What is a chief data officer, and why do you need one to implement your business-driven data strategies? We explain in this blog.
Many CEOs realize a business-driven data strategy leads to stronger bottom-line results. A recent Gartner study states that companies that treat data as an asset have a market-to-book value ratio nearly twice the market average. And, companies that sell data products or data derivatives of some kind have a three-times market-to-book value ratio.
In addition, according to Alation, companies with strong data cultures outperform their peers. In its survey, Alation found that “90 percent of companies with top-tier data cultures met or exceeded their revenue goals over the prior 12 months.” Countless other studies and research are motivating companies to modernize their data capabilities. However, the path to achieving that goal is complex, and it’s littered with hidden barriers.
A chief data officer (CDO) can help pave the way. A CDO’s primary job is to understand and implement all aspects of data governance as they apply to your business. In doing so, CDOs oversee a range of data-related functions, which may include managing data, ensuring data quality, and creating data strategy. They may also be responsible for data analytics and business intelligence — the process of drawing valuable insights from data.
However, to realize the full benefit of your CDO, you must view them strategically. Your CDO must work closely with your CIO and CEO to learn your overall business strategy, understand where the company needs to go and work with the rest of the business and technology to discover how data can get you there. In other words, they help develop and implement a business-driven data strategy.
You can hire or promote a CDO as a permanent part of your company, but a more effective approach may be to obtain a CDO consultant who has expertise in all of the areas beyond data that can stall or derail a data effort. An external company then supports that consultant with expert resources that can fill common gaps between failure and success, including implementation.
This practice is known as chief data officer as a service (CDOaaS). A survey from NewVantage Partners found that more than half of executives in Fortune 100 firms feel that a successful CDO must be an external change agent with fresh perspectives.
In this blog, I share five fundamental truths I’ve learned during five years of providing temporary CDO-related services to clients who needed to modernize their data capabilities. Those five years are part of the over 20 years I have spent building solutions for various clients and industries.
I hope you will benefit from these five truths, which I have learned through observation, experience, and research. I have seen them consistently differentiate success from failure when companies hire CDOs to implement their data-driven strategies.
If you keep these in mind as you consider becoming a data-driven company and determining a CDO’s role in the journey, you will find it easier to find elegant, efficient solutions to your most complex data challenges:
- Building a data-driven strategy starts with the CEO.
- Hiring a CDO alone is not enough.
- The CDO doesn’t have to understand your business.
- Buying a new tool or technology alone is not enough.
- Data governance is not optional.
I will explore each of these truths in more detail below.
Five Truths of CDOs and a Data-Driven Business Strategy
1. Building a Data-Driven Business Strategy Starts with the CEO.
You can only derive significant value from data with the business strategy driving your data strategy. If data is going to help you get there, you must clearly define where “there” is and ensure all levels of the business understand it. That means starting with the CEO.
To focus your organization, develop a long-term business vision and short-term goals that support it. Employees in every part of your business should understand their roles in reaching those goals. Participation from across the organization is the foundation of a holistic solution.
However, some CEOs err by allowing IT departments to take an “If you build it, they will come” approach to creating or updating data solutions. This approach often results from focusing on a specific delivery pattern or set of tools that produce standardized analytics, and the reality becomes more, “If you build it without gathering their specific needs, they probably will not come.” Instead:
- Business users will take data from that system, put it into Excel, and manipulate it for their needs. This approach wastes valuable time, creates a significant risk of manual error, and can lead to misinterpreted data.
- IT will build, refresh and maintain many analytical reports, dashboards, and so on, but no one will use these tools – another waste of time and money.
- No one will use these reports and tools to inform business actions that move your company closer to its short-term goals and long-term vision.
The key to avoiding these failures is accepting that building a data-driven strategy requires organizational change, not simply new processes or tools. That means investing in the expertise, planning, effort, and time needed to communicate how the change will benefit employees and the organization. When that message comes from the CEO, employees are more likely to believe and execute it.
2. Hiring a CDO alone is not enough.
Some CEOs have hired or promoted a CDO with the expectation that they alone would turn data into gold. That misunderstanding explains why the average tenure of someone performing the CDO function is about two years. Research shows that in these instances, either the company or the person in that role failed to realize the full scope of what they needed to do and the potential impact that work could have on the day-to-day functioning of the business.
Instead, your CEO must partner with the CDO so that the CDO has a clear picture of where the business needs to go. They can then work with the rest of your company and technology to identify data’s role in reaching that goal. As your CDO learns the overall business strategy, their understanding of technology, process and governance can turn that into an effective data strategy. The purpose of this is to help the downstream stakeholders achieve their goals in a way that supports your business’s overall direction.
That said, you may not need a permanent CDO. Most organizations can use a CDO to design and implement a data solution that includes people and processes (assuming they are able to identify and overcome the barriers listed here). Once implemented, that solution should be able to run without oversight in a relatively short time unless your business directly monetizes data or has an application defined by constantly changing needs. But for most, once the solution can operate independently, revisiting it every four to six years should be sufficient to keep it aligned with changes in the business, technology, or both.
3. The CDO doesn’t have to understand your business.
In other words, CDOs don’t need to be promoted from within or even come from your industry. A CDO’s critical skill set is clearly understanding all aspects of data governance and how to apply them to your situation. They should clearly understand the breadth of available solution designs and tech capabilities, but they don’t need to understand the intricacies of your utility brokerage firm, for example.
The role of the CEO and other business leaders, on the other hand, is to understand the business and the business needs and to define them for the CDO. The CDO applies their knowledge and skill set to those needs.
4. Buying a new tool or technology alone is not enough.
Vendors with solid marketing teams can make it seem like a specific tool or suite of tools is the answer to all your problems. However, implementing tools without regard to the people, processes, and your business’s specific needs won’t produce significant results.
I’m hearing these claims more frequently as more technology vendors engrain AI into their offerings. All insight requires high-quality, well-defined data. The old maxim “garbage in, garbage out” applies as much in the age of AI as it ever did.
To have high-quality data, you must have people and processes consistently producing it, and the data must be well-defined and understood. You should then apply data to well-defined business needs, such as, for example, reducing the amount of scrap used in a manufacturing process or increasing the revenue generated for a specific product line by X percent. Implementing process automation or architecture modernization are then steps you can take so your company can breed success.
5. Data governance is not optional.
Many leaders don’t fully understand the scope and breadth of data governance, but it is becoming more critical every day. A data-driven culture requires accurate data, and accurate data requires data governance. The CDO’s primary job is to understand and implement all aspects of data governance at the level they apply to your business.
Finally, it’s worth repeating that with the rise of generative AI and other advanced analytics methodologies, such as cluster analytics and predictive analytics, also increases the need for clean, well-defined, fully populated data.
Conclusion
The CDO’s work is becoming more critical as the age of AI accelerates the role that data plays in business, but the CDO’s role is not a one-person job. It depends on your organization’s ability to define where it’s going, convince its employees to make the day-to-day changes that will get you there, and implement the modern technology best suited for your needs. CDOaaS equips you with the ability and expert resources to overcome all the barriers that stand between you and success.
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