The CIO/CTO Will Become Merchants’ Most Important Position

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The 1990’s were a great time to be a Chief Information or Chief Technical Officer (CIO and CTO, respectively). As the internet roared to life, creating ephemeral wealth for everyone and their dog (who owned a dot com, at least), every company wanted tech chops to compete.

The prevailing theory was that being on the “interwebs” would fix every inadequacy of your business. Even large companies were in a hurry to gobble up scarce talent that was sophisticated on what this internet this was, and how it could be put to work to justify their most recent compensation package.

Go tech, go!

Here’s the Today Show reminding us how we all sounded in 1994 when talking about [sic] “internet”.

Internet hype fizzled out with the razing of investor dollars. It turns out there was no quick way to 10x your business, though that hasn’t stopped companies (cough, Groupon, cough) from peddling similar notions since.

From the burst of the internet bubble through today, technology companies have made serious ground. For proof, look no further than the top 10 public companies by market capitalization.

Half of the top 10 are technology companies, and two of these were started in the last 20 years. For reference, the five non-tech companies on this list were started an average of 168 years ago, while the tech companies are, on average, 27 years old. One could fairly argue that technology companies have proven to be 6x more efficient than non-tech companies in creating value as measured by market capitalization.

So even though technology has been permeating its way into every corner of the modern world for the obvious value it’s creating, there is still one area where it has not come knocking in any material way: brick and mortar.

But that’s about to change.

What’s stopped technology from creating positive impact in brick and mortar has been the ease of connecting the dots. Think of other technology companies on the top-10 list as examples: Google has been able to connect people’s online search behavior; Facebook has been able to connect people’s online social behavior; and Amazon has been able to connect people’s online purchase behavior.

In brick and mortar, connecting people’s offline behavior involved crashing through some very thick walls. First was the merchant decision-maker, who was usually not very sophisticated. Second was the technology employed at the merchant; the system of record (ie POS – point of sale) was hellish to deal with and unfortunately the common denominator for new technology implementations.

Now that the online world is putting significant pressure on brick and mortar, they’re being forced to evolve lest they chart their path to extinction. It’s obviously preferable when someone recognizes they need to make changes on their own, but brick and mortar merchants are a very different breed.

Regardless, merchants are getting more sophisticated (if for nothing else because hedge funds and private equity groups are taking active roles in making decisions or placing talent from outside the industry) and POS is opening up to cloud connectivity… not that any of the legacy POS providers wanted to invest in making this possible. Thus the two biggest walls are slowly crumbling.

As it so happens, technology solutions will almost certainly be touching the POS transaction data to provide value to merchants. Here’s a list of some examples, in no particular order:

  • Traffic measurement
  • Online ordering & voice ordering
  • Chatbots
  • Delivery
  • Marketing measurement
  • Marketing recommendations
  • Labor measurement and optimization
  • Inventory measurement and optimization
  • Site selection
  • Theft reporting
  • Menu/item pricing
  • Customer communication and feedback
  • Loyalty
  • New item introduction
  • Category management

And although you’d be lucky to find merchants doing three of these things objectively based on data, do you know who controls the POS and the integrations to it?

The CIO/CTO.

The CIO/CTO role becomes increasingly important not just for the technology stack, but for finance, operations, real estate, marketing and strategy; they become the intermediary between technology and business solutions.

As more revenue is derived from online ordering and delivery, the CIO/CTO is involved.

As more revenue is derived through labor optimization, the CIO/CTO is involved.

As new sites are chosen, the CIO/CTO is involved.

… and on and on we go.

In order for merchants to attract high quality CIO/CTOs, those who are able to solve business problems, they’re going to need to give this position the importance it deserves. You can’t look to your high value assets to be replacing phone cables in the field, or running errands for your CEO. Does it sound like a good idea for someone to be on all fours scrounging in a back office when they’re responsible for shepherding 30% of your revenue via online ordering and delivery?

The new CIO/CTO role can’t be viewed as someone who handles basic phone systems but instead as someone with a strategic impact that sets the direction of the organization’s technology needs. Stop hiring the oldest tech in the room and start looking for the the person who has a vision and understanding for how technology can positively make business change.

The CIO/CTO in brick and mortar will become just as popular as they once were in the late 90’s. Let’s hope this time we don’t see their value cast aside.

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  • Michael L. Atkinson

    Great post, Jordan, as usual. So, what is the skill set of the “new” CIO? Operations + Finance + Technology++? The number of positions that need to be filled seems to far outweigh the number of professions that possess such a unique combination of skills, experiences and passion. Especially in retail/restaurant sectors.

    • Jordan Thaeler

      Mike, there is definitely a shortage of talent at the upper echelons. PE firms are bringing in those with outside experience that are doing well… I think that is a good model forward: find someone in a different vertical with a good brain, give them a bump up in title and let them figure it out.