The Number of Chief Data Officer is Rising But This Role is Still Unclear
In a just few years the rising number of the Chief data officer is staggering. Timeline looks like this. The first appointment of Chief Data Officer was in 2002, in Capital One and in 2005 Yahoo followed. According to Gartner in 2010, there were just 15 CDOs in large organizations, and that number rises in 2014 with 400, and a huge leap up to 4000 in 2017.
The last year survey shows that 63% executives report that their firm has Chief Data Officer, with firms including American Express, Bank of America, Capital One, Charles Schwab, CitiGroup, Fidelity Investments, Ford Motors, Goldman Sachs, JP Morgan, IBM, Wells Fargo, and VISA, among nearly 60 industry leaders.
What Chief Data Officer should be
A chief data officer (CDO) should be a senior executive responsible for organization-wide governance and utilization of information as an asset, via data processing, analysis, data mining, information trading, business intelligence, advanced analytics and other systems and services.
CDOs report mainly to the chief executive officer (CEO). Depending on the area of expertise this can vary.
Regarding the importance of the data and new technology that emerging to analyze data which affects the whole organization and whole C-suit, CDO reports to CEO but also to CMO, COO.
Why CDO become so important?
With the development of the internet and many technologies, systems and tools that continued and leverage upon existing solutions like decision support systems (DSS) — created in the 1960s and developed throughout the mid-1980, the possibility of gathering, collecting and analyzing data arose to the levels that were never possible before.
Green computing, social networking services, data visualization, mobile BI, composite applications, cloud computing, predictive analytics, machine learning and in recent years internet of things (which alone will provide staggering amount of new kind of data not accessible without this technology) opened enormous opportunities not just for companies but for public sector, science and innovations as well.
In recent years it becomes very clear that data-driven feedback effects are becoming a necessity for innovation and competitive advantage.
A good example is given by the Harvard Business Review:
“During 2016, self-driving cars by major car manufacturers improved by roughly a third. But, Google collected far more data per car to feed a more advanced machine learning system, and its cars improved by 400%”
With this importance, some experts even describe data as the new oil, although not everyone agrees with this comparison one thing is sure nobody is questioning that strategic approach to data will be a crucial factor for future growth and success.
Now if “data is new oil”, then any serious organization should have a “refinery” for this new oil with the manager responsible for this strategic operation, and this is what we see in recent years.
Before this rise of CDOs, responsibility for data was often in hand of Chief Information Officers, for whom this was just one of their responsibilities, not related to data, or was in the Director of Business Intelligence and someone in similar level accountability.
Or even worse many corporations that have been in business for decades or longer were not organized around data at all.
Thus, according to Gartner in 2012, more than 35 percent of the top 5,000 global companies regularly failed to make insightful decisions about significant changes in their business and markets.
Realizing now that data as the critical strategic asset, companies are making adjustments to become data-driven organizations which will leverage on insights of a systematic approach to data, and this the reason why this role is raised to the C-level.
Lack of consensus what is the role of Chief Data Officer
But It seems that there is a huge difference between experts and the business community regarding the role of CDO and his responsibilities.
CDO Roles in theory
According to experts, the role of CDO has to go in three directions:
First as the Data integrator, which means that CDO has to manage the exploration of raw internal data, diagnostic analytics, and value-added data quality and integration.
Second, consequently, he has to be a Business optimizer with focus also on external context and benchmarking, cost-reduction analysis, and discovering business-driven growth opportunities.
And finally, CDO has to take a role of a Market innovator and to explore and execute data monetization opportunities, use cognitive trend analysis and create innovative business models.
Reality — Luck of consensus
However, in spite of widespread perception of the necessity for Chief Data Officer, 2018 survey with participants from nearly 60 industry leaders showed a lack of consensus on the nature of the role and responsibilities of CDO.
As first, there is a huge disagreement about the long-term role of the Chief Data Officer. Exactly 50% stated that CDO should be on the executive committee, while the other half have totally opposite opinion, with 37.1% among them think that CDO should report up to the executive committee, but without a seat on the committee.
Then there is a difference how survey respondents see the primary responsibility of CDO, 39.4% consider that it is data strategy and results within their firm, other 60.6%, a clear majority, identify other C-Executives as the point person, or claim no single point of accountability.
On the other hand, few executives — only 2.2% — perceive the primary CDO role as creating new sources of revenue.
Regarding the overall data and analytics strategy role, lack of consensus is also present, 26,7% see CDO as coordinator of data initiatives across the firm, while 20% view the role as leading these initiatives across the firm.
Where do you start as CDO then?
If the CDO position is clearly recognized as the most important position in an organization, but in another hand, his role is still ambiguous and unclear, the question arises: as a CDO, where do you start and where should your attention be focused?
In the recent McKinsey interview with the recently appointed Scott Richardson, CDO of Fannie Mae about his first 100 days in this role, he shares valuable experience for starting in this position.
First, he wanted to create a relationship with all senior leaders in the company. He arranged the initial meeting with them to be more as a personal introduction where everybody talked about private life and themselves. Then his focus was to receive direct feedback from each leader to have a better sense of organizations needs and where it was in its journey, so he could form a clear picture and explain how data can be used to “maximum advantage for our customers, our mission, and running our business”.
Other experienced professionals identified several areas to focus on when starting in CDO role.
Of course, as fundamental, checking that existing privacy and security mechanisms in the company are sufficient above everything else.
Then, the governance issue ensuring that data is consistent and establishing a common understanding of what data means, and company-wide definitions for all measurable business terms.
Underlying technical aspect and important both for security and governance is the integration of data silos which are often in the companies created in the isolation.
And finally, considered strategic as “data evangelism” (covered in above mentioned McKinsey interview) is exploring the opportunities for data monetization.
This is the real and relevant utilization of data as an asset. Firs, using it in a traditional way as a foundation to grow top-line revenue and decreasing cost, but also to create new revenue streams with strategies s that will work for the organization’s specific situation.