Rise And Fall Of The Chief Data OfficerRise And Fall Of The Chief Data Officer
The C suite is expanding with more roles dedicated to data and analytics. The Chief Data Officer, or CDO, is one of these roles seen more often in some industries than others. The position may evolve with time. We explain some of the dynamics that cause CDOs to succeed and fail.
February 16, 2016
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There's a new sheriff in town and the title is chief data officer, or CDO. Found most often in regulated industries, the CDO is sometimes hired to help a company improve regulatory compliance, data management, and data governance. In other organizations the role may also be responsible for data analytics and/or data science. However broad or narrow, a CDO's charter depends on what the organization’s leadership thinks it requires, although the actual needs of the organization may vary over time. Here are a few important things to consider.
Is a CDO Necessary?
Large organizations in highly regulated industries are the most likely to employ a CDO. In smaller and data-first companies, a CDO's responsibilities may be shared among other titles or be the domain of a single individual, such as the CIO. The question is whether a CDO is actually necessary.
In a recent Forrester Research survey of 3,005 global data and analytics decision-makers, 45% of respondents said their company had appointed a CDO. The survey also revealed that "top performers" (those with 10% annual revenue growth) were 65% more likely to appoint a CDO than "low performers" that have less than 4% revenue growth.
[Are you ready for 2016's challenges? Read: 10 Skills CIOs Need to Survive, Thrive in 2016.]
"There are a lot of younger organizations that don't have CDOs because they've grown a data culture where all of this is already embedded in the organization," said Jennifer Bellisent, principal analyst at Forrester, in an interview. "In more mature organizations there isn't a culture of data. They don't have the right skills and processes and they're missing the tools and processes to put those in place."
Many companies have significant volumes of data hidden throughout the organization. To drive the maximum amount of business value from that disparate data, they may appoint a CDO to help integrate the sources.
"Governance and leadership are the first and most important challenges CDOs face," said Martin Fleming, VP, chief analytics officer and chief economist at IBM. "There are significant challenges around change management, the reprioritization of expense, and the ability to create the business benefit from taking the broader view of data."
Professional services organization Pricewaterhouse Coopers (PwC) sees the greatest concentration of CDOs in the US, but the role is becoming more common abroad.
"All of the math, algorithms, technology, and data are useless unless they're understood by the organization and utilized," said Dan DiFilippo, global and US data and analytics leader at PwC, in an interview. "CDOs are the ones who understand the business issue or opportunity, know how to apply it in science, and are really good at explaining that to business leaders."
On the other hand, hiring a CDO without a clear vision of what that person will do and how the responsibilities are handled already can result in redundant efforts and political feuds.
"When I look at what most CDOs do, at least those with whom I've interacted, they're actually doing the board-level responsibility of a CIO, which tells me that people are being hired to fill skill gaps that the CIO lacks," said Mike Guggemos, CIO of global technology solution provider Insight Enterprises. "Last time I checked, IT stands for Information Technology, and the CDO is all about how that information is processed and used."
The Reporting Structures Differ
Not all CDOs are created alike. Some of them, despite their C-level designation, may be subordinate to other C-level titles. Which title depends on how an organization is structured. The Forrester report referenced above indicated that in respondent companies, one-third report to the CEO, one-third report to the CIO, and one-third report to other C-level titles.
"We were very interested to find that very few reported to the CMO," said Forrester's Bellisent. "We hear a lot about the use of data in marketing campaigns, understanding the customer, and improving customer experience, but only 2% of our survey respondents report directly to the CMO."
Aside from corporate politics, the reporting structure may depend on the business outcome or primary business outcomes the organization is trying to achieve.
"More and more, we're seeing the CDO report to a COO or CFO, but I don't want to say there's a hard-and-fast rule. Who the CDO reports to can vary quite a bit," said Chris Mazzei, chief analytics officer at professional services company Ernst & Young, in an interview.
