Chief Data Officers Are Useful. But Their Role Is Still Murky.
Quick. What do Coca-Cola and the Centers for Disease Control and Prevention have in common? Yes, both are based in Atlanta, but there’s a lesser-known shared trait. Both recently hired their very first chief data officer.
That might seem a surprise for the latter, since the healthcare industry has largely embraced the role. But the former is part of an emerging trend. While the CDO role originated at Capital One and, for years, predominated in finance, then in health, consumer brands and services are increasingly embracing the CDO. Today, SeatGeek, Hulu, Sotheby’s and Poshmark are just a few that sport a data officer in the C-suite.
“It all goes back to digital transformation, the degree to which interactions are digital,” said Cindi Howson, chief data strategy officer at ThoughtSpot and host of The Data Chief podcast. “You want to get your data house in order.”
Consider Arcadia Group, the now-defunct company behind several clothing retailers, most notably Topshop. The pandemic accelerated its demise, but according to retail watchers, it had already been spiraling due to a failure to fully embrace data-driven e-commerce.
“It was one of the biggest high-street fashion retailers in Britain in the last decade, [but] because they didn’t get their heads around digital and data, it’s gone bust,” said Peter Jackson, chief data and analytics officer at Exasol and co-author of The Chief Data Officer’s Playbook.
According to Jackson, there are a few broad factors that influence an organization’s decision to bring on a CDO. One is data maturity — or, sometimes, immaturity. That is, a company recognizes it’s lagging in data and wants to proactively avoid becoming another Topshop. Related is the realization that data-enabled personalization can provide standout service and boosted revenue in sectors where margins are thin.
Another factor might be regulatory pressure. “That’s why financial services embraced it early,” Jackson said. “You get regulators who start to not trust the data, and organizations get fined for handing over incorrect or inaccurate data.”
Lastly, don’t discount the keeping-up-with-the-Joneses impulse: Others are doing it, so should we! Not the best rationale, Jackson said, but one that might deliver nonetheless.
Structure and Impact
In 2021, fewer and fewer companies doubt the primacy of data. But does that necessarily mean an organization needs to take on the expense of installing a dedicated data officer into the upper echelons of the org chart? What about building a robust data team without a chief data officer?
For Doug Laney, the proof is in the numbers. Laney, a data and analytics strategy fellow at West Monroe and an instructor in Carnegie Mellon’s chief data officer certificate program, conducts an ongoing survey of companies about the impacts of CDOs. So far, he’s interviewed some 500 organizations, and a few key statistics have emerged.
According to Laney’s research, organizations with a CDO are:
- Four times more likely to use data to transform their business.
- Three times more likely to freely share data across the business.
- Seven times more likely to generate external monetary value from their data.
- Twice as likely to run advanced analytics, rather than basic operational reporting, than organizations that make a CIO responsible for data assets.
- Three to four times more likely to formally value their data assets.
The last figure is notable, as many companies fail to formally value their data, since accounting often doesn’t consider it a balance sheet asset the way it does other technologies. Aside from being a bitter irony, the failure to quantify the value of data creates a vicious cycle of not monetizing it.
“You can’t manage what you don’t measure,” Laney said, quoting an industry maxim.
While the rise of the CDO also reflects the elevated stature of data in general over the last decade-plus, Howson agrees that the structure of senior data management is itself important. In Howson’s opinion, the most impactful CDOs are those who report to the chief operating officer or directly to the CEO.
“It’s almost like the CDO started out reporting to IT, because data was seen as an IT thing,” she said. “But over time, they realized this really helps improve customer loyalty, boosts revenue and increases operational efficiencies.”
Data leadership is also not necessarily the domain of even the highest-ranking technical officer.
“I think if you asked a lot of CTOs what DataOps is, they wouldn’t know, whereas I think the CDOs know how to create an operating model that governs the data and leverages the value,” Jackson said.
Should Your CDO Be Defense-Minded or Offense-Minded?
Talk to enough CDOs and an inevitable theme arises: offense versus defense. Because the role originated in finance — focused on data governance and regulatory compliance — it was born “defense-minded.” But over the years, a shift has occurred.
