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Does Your Company Need A Chief Data Officer?

Companies that have CDOs tend to perform better than those without, according to a report from Forrester.
Real-Time Analytics: 10 Ways To Get It Right
Real-Time Analytics: 10 Ways To Get It Right
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Companies with strong revenue growth are more likely to have a chief data officer (CDO) than organizations with less impressive financial performance.

According to a report from research firm Forrester, 54% of companies with 10% year-over-year revenue growth or more have CDOs, while 33% of companies with less than 4% revenue growth have them. That alone suggests organizations could benefit from a CDO.

The report is based on a Forrester survey of  3,005 business and technology decision-makers located in Australia, Brazil, Canada, China, France, Germany, India, New Zealand, United Kingdom, and United States from companies with 100 or more employees. The survey was fielded from January to March 2015.

Overall, the report says, only 45% of companies have a CDO. Some 16% of companies plan to add the role in the next 12 months.

[ See how companies are turning social media data into dollars and cents. Read 7 Smart Ways To Leverage Social Data. ]

Gene Leganza, a Forrester analyst and co-author of the report, said in a phone interview that while correlation with higher financial performance should not be construed as causation, "The data does seem to support that higher performing companies are just better with data."

Not every company needs a CDO. Neither Netflix nor Uber has one, according to the report, and both demonstrate effective use of data.

But companies with CDOs recount a variety of benefits. According to Forrester, organizations with a CDO are 70% more likely to ensure compliance and reduce risks and 60% more likely to increase business agility than those without a CDO.

The relative scarcity of the position reflects an uncomfortable truth for many companies: They aren't sure how to derive value from their data. Forrester's report argues that companies often lack the capabilities, comptence, and culture to turn data into actionable business decisions. Hiring a CDO doesn't necessarily ensure competency with data, but it can indicate commitment to that outcome.

The role of the CDO varies across organizations, but it generally includes data management, data governance, data analysis, and/or the delivery of insights.

About a third of CDOs report to CIOs, according to Forrester. Another third report to the CEO. While this could create a sense of rivalry with the CIO, Leganza said there's less conflict than one might expect. "Whether CDOs report to the CIO or the business side, there's a great deal of collaboration," he said.

The report argues that CDOs and CIOs have what amounts to business superpowers when they collaborate. "The CIO-CDO relationship is nothing short of the Hanna-Barbera's Wonder Twins 'shapeshifters' who transform themselves into various forms to solve the world's problems," it says.

The reason organizations appoint a CDO is often because they feel the responsibilities would be too much to put on the CIO's plate, said Leganza. And CIOs are generally supportive because they realize that. "Most of the CIOs we talked to are very happy to have their organization invest in data improvements because they don't have time to do it."