What is a chief data officer - and do you need one?by
With data volumes increasing exponentially, a growing number of organisations are appointing chief data officers (CDOs) in the hope that they can improve efficiencies in the way that information is dealt with, and ultimately drive competitive advantages from it. Analyst house Gartner estimates that the number of CDOs has risen from 400 in 2014 to 1,000 in 2015, and forecasts that as many as 90% of large companies could have a CDO role by the end of the decade.
Explaining this ambitious estimate, Gartner’s research VP Mario Faria says: "Business leaders are starting to grasp the huge potential of digital business, and demanding a better return on their organisations' information assets and use of analytics. It's a logical step to create an executive position — the CDO — to handle the many opportunities and responsibilities that arise from industrial-scale collection and harnessing of data."
Certainly there is strong evidence of a significant appetite for such a role. In an Experian report from 2015, which interviewed 250 CIOs, 90% of respondents said they believed that data is changing the way that they do business. And – critically – nearly half of them (44%) reported that they themselves are facing major challenges with the volumes of data.
With over half (58%) of CIOs expecting the volume of data their organisation needs to manage to increase, the need for an executive-level data specialist - a CDO - to take charge of all organisational data is apparent, and 61% of the respondents told Experian that they wanted to see a CDO hired within the next 12 months.
The main motivations for this appointment included the need to capitalise on Big Data (reported by 44% of respondents), the desire to provide a consistent approach to de-risk data driven projects (41%) and the demands of increasing data regulation (38%).
Role and responsibilities of the CDO
“The role of the chief data officer is becoming more popular and their relevance within businesses is becoming stronger and stronger,” notes Stephan Thun, CEO Europe of MaritzCX. “With masses of transactional and relational customer data and countless operational data that has previously been sitting within functional silos in an organisation, better analytics from all information sitting in central data warehouses has become an important element of successful companies’ strategies.
“The CDO is not only the keeper of that information, they also oversee how data is gathered, managed, protected, and monetised. They provide vision and strategy for all data management activities, meaning they are the champion for data management across the business. And with huge financial risks attached to the misuse of personal data – fines of up to 3% of a company’s global revenue are a real threat to business – the CDO is a key position that has executive-level responsibility and needs direct board access.”
Estimating that as many as 45% of businesses and governments across the globe already have a CDO in place, analyst house Forrester surveyed 3,000 business and technology decision-makers to establish four key areas that CDOs are initially being appointed to address:
- Remedial data practices.
- Governance and building on a “data foundation”.
- Using data to improve customer insights.
- Embedding data into the culture of the business.
But Forrester also anticipates that the role will ultimately evolve in most businesses to serve as a bridge between IT and the rest of the business, removing some of the pressure being placed on IT departments in relation to data management, and freeing up the CIO.
In its own research into the ways that CDOs are being deployed in organisations, Gartner has identified four possible value propositions for the office of the CDO, and four organisational structures that are being built to support them.
In its paper "Successful Organizational Design Principles for the Office of the Chief Data Officer", it identifies:
- The CDO’s organisation as an engine room: The office of the CDO delivers operational data services that are focused on the needs of the internal users. It succeeds by monitoring any data market developments and building expertise in data asset usage, information management and analytics.
- Everyone's CDO organisation: The office of the CDO focuses on the needs of the internal users. But there is a strong push for data assets to be used aggressively by business leaders and individual contributors to break through traditional perimeters of business, and to drive transformation and new digital business models across the organisation.
- The CDO’s organisation as a business service provider: The office of the CDO delivers operational data services that are used by both internal and external users. The activities are expanded and integrated into a shared-service organisation that runs like a business.
- The CDO’s organisation is the business: Information is one of the explicit external offerings of the organisation or is inseparable from the product line. The office of the CDO delivers internal and external data services that drive business transformation and differentiation.
"There's no one correct way to design a CDO office — its structure and strength depend on how it is used by the evolving organisation," says Faria. "In Gartner's model, the organisational design depends on four possible ways to organise and exploit the benefits of data within the business."
The proliferation of CDOs, and the range of different primary goals that CDOs can be tasked with, should of course be no surprise given the enormity of the data challenges facing today’s businesses. What does appear clear is that for large organisations a CDO is increasingly viewed as the solution for a great many of the biggest data headaches they are encountering.
“It is encouraging that we are seeing a clear response with more and more appointments of ‘data champions’ who are entering organisations at board level and have the skill set to drive change and culture from the top.” says Boris Huard, managing director at Experian Data Quality. “This is even more important in a digital world where data, processing and interconnectivity are everywhere, meaning poor data quality can have a profound impact.
“Conversely, those who put data at the centre of their business strategy will reap the rewards and make their organisation more agile, competitive and forward thinking, in a hyper-competitive marketplace.”
Kevin Tan, CEO of Eyeota, concludes: “Whether you need a chief data officer really depends on the size of your organisation. Most large and successful companies are those that typically employ a chief data officer to make use of their existing data to plan business strategies. Gartner estimated recently that 90% of organisations will have a chief data officer by 2019 – this is not surprising seeing that data is money and companies view it as a worthy investment.”
Neil Davey is the managing editor of MyCustomer. An experienced business journalist and editor, Neil has worked on a variety of newspapers, magazines and websites over the past 20 years, including Internet Works, CXO magazine and Business Management. He joined MyCustomer in 2007.