Why Manufacturers Need a Chief Transformation Officer

Some are now looking to chief digital officers and chief transformation officers to exclusively focus on the organization’s digital transformation.

Olivier Gorter, senior vice president of McKinsey Recovery & Transformation Services, said having a C-suite-level executive to lead the charge can significantly improve the chances of a successful digital transformation. Gorter said CTOs (chief transformation officers) can single-mindedly drive the organization to the digital realm and help encourage and embed change.

Many companies are already using their traditional CTOs (chief technology officers) to oversee and manage digital adoption. But for some organizations, the work is so extensive and so critical that they’re creating the separate role of chief transformation officer.

Because their job is partly to shake up the organization, Gorter said the CTO must strike the right balance between “carrot and stick” and between short-term improvement and long-term value. A CTO also should be independent, have experience in turbulent environments and have the support of the board and the CEO. “Ideally, they should behave like an extension of the CEO or even the board and, as such, be able to hold the top managers accountable,” said Gorter.

A number of manufacturers, including Renault, L’Oréal and Sephora, have chief digital or transformation officers who are driving digital change in everything from manufacturing processes to marketing.

Sean Riley, director of manufacturing solutions for Software AG, said that digital transformation and a growing use of analytics will drive up the bottom line in manufacturing. To see the benefit, however, manufacturers will need to adopt technologies that will allow them to transform their operating models and digitally connect processes, actions, events and internal and external partners. Digital will become central to strategy—a linchpin for all major initiatives—and adoption will be “directly measured by the impact of the bottom line.”

A recent report by Forbes Insights and Hitachi Data Systems surveyed 573 senior executives and found that half said digital transformation was the “top strategic priority.” These executives said they were driving digital transformation with new business models and new technologies, and they were measuring success through innovation, revenue growth and cost reduction.

“Digital transformation is now essential for corporate survival…and it’s more about people and culture—about change management—along with investing in the technology,” said Bruce Rogers, chief insights officer at Forbes Media.

Manufacturers need a CTO to make day-to-day decisions about digital transformation and implement those initiatives with line managers. Gorter said the transformation expert will need to act as the face of the transformation, set the tone and challenge the current wisdom. He or she not only must be good problem solvers and business leaders, but also must have strong interpersonal skills and a high emotional quotient. It’s important, Gorter added that CTOs have a strong cross-functional background and have experience with a variety of business situations and challenges during their career.

“Like a military drill sergeant who demands daily push-ups and ten-mile runs, the CTO has the objective to make the organization fitter so as to sustain the effort over the longer-term,” Gorter said.