfinancial incentives, all the while keeping in mind the variety of factors that motivate employees.

Emphasis on the ‘soft stuff’ (to drive hard results)

Changing mindsets and behavior is critical to creating sustained performance improvement and to helping employees build new capabilities. CTOs may use the transformation office as a “leadership academy” to train the next generation of high performers at the company.

The CTO role is unique by design, requiring a versatile leader with the conviction and flexibility to adapt to whatever circumstances arise. In this era of nonstop disruption, consumer companies that recognize the value of the CTO role are positioning their transformations to succeed as well. Attracting and retaining this kind of top talent can be a daunting process, particularly for companies that are new to the idea of transformation. A relationship with a recruiting firm that understands and stands for the company’s purpose and its support of digital trust is likely to produce the best results. An effective recruiting partner will partner with the company to identify the right combination of skill and experience to find the top candidates and to convey to them what it is the hiring company stands for.

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