Generally speaking, the C suite is getting mighty crowded as a result of the digital revolution. There are CDOs, chief analytics officers (CAOs), and chief digital officers (also called CDOs), all of which may reside in the same company. The CDO may even report to the chief digital officer. Usually, a chief digital officer is in charge of digital strategy and customer experience. The chief data officer may focus on the quality, procurement, access, and use of the data.
The CAO may oversee analytics throughout the organization with the goal of transforming analytics into insights, and insights into actions that benefit the business. However, titles are less important than ensuring that the organization has the critical mass of skills it needs. When a CDO is appointed, that person needs to have the responsibility, authority, and organizational support necessary to succeed.
"A CDO needs to have a role and position within the leadership in the organization to have the influence and the clout necessary to drive the change that's required," said IBM's Fleming.
The role can also evolve over time. For example, an individual may be brought in to help improve data quality or compliance, which means investing in technology, improving processes, and helping to make the corporate culture more data-aware. Once the foundation has been laid, the CDO may then begin to explore how he or she can analyze the data, generate business insights, and enable better business outcomes.
"Sometimes we see CDOs evolving into CAOs. Interestingly, in government, we've seen CDOs become chief performance officers, where they're focused on improving government performance, such as capturing metrics around emergency response or on-time business arrivals," said Bellisent.
Get Ready for Change
An effective CDO will have the ability to effect positive organizational change. However, since humans are change resistant, it may be difficult to get the executive-level support, technology investment capital, or authority necessary to succeed.
"CDOs need to be chiefs, and not buried four layers under the CEO," said Tony Fross, VP and North American practice leader of digital advisory services at Capgemini Consulting, in an interview. "They have to have ownership of an enterprise strategy with broad horizontal input. Otherwise, they're not truly CDOs."
CDOs also need clear objectives and incentives that align with those of their peers, so they're not solving the wrong problems in isolation.
"Isolating a CDO is never a good idea. They need to be equal peers to the rest of the C suite, and their incentives and behavior must be aligned with what the organization is trying to achieve," said PwC's DiFilippo.
Similarly, CDOs should not be establishing their own fiefdoms. Instead, the CDO should work collaboratively with other organizational leaders, so she can better understand how the data can be used to achieve business objectives.
"CDOs need a strong business-IT partnership. If the CDO is on one side of the fence or the other, then they may get marginalized by the other part of the organization," said Fross.
Some CDOs struggle to develop horizontal capabilities when business units have strong vertical controls in place. Alternatively, brands may be so strong that they consider the CDOs digital strategy "binderware," Fross said.
Data-related competence isn't easy to achieve, especially at the enterprise level. Hiring a CDO may help, but then again, it may not if the CDO's charter and value are unclear. For example, a company may hire a CDO to improve compliance but then question the investment, because the organization is still not able to realize quantifiable business value from its data.
"Companies have struggled to supplement data governance with analytics insight. The link between data, analytics, insight, and business value is a multi-step process, and it's not necessarily easy to make your way down that path," said IBM's Fleming.
Organizations need a strategy and operational model in place for creating business value from their data, with or without a CDO. Getting there requires the consensus of business leaders, including the CDO or someone equivalent.
"The really effective CDOs are leaders. They have to inspire and motivate people, be a good team builder, and have a thick skin, because as they go down this path of educating the organization about data and analytics, they're going to encounter people who are naturally reluctant to change, and who see things in a different way," said PwC's DiFilippo.
In short, don't hire a CDO for bragging rights. Make sure your organization actually needs one, that the role supplements what already exists, and that your organization is culturally ready for the change a CDO may effect.
"I'm anti duplication of efforts without clarity of purpose," said Insight Enterprise's Guggemos. "If I had to hire a CDO, I'd go to my manager and ask where I'm failing. I'd know to know where the gap is and how it came about."
Filling the gaps is generally the point of hiring a CDO, whether the gap is real or perceived. But not every organization needs a CDO yet. Most organizations require the kind of expertise a CDO has, but the responsibilities may be better handled by other parties for the time being.
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