55

The Chief Technology Officer

Paul S. Adler Kasra Ferdows

he growing recognition of the increasing importance of

T technology to competitiveness has focused considerable

attention on the management of product, production pro-
cess, and information technologies.' It is hardly surprising that
these new strategic priorities should influence the organizational
design of large manufacturing corporations. In particular, from among the
possible organizational design responses, a number of large corporations
have created a senior position at the corporate level with broad responsibility
across at least two of the three general technology areas-product, process,
and information technologies. The person who occupies this position is
commonly referred to as the Chief Technology Officer (CTO).
Many companies have Vice-Presidents for Research and Development.
The breadth of their responsibilities and authority over technological mat-
ters in the corporation is, however, variable and often less than aCTO's. 2
They often derive their influence from the corporate and divisional R&D
laboratories for which they are directly responsible, and they often have a
basically functional orientation in their jobs. The growing importance of
technology to competitiveness and the growing interdependence of various
types of technology-some of which often fall outside the purview of the
R&D labs-make a purely functional view of technology increasingly in-
sufficient. This perhaps helps explain why only one CEO in five regards
their top technologist as part of their "inner circle."
But what, more precisely, does this broader, general management view
of technology consist of? This article reports the results of a survey of
CTOs in Fortune 100 industrial companies designed to help us understand
the tasks and background of the CTO.

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56 CALIFORNIA MANAGEMENT REVIEW Spring 1990

Data
For the research reported this article, we focus on the Fortune 100 industrial
companies in the United States (in 1985). Using the 1985 10K Reports and
Standard and Poors Register, we identified the subset of corporations that
had corporate officers with explicit technology responsibilities and with
titles other than "VP for R&D." While there are certainly cases in which
VPs for R&D play the CTO role, we did not have the resources to distinguish
those who did from those who did not. We thus assumed provisionally that
corporations that had nominated a CTO would exemplify the general issues.
A questionnaire was mailed to these 29 executives in the spring of 1986.
We received replies from 26; and of these, only one did not have the
breadth of responsibility his title had suggested. Of the remaining 25, we
conducted follow-up phone interviews with 22.
All the 25 CTOs considered themselves to be the most senior technical
officer in the company. Their actual titles were Chief Technical Officer (in
4 companies), Executive (or Senior) Vice President for Technology (11
companies), and Vice President for Science and Technology 00 com-
panies). Of the 25, 19 reported to Presidents, Chairmen, Chief Executive
Officers, or Chief Operating Officers; the other six reported to Executive
Vice Presidents or Vice Chairmen. In short, the executives in our sample
occupied very senior corporate positions.
These executives also met our criterion for breadth of responsibilities.
As summarized in Table 1, 3 had direct reports from all the major technology
functions and 17 had direct reports in more than just R&D. The remaining
5 had only R&D reporting directly to them, but like their 20 colleagues,
they all insisted that direct reporting was not the only medium for their in-
fluence. All 25 characterized their responsibilities as encompassing both
product and process technology in both centralized labs and business units.
(Information support systems was the most common missing element.)

Results
What do these chief technology officers actually do and where do they
come from? We put these question directly to the CTOs in our sample,
through the questionnaire and the interviews.

Reporting Relationships-All the 25 CTOs in our sample considered

themselves to be the most senior executive responsible technical matters in
the corporation-a responsibility that spans both product and process
technologies (and in a few cases information technology), typically at both
divisional and corporate levels. The extent of CTOs' formal authority over
these areas varied considerably. As one might expect, these relationships
were not always clear nor simple. In order to summarize our observations,

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 The Chief Technology Officer 57

Table 1. Breadth of eTa Authority: Direct Reports

N Breadth of Responsibility "Who reports directly to you?"

3 veryhigh R&D, Engineering. Manufacturing Process

Technology. Information Systems. Operations
Support.
10 high R&D, Engineering. Manufacturing TechoIogy,
Operations Support;
orR&D. Engineering, Manufacturing Technology;
or R&D. Engineering. Information Systems.
Operations Support;
orR&D, Engineering, Information Systems.
7 medium R&D. Engineering. Operations Support.
5 low R&D.

we used a two-parameter framework to capture both "solid line" and "dotted

line" relationships: CTOs' solid line relationships were captured through
questions about their authority over the business units' technology invest-
ment budgets, and CTOs' dotted line relationships through questions about
their power to appoint senior technical officers in the business units. Howe
and Cashel's analysis of Chief Financial Officers used this framework and
found that CFOs typically had both direct channels of influence-solid
lines as reflected in budgetary authority-and less direct channels-dotted
lines as reflected in the power to approve appointments."
Table 2 shows a cross-tabulation of the sample according to the breadth
of budgetary and appointment authority (proxies respectively for solid and
dotted lines). As the Table shows, five CTOs had full authority over technical
budgets and technology appointments in the business units. These five were
the most like "line managers" in the sample. In another five cases, the
CTOs were in purely "staff' positions in the sense that they had formal
authority over neither budgets nor appointments in the business units nor
even over corporate research; their influence over technological matters
inside the company was more informal-they correspond to Galbraith's
integrating roles based on "expert power," with little of the formal decision-
making, planning, and budgetary power characteristic of what he calls the
managerial linking role." Between the "line-type" and "staff-type" CTOs,
there were others who had formal reporting authority over corporate R&D,
and those who in addition to control over corporate R&D had authority
over budgets and appointments in the R&D functions within the business
units. As one might have expected, however, there is some of correlation
between authority over budget and authority over appointments, as
evidenced by the degree of diagonalization of the matrix in Table 2.

