Chief Data Officer: the new mainstay for data-driven companies?
In less than one year, Gartner predicts that 90 percent of large global companies will have a Chief Data Officer (CDO) on their executive team.
A study run by NewVantage Partners on the impact of big data, which surveyed 60 Fortune 1000 companies, confirms that this upward trajectory of the CDO is happening. Leading corporations in the financial services, insurance, pharmaceuticals, and medical industries have recently added a CDO to their c-suite portfolio.
The role has been seeing healthy growth over the last five years. The same study from NewVantage found that just 12 percent of firms had a CDO in 2012. Today, nearly two-thirds, or 63.4 percent, of firms have a CDO.
Looking at the year-over-year trend from just 2017 to 2018, the percentage of titled CDOs who responded to the NewVantage survey has spiked significantly from 32.3 percent to 55.6 percent respectively.
“One of the approaches that firms have established to deal with data-driven disruption and change is to establish new management roles,” writes Thomas Davenport and Randy Bean, managing partners at NewVantage.
The survey data suggest that the role of a CDO is on its way to becoming table stakes for any company looking to compete in the digital landscape and innovate not only a company’s offerings but also their revenue model using data.
But what exactly is this role and why is it on the fast-track to the top?
What is a Chief Data Officer?
While the role has established a foothold in executive leadership, it remains ambiguous and unclear to many.
For most organizations, pulling up a seat for the CDO at the head table is the first step of many that will go into shaping it. The role itself, research from Forrester tells us, varies significantly across organizations in both hierarchy and responsibilities. Dependencies on the differences include data legacy and current organizational needs and goals.
Despite the differences, CDOs have three main areas of responsibility:
- Data management including quality and regulation,
- Using data for operational improvements, and;
- Having data play a large role in driving revenue.
Other responsibilities, according to the third annual Gartner Chief Data officer survey, released late last year, include:
- Defining a data and analytics strategy
- Leveraging data science methodologies
- Steward of data ethics
- Profit and Loss (P&L) ownership
Industry, market and organizational maturity strongly impact the individual responsibilities of the CDO, according to a recent Deloitte report.
The IBM Institute for Business Value defines the role of the CDO as:
The Chief Data Officer is a business leader who creates an executes data and analytics strategies to drive business value. The role is responsible for defining, developing and implementing the strategy and methods by which the organization acquires, manages, analyzes and governs data. It also carries the strategic responsibility to drive the identification of new business opportunities through more effective and creative use of data.
Why are companies hiring Chief Data Officers?
Data is a critical business asset that is highly vulnerable.
It’s becoming increasingly more difficult for businesses to continue to operate with so much data at their disposal and not find themselves in the crossfires of a ruptured or compromised data security strategy thanks to malicious attackers and threats.
In the last few days alone, data has again been bringing in headlines for landing in the wrong hands at the expense of the company, its customers, and other key stakeholders.
Breach events hitting Under Armour’s MyFitnessPal app and retailers Saks Fifth Avenue and Lord & Taylor prove, yet again, the universal lack of immunity around the very real dangers of working with and sharing data.
It’s not a matter of if, it’s a matter of when a data breach or attack will occur. Companies are quickly finding out that their luck of operating without the oversight of a CDO is going to run out sooner rather than later.
The role of the CDO is being framed as a company’s cross-functional leader alongside data risk management to ensure a responsible use of data. And it’s because of this, that the role is becoming more attractive for companies to adopt.
It’s easier today to name five recent data breaches at large companies than it is to name the latest medical breakthrough or the latest Nobel Prize winner — proving the level of importance and impact data has had not just on running a business but on how we live our everyday life.
Couple these threats with the increasing pressure to mine value from business data, CDOs are the horsepower companies need to strategically move ahead of the competition, generate revenue in the digital landscape, and meet the demands and reliance on data initiatives such as improving the customer experience — all tasking the CDO with high-impact business outcomes.
Data regulations like the GDPR require CDOs
With regulations like the European Union’s General Data Protection Regulation (GDPR) hammering down on the protection of personal data, having a c-level executive overseeing data or what the EU calls a Data Protection Officer (DPO), on staff is required for businesses and retailers based on the EU. Failure to appoint one welcomes steep fines.
Under GDPR, the DPO is seen as the ultimate authority to manage, monitor, and assess an organization’s data processing and management as it aligns with the regulation.
With or without the legal impetus to have executive oversight of a company’s data, organizations around the world should feel the pressures to break down operational silos and invest in good data management.
GDPR and other data regulations are evidence of how serious companies should be with protecting data. If not required to comply with GDPR, investing in data protection by appointing a CDO is quickly becoming standard practice for companies.
Not only does it send the message that data is being protected to the utmost degree, but customers will feel more inclined to do business with a company that goes above and beyond to ensure that personal data is safeguarded. And it’s that level of trust that will be a major competitive advantage throughout and beyond the digital transformation.
Data-driven businesses are the most valuable
According to the S&P Capital IQ, six of the top 10 companies with the highest market capitalization worldwide are data-driven.
- Alphabet (Google’s parent company)
“Data-driven enterprises are businesses that have a cultural mindset to use data analytics to make fact-based business decisions,” says the CEO and founder of Platfora. “More than that, they have the ability to quickly gather the right data from the right parts of the business to make those decisions. The CDO is central to making that happen.”
