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The phrase "data is the new gold" is often taken as gospel in the IT industry. But turning data into gold or other forms of value requires the right data monetization strategy -- and often a chief data officer.
Even with a chief data officer in place, the amount of power and types of responsibilities delegated to a CDO matters. "[Our] ongoing study of the role of the CDO shows that organizations with a C-level CDO -- rather than one in title only, or what we call a 'CDO-lite' -- are seven times more likely to generate external monetary value from their data and three times more likely to generate other forms of commercial value from their data by sharing it externally," reported Douglas Laney, data and strategy innovation fellow at technology consultancy West Monroe Partners. "I believe this has everything to do with these CDOs having real authority, autonomy and resources to design and execute on direct data monetization initiatives. Organizations putting in place data executives expect them to do more than just manage the data."
In companies without a CDO at any level, data is considered valuable, but no one has responsibility to monetize that data, said Alan Duncan, distinguished vice president analyst and CDO at Gartner. An executive-level CDO helps bring focus and leadership to data monetization strategies and programs, according to Gartner's 2020 survey of CDOs, chief analytics officers and other high-level data and analytics leaders. "If there is a CDO," Duncan said, "then there is a higher propensity for the value opportunities in data to be on the radar -- at least that's the case for the high-performer CDOs."
The following are 10 best practices to help CDOs derive the most value from their company's information and ensure a solid data monetization strategy with the flexibility to adapt to changing business needs.
1. Adopt a product orientation approach
Successful data and analytics leaders frequently adopt a product orientation approach that creates direct connections among data, insights and business value. "Data is no longer secondary and supportive to the business strategy," Duncan said, "but a primary part of the ability to drive new business outcomes."
2. Establish an information governance program
Data governance and the ability to manage information as an "asset" are critical factors in monetizing data and generating cash. CDOs can help their company establish an effective data governance program with the support and cooperation of other C-level executives. "There are often several challenges in making these programs work," observed Satya Sachdeva, vice president for insights and data at Sogeti, a division of IT consultancy Capgemini. "But information governance can be effective in breaking down data silos and creating an environment where certified and quality data is easily accessible by relevant stakeholders in a secure manner."
3. Delegate domain ownership responsibilities
CDOs can quickly scale a data monetization framework by setting up data domain "owners" responsible for monetization initiatives. Sachdeva, for example, said he worked with a CDO at a manufacturing company who assigned an owner to manage IoT data, develop an analytics framework and create a new revenue stream of value-added services for clients.
4. Create an ROI culture
"It's important to establish a culture that views data as an organizational asset," Sachdeva advised. An ROI culture can help guide investment decisions based on expected returns, liberate data silos to facilitate data sharing, and initiate programs that track data usage, monitor results and promote greater investment returns.
5. Plug data leaks
"Many companies give away data to partners, suppliers and customers without getting much tangible value in return," West Monroe's Laney said. To avoid a slippery slope of giving away too much information, CDOs should define limits to sharing data while maintaining goodwill with customers, partners and third parties.
6. Monitor utilization of data assets
CDOs should measure the degree to which their organization's data assets are being underutilized and identify ways to better deploy them. West Monroe's ideation workshops, for example, have shown that some companies identified up to $100 million in annual data monetization opportunities, while others have realized up to $300 million in increased valuations for their businesses. "Money talks," Laney noted, "so if a CDO can put dollar signs on data, they'll win the support of business leaders and other executives."
Back-office data should not be ignored. "Data monetization strategies are often focused on productizing data to sell for additional revenue streams and often overlook the opportunity that lies within back-office data already owned by the organization," said Bas Kamphuis, chief growth officer at analytics platform maker Magnitude Software. "CDOs who can successfully extract existing data to substantially improve business operations will gain credibility among C-suite peers as strategically providing value to their business."
7. Promote data monetization literacy
Lack of data literacy throughout the enterprise can significantly inhibit data monetization programs. Consider a strategy that rewards good data management behavior and discourages data hoarding tendencies. "It's key to educate everyone from the boardroom to the breakroom on data's actual and potential value," Laney advised. "Most organizations manage their office furniture with greater discipline than their data because they fail to adapt and follow well-honed asset management principles and practices when it comes to data management."
8. Make it a team effort
Allocating data assets requires the support and cooperation of many internal departments, including the legal, sales, marketing and engineering departments, which form the basis of a data monetization team. "The CDO is the logical person to spearhead this effort, as they have direct oversight of all things data," reasoned Brad Schneider, CEO at data matchmaking service Nomad Data. "And they are on the management team, which allows them to work directly with the other functional leaders."
9. Start with small, achievable goals
It's important to demonstrate some degree of success by starting with smaller projects and using that momentum to expand into larger initiatives. Many companies come out of the gate overly ambitious and fail to build successful traction, warned Schneider. He pointed to a global logistics outfit's CDO who was interested in making a data monetization strategy a companywide initiative. "This meant starting out with data products that were the easiest to produce and where they had multiple pilot customers identified," Schneider explained. The first product was a report summarizing findings from the raw data.
10. Diversify monetization opportunities
CDOs need to expand their data monetization programs to identify revenue opportunities and generate cash beyond the obvious -- direct data sales. "There is more value to data than selling it either directly or through brokers," said Tapan Patel, senior manager for product marketing at analytics software provider SAS. Data monetization programs can help improve products, services, customer experiences, operations and revenue streams, as well as minimizing enterprise risks.