What is Chief Data Officer — and Do You Need One?

Gartner anticipates that 90% of large organizations will have a Chief Data Officer by 2019.

This isn’t too surprising when you consider than the total amount of data is expected to grow exponentially, doubling in size every year until 2020. That’s 50 times more data in a decade.

Big data has plenty of insights for business large and small, and data-based initiatives are underway across the globe, as organizations seek to quickly understand and analyze mountains of information to glean a competitive advantage.

A Chief Data Officer makes key decisions around the storage, handling, and use of a business’ information, including the type of platforms used, connections to/from production applications, analytics processes, and efficient flow of data.

Let’s dig into what that means in practice and how a CDO can help reduce the significant costs around data storage, platforms, and access, while also improving business functionality and agility.

Defining the CDO Role

Analytics can be useful for fraud detection, business intelligence, marketing insights, product research and development, automation, and more. With data growth exploding, it can be difficult to decide what data is useful to store and which can be safely archived or deleted. A CDO makes those key decisions as part of an overarching data strategy.

Direct reports to the CDO may in fact reside outside the IT department, consisting of data analytics roles more than cloud engineering titles. In some cases, this can actually save the IT department some time and budget from salaries, as data-related roles are offloaded to this new department.

Data governance is an essential responsibility for CDOs, but ensuring quality data, security of stored data, and analytics are also important. This will work differently in different organizations. In some cases, it may be more efficient to leave data management — as far as the systems themselves and how they interact with the IT infrastructure as a whole — as part of the purview of IT.

CDOs and their reports therefore should focus primarily on business drivers and how the use of data can benefit departments across the entire organization. Those who choose to also manage the data itself should take care not to be too bogged down with technological details, as it can be hard to prove an ROI on analytics and big data investments if you are too distracted by the nuts and bolts of the system. Consider forming a committee between data and IT to properly assign and delineate who is responsible for what.

Because the CDO role is relatively new, those filling it may come from finance, engineering, mathematics, marketing, or business backgrounds. Whatever their experience, be sure to define the expectations and goals of the role before hiring.

How the CDO Functions in Practice

Ultimately the CDO is a liaison between other departments and the data that is stored and managed by the IT department. For example, at a manufacturing firm, the engineering department might need insights into their production overhead from the previous year to decide if they can add a new feature to next year’s model. But the production facility is located in another state, and uses a different technology platform.

A new CDO would have to investigate software, networks, security solutions, and any additional infrastructure necessary to bring data from both sides together in single Business Information/Analytics platform, accessible by leaders across the business. Data access and governance would be unified so all locations and departments can access stored information.

Do I Need a CDO?

Chief Data Officers are largely being installed at enterprise-scale organizations who have the budget and organizational structure to implement a new role. They also have huge quantities of data and often face siloed areas of the organization as described above.
However, a CDO can be useful at smaller organizations who find themselves facing data growth without much idea of how to manage it, including those in healthcare, banking, finance, media/entertainment, manufacturing, government, insurance, and retail.

A report from 2015 even states that companies that already had a CDO were performing better, with a 10% YOY growth rate vs. a 4% revenue growth rate; it further found that CDOs could reduce risk and ensure compliance.

Security and compliance risks are another factor that must be considered. If you lack a dedicated compliance team and don’t have much organization around your data, then a CDO is likely in order.

If your CIO and IT team have been handling data well across your entire organization, it may not be time to institute a new role like the CDO. But as data growth continues to grow exponentially, you should continue re-evaluating at least annually to see if the position could benefit your organization.