In the debut episode of her podcast The Data Chief, Howson identified the shift — from the data streamlining and safeguarding focus of CDO 1.0 to a focus on leveraging data for digital transformation and business impact — as one of the key evolutions in data management.
“If the CDO cannot evolve to that, then there’s no point in having a CDO,” she said.
A poll conducted by Howson showed that her analytics colleagues overwhelmingly measured success through the lens of business KPI improvement, rather than amount of data collected, number of users enabled or response time rates.
That jibes with the most recent NewVantage Partners survey, an annual poll of 85 firms about AI adoption and the role of the CDO. Seventy percent of respondents said that “offense-oriented data initiatives are more vital than defense-oriented ones like regulatory and compliance issues” for CDOs.
It’s not an either/or proposition, of course. CDOs are still expected to mitigate risk related to data. But their jobs can’t be limited to just security and run-of-the-mill reporting.
Laney recalled working as a consultant with publishers who had reams of valuable data — subscriptions, clicks, views — but weren’t using them beyond basic metrics.
“Not only were they not using it internally, but they were also not making it available to partners, suppliers, customers or others in the extended business ecosystem, who might find it valuable and pay for it,” he said.
Potential Projects for a Chief Data Officer’s First 100 Days, According to Experts
- Empirically quantify the organization’s data quality and its impact on the business.
- Assess the overall data architecture, with an eye toward removing inefficiencies.
- Hold brainstorming workshops for ways to generate value from data. Prioritize a few based on impact and feasibility. Tackle low-hanging fruit first.
- Bring in lesser-utilized data sets — such as service-center data, in retail — into the core data flow.
- Consider investing in external alternative data.
What Kind of Candidate Should You Pursue?
Corporate adoption of the CDO role continues to climb. Sixty-five percent of mainstream companies have now incorporated the role, compared to just 12 percent in 2012, according to the NewVantage Partners survey. And yet, the role is still not completely defined.
One of the most polarizing questions is whether a company should prize technical expertise or business strategy in a CDO candidate. The answer? It depends on who you ask.
“I think it’s one of the hardest jobs because you have to know the technology, but you also have to know business,” Howson said. “And you have to be respected by both.”
Jackson, of Exasol, said he’s seen a slight shift in recent years toward people with stronger technical backgrounds, namely former data scientists. That’s one of four traditional paths he’s observed. People migrated to the CDO role either from CTO positions (or aspiring CTOs), from governance positions (especially around the time GDPR was implemented), from business strategy backgrounds or from data science.
“A CDO has to be technically credible” — conversant, if not necessarily expert, in ETL pipelines and different query languages, Jackson said. “So coming more from the technical and data science side is probably stronger than from the governance and strategy side.”
Laney, however, sees it differently.
“I think the most successful CDOs are those with the people skills, more so than the technical skills, and those who report into the business, not into the IT organization,” Laney said.
He stressed firm grasps of supply chains, consumption and production models, a dual offense/defense capability, an ability to drive organizational data literacy and a firm background in economics — “applying concepts like supply and demand, productivity frontiers and price elasticity to data.”
“Those kinds of economic concepts were never intended to be applied to data,” he said, emphasizing the difficulty of that last requirement. “They were intended to be applied to guns and butter.”
Such difference of opinion is reflective of some larger uncertainties related to the role. The NewVantage Partners survey found that just 49.5 percent of CDOs have primary responsibility for data within their organization, and just a third said the role is “successful and established.”
That bears out in what respondents consider a profile of a successful CDO. While “external change agent/outsider” has won out the past four years, the percentage that favored “company insider/veteran” and “data scientist” both climbed from 2020 to 2021.
That preference for so-called change agents may help explain the significant turnover rates for CDOs.
Nearly 18 percent of respondents in the NewVantage Partners survey said they struggled with CDO turnover. Few candidates kept a position longer than two years, according to IBM research based on data from 2014 through 2016. Laney said the average tenure is about 2.7 years based on his observations, while Parker noted each of his last three CDO positions were less than two-and-a-half years.
That can be a bad thing in instances where people feel pushed out by change-resistant employers, but it’s more often a sign that goals are being accomplished, Howson said.
“They get in there, do the work, get that company in flight, and are onto the next problem and a bigger impact,” she said. “That, I think, is a good thing.”