These companies are experiencing 20 to 30 percent gains in earnings before interest, taxes, depreciation, and amortization (EBITDA) in large part due to their use of data to drive sales, marketing, supply chain efficiency, manufacturing, and R&D, according to leading analysts at the Boston Consulting Group (BCG).
It’s then no surprise that with the widespread use of data across the business requires a dedicated leader responsible for the strategic use and management of data as it relates to the organization.
Chief Data Officers build the links between data analytics, business processes, and outcomes.
The use of data in business has matured past the point of simply using it respond to situations in the retroactive sense — only calling for data after the fact to put out fires or to remedy a sour situation. However, to be truly data-driven the approach needs to shift to be more proactive and predictive.
This shift swings the revenue pendulum into the realm of the CDO, who can then build various monetization strategies with data at the core.
This is a notable difference that comes with having a CDO. Traditionally, data oversight roles are more of a guardian in a way — someone who keeps a close eye on the data and ensures it’s protected, maintained and used properly in operational processes.
With the dedicated focus that comes with a CDO knowing a company’s data inside and out, they can uncover ways to leverage the data by extracting insights that often are hidden inside existing processes and functions. The insights derived can then be used to open new revenue streams in a variety of ways.
Leveraging data to drive business value means different things for every organization, industry, and geography. However, one of the core objectives of the CDO — of linking data, business processes, and outcomes — may range, according to the IBM Institute for Business.
Extracting value using data could mean the CDO defines the best way to leverage existing internal data. It could mean the CDO finds and exploits new data sources from existing or new business partners. Or the CDO could draw from big data sources such as social media or artificial intelligence and machine learning data.
Put simply, the role of the CDO calls for excellent tech savviness and change management skills, but also creative problem solving and a high level of sophisticated craftiness.
Biggest Roadblock for CDOs: Data Literacy
Data literacy, or the lack of by data knowledge and understanding across the company, is a major concern for incoming CDOs. To learn more about this challenge, we asked Donald Farmer, Principal at TreeHive Strategy on how to improve data literacy in organizations.
Expert Spotlight: Donald Farmer, TreeHive Strategy
Data literacy often presents a dilemma for the CDO. Where business users lack data skills, the IT team struggles to provision all the insights needed by the organization. They are constantly running to catch up with users’ demands. Yet, with technically savvy business users the CDO may face another problem: users can access, analyze or share data in ungoverned ways, beyond IT’s original expectations.
How should the CDO square this circle?
Firstly, let’s recognize that data literacy is a good thing: the ability to collaborate on decisions with a sound understanding of data improves organizations in quite measurable ways. We should encourage greater data literacy through training in tools and techniques.
Today, numerous online courses cover subjects ranging from the basics of spreadsheets to advanced machine learning and data science. A CDO can put together a virtual curriculum appropriate to their own business users and needs.
Training, however, is only the start for a data literate organization. Learning to be literate takes practice. We know that successful kids in the real-world are surrounded by stimulating books and comics.
In the same way, the CDO should work to ensure that their organization lives with data every day.
- Are strategies and plans communicated with a good and clear analysis of the data behind the decision?
- Are targets and incentives laid out with data to support them?
- Do people have the right tools to share data in meetings, and are meetings structured to encourage the use of data in decisions?
When we live and work with data on a daily basis our literacy improves in a natural way.
But the second strategy of the CDO is equally important.
We must ensure that we have clear, helpful, policies for the use of data. We need a governance framework and a training program for staff as they ensure they understand their own roles, responsibilities, and risks when it comes to the professional use of data in their work.
In a sense, just as we encourage data literacy to build a smart organization, we need to develop what we might call “Data Civics”, to ensure we grow into a well-governed organization too.
The cool thing about this approach is that, with the right governance framework and with the right training in place, business users can find themselves with more access to data than before.
The result is a more data literate, better managed, and more successful team for both business and IT.
How to find the right person to fill the CDO role at your organization
In the United States, there are 357.5K people with the title of Chief Data Officer. The top 10 qualifying skills across CDO job postings regardless of industry or organization maturity include:
- Domain experience and deep IT knowledge
- Innovation driver
- Change manager
- People management and relationships skills
- Independent and self-driven
- Strategic thinker
- Maintain productivity in fast-paced and high-pressure environments
- Ability to scale change
- Leading and motivating cross-functional, interdisciplinary teams
It’s clear that to be a successful CDO in today’s business landscape it requires skills that are traditionally developed across roles.
However, with the emphasis on wide-spread collaboration across functions, CDOs need to be multi-faceted across areas and considered the experts not only for the technical skills and qualifications required, but experts in business, communication, and management skills of people and systems, which can be a challenge for both the organization and those looking to become a CDO.
When a visionary CDO is identified and secured, an organization must continue to empower them by truly understanding the role’s potential for change and the value it can bring to the organization.
Without this two-way street established from the get-go, the CDO can be only so effective. Set them and the organization up for sustainable long-term success by making a concerted organization-wide effort to improve technology and data management, finding new ways to add business value with data, and fully embracing the CDO as a true c-level executive capable of helping companies go from good to great.