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58 CALIFORNIA MANAGEMENT REVIEW Spring 1990

Table 2. Breadth of eTa Formal Authority

Budgetary Authority over Tectn"lOlogy ExpendItuNIIn:
ApprovallUtttortty 0YIf' all all corporate
Ippolntmtnte of...,1or business R&D units R&D units
technology rellttd poettton, In: units only only none Total
allbusiness units 5 0 2 8
allR&D units only 0 3 0 0 3
corporate R&D units only 0 0 3 0 3
none 2 5 9
Total 6 4 7 6 23

Tasks-Our questionnaire asked CTOs "What are your major responsi-

bilities?" The answers fell into five groups:
• Coordination among business units' technological efforts to ensure
synergy and economies of scale. The tasks most frequently mentioned
were coordination tasks: avoiding duplication of effort in different business
units and assisting in the transfer of technology from one unit to another.
Some 60% of respondents mentioned among their major responsibilities
tasks related to coordination of technology efforts across business units;
20% mentioned getting technology out of R&D; and 12% mentioned
responsibility for ensuring synergy between product and process tech-
nologies. The common theme among these tasks was coordination-between
the business units and corporate research, across the business units, and
across functional areas. This corresponds to what Porter calls "horizontal"
strategy, in this case, horizontal technology strategy. 6
• Representation of technology within the top management team. Represen-
tation was the second-most frequently mentioned group of tasks: 52% of
respondents described one of their key tasks as being a voice for technology
in the top management team. In contrast to the coordination tasks, the
focus of these tasks was within top management and upward towards the
Board: pushing for a long-term view of technology, nurturing infant
technology development projects, and providing expert opinion on tech-
nological questions.
• Supervision of new technology development. Besides ensuring technology
coordination and representation, some of the CTOs directly supervised
technology activities in their company. This task was mentioned by
28% of respondents. As indicated in Table 2, the central corporate and
divisional laboratories sometimes reported directly to the Cl'O; among
the tasks of some of these CTOs was the supervision of these organiza-
tional units.

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 The Chief Technology Officer 59

• Assessment of technological aspects of major strategic initiatives.

Another 28% of respondents mentioned tasks related to the assessment
of the technological implications of proposed new acquisitions, joint
ventures, strategic alliances, and lines of business. Under this heading
respondents also mentioned their responsibilities for assessing the busi-
ness impact of the long-term trends in the relevant technologies .
• Management of the external technology environment. Many CTOs also
dealt directly with organizations and individuals outside the corporation.
Two external groups were often mentioned: 20% mentioned universities
and other outside research organizations, and 20% mentioned relations
with regulatory agencies. With the first group, the main tasks were to
provide broad guidelines for funded research and to collect signals about
important technical developments. With the second group, the main tasks
were ensuring that the corporations' products and processes complied
with the relevant regulations, identifying trends in regulatory constraints,
and orchestrating the corporation's efforts to influence the regulatory
process.

Personal Background-All the CTOs in our sample were men. Table 3

describes their prior work-experience in the major functional areas. While 16
had general management experience, all but one CTO had spent a considerable
part of their careers in technology functions (R&D or Engineering).
Rubenstein suggests that in recent years more CTOs have been recruited
from outside R&D; 7 but our findings suggest that few CTOs have not, at
some point in their career, sunk deep roots in the technical community.
Another question revealed that 15 of the 25 CTOs had PhDs. An advanced
degree may be a vehicle for more rapid advancement within technical
management and probably serves as a gage of technical expertise. Only 5
of the 23 CTOs on whom we have this data report experience in Manufac-
turing, and none report significant experience in Information Systems.
Seven CTOs had been recruited to their current position from an R&D
management role, while 11 had come via other roles. Four were recruited
from outside the company, in most instances because of their extensive
experience in Government. 8

Table 3. "Inwhich functional areas have you had working experience?"

G8l'1fmIl ~ sndTechnology (A&D &lor EngIneering) and Manu1acturtno 4
6"~·and.~(a&ON~S~)
, , ' '
11
~,(RID\*~-~. 1
~flUW~ 6
~.~ 1

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60 CALIFORNIA MANAGEMENT REVIEW Spnng 1990

Business-Unit-Level Technology Directors-Our research's premise was

that technology has become a more important competitive factor and that
there is an increasingly large potential for synergy between product, proc-
ess, and information technologies. We were therefore interested in examin-
ing the effect of this trend not only at the corporate level but also at the
divisional level: Do the business units have positions with broad responsi-
bility for more than one technology domain?
Nine companies reported such business-unit-level "technology director"
positions. Of these 9 companies, 5 were distinctive in that they were dominated
by continuous-process operations, rather than discrete-parts fabrication!
assembly operations. Petro-chemical and paper products companies were
particularly well-represented, and discussions with their CTOs confirmed
that the linkage of product and process technologies is so tight in these
industries that broader technology management roles were taken for
granted. In the remaining four companies with business-unit-level technology
directors, discussions with the CTOs revealed that competitive pressures
and growing synergy opportunities across product/process/information tech-
nologies were encouraging a growing number of their divisions to revamp
their organizational structure to bring product, process and sometimes
information organizations into closer alignment.

Motivations in Creating CTO Positions-In several cases, the telephone

interviews suggested that the creation of the CTO position had been trig-
gered by the availability of the right individual. Our interviews also
suggested some performance factors that prompted the creation of aCTO
position. Broadly speaking, the motivations differed depending on whether
the corporation had a central R&D organization. When we asked CTOs
from corporations with central R&D organizations why their firm had
created a CTO position, responses highlighted the need to foster greater
"responsiveness" on the part of central R&D and greater "receptiveness"
on the part of the business units. For those without central R&D facilities,
the driving concern was more often the need to "avoid duplication of
businesses' R&D efforts," to ensure the "cross-fertilization" of businesses'
technology efforts, and to "exercise overall leadership" in order to maintain
the technological base of the company, in particular, by serving as a "win-
dow to outside technologies."

Discussion
A skeptic might argue that CTO positions are a fad or fashion. The creation
of CTO positions might reflect a "mimetic'" process-it may not be moti-
vated by any rational calculation of the expected contribution to profitability
or to growth so much as by the desire to imitate what they see other suc-
cessful companies doing.

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 The Chief Technology Officer 61

While there is probably an element of truth to that hypothesis, our survey

suggests an alternative hypothesis: that the CTO plays an integrating role
made increasingly necessary by the peculiar dynamics of technological
evolution. As technological change accelerates, it both diversifies the range
of technological opportunities-such as with the emergence of new composite
materials-and creates new intersection zones among those technology
opportunities-such as when mechanical and electronic sub-systems are
integrated into "mechatronic" systems or when new composite materials
facilitate changes in product designs. As a result of the technological diver-
sification process, the corporation's technology players-internal and exter-
nal, centralized and divisionalized, product and process, research and
development-are naturally pulled in different directions: the expanding
universe of technological opportunities leads each player to adopt an in-
creasingly differentiated agenda. But in tandem with this differentiation,
the opportunities represented by both the new technology intersection zones
and the broader business logic of technology synergies are simultaneously
increasing. The combined effect of technological diversification and multi-
plying synergy opportunities puts under increasing strain the established
coordination mechanisms that link the corporation's technology players:
divisional autonomy makes it difficult to avoid redundancy of effort, to
ensure adequate coverage of emergent technologies, and to ensure adequate
exploitation of potentials synergies, while the traditional division of labor
between central R&D and the operating divisions exacerbates difficulties in
technology transfer and in appropriately linking the central R&D organiza-
tion's agenda with the divisions' needs.
Corporations that are experiencing these types of coordination problems
might be expected to lag their more effectively integrated competitors in
their ability to develop and deploy new technologies. While there are many
factors that contribute to the corporation's ability to derive competitive ad-
vantage from technology, a CTO can contribute to that ability by facilitating
the process of tapping opportunities emerging among technology suppliers,
developing products and processes that capitalize on new technological
opportunities, and marshalling the complementary skills and resources
needed to effectively exploit these innovations. As one element of a broad
range of organizational responses to the acceleration of technological
change, Chief Technology Officers are thus likely to become an increasing
common figure in top management teams.

References
I. A.M. Kantrow, "The Strategy-Technology Connection," Harvard Business Review
(July/August 1980); A.H. Rubenstein, Managing Technology in the Decentralized Firm
(New York, NY: John Wiley & Sons, 1989).
2. See R.N. Foster, Innovation: The Attacker's Advantage (New York, NY: Summit, 1986);
Rubenstein, op. cit.

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62 CALIFORNIA MANAGEMENT REVIEW Spring 1990

3. Conference Board, "Top Management Staffing Challenges," Report RB 121 (New York,
NY: Conference Board, 1982).
4. T.H. Howe and WS. Cashel, Jr., "Organization for Financial Management," in R.E
Vancil, M. D'Amico, and B.R. Makela, eds., The CFO's Handbook (Homewood, IL:
Dow Jones-Irwin, 1986).
5. J.R. Galbraith, Organization Design (Reading, MA: Addison-Wesley, 1977).
6. M.E. Porter, Competitive Advantage (New York, NY: Free Press, 1985).
7. Rubenstein, op. cit., pp. 100-113.
8. See also Rubenstein, op. cit., on the pros and cons of external recruiting of CTOs.
9. P.J. DiMaggio and WW Powell, "The Iron Cage Revised: Institutional Isomorphism
and Collective Rationality in Organizational Fields, American Sociological Review, 48
(1983): 147-160.

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