The chief data officer (CDO) is a relatively new member to executive teams, but technological advancements, changing data landscapes and digital transformation culture heavily influence how the role functions -- and its importance to business success.
In 2012, only 12% of surveyed organizations had appointed a CDO or chief data and analytics officer, according to NewVantage Partners' "Big Data and AI Executive Survey." In 2022, that number grew to 73.7%.
"This is someone that can be proactive in driving data-driven business decisions or ensure end-to-end clarity and consistency across the organization," said Peggy Tsai, CDO at data management firm BigID.
The need for the position is growing rapidly as technology and data advancements accelerate. CDOs are now juggling a variety of responsibilities beyond data strategy and illustrating data value.
Chief data officer responsibilities
1. Data governance
The CDO traditionally has been the "king of data" in an organization. They set data strategy, drive the framework development, control policies and help employees understand data usage.
"I call it the 'lifecycle of the data,'" Tsai said. "Understand how it's created externally, collected, how and where it's being used as it flows through all the systems."
This is more important in some industries than others. In more regulated industries such as finance, insurance or healthcare, it's vital to have a single person set the data strategy and manage regulation compliance. This makes one person accountable for data accuracy, validity, regulation compliance, privacy and security.
"The CDO started after big financial institutions became regulated to the point if their data was out of order, the CDO could go to jail," said Wayne Eckerson, founder of Eckerson Group, a data analytics research and consulting agency.
CDOs oversee the organization's data use operations. They are the primary force ensuring data is available and usable. The more efficient an organization is with this process, the more value the organization can extract from its data. This starts with the CDO.
"There really is a benefit to have one single person be responsible for defining, executing and working with their peers on end-to-end data management," Tsai said.
CDOs also should be aware of when to delete data because it is no longer needed or what vital business information to save.
3. Data management and analytics
CDOs are responsible for managing the organization's data and analytics operations -- including the architecture, user requirements, software development, report development and AI and machine learning integration. They must deliver timely data-related insights, which will help improve the organization's ability to proactively respond to security issues and optimize business processes.
CDOs are also the ones that must demonstrate the value of data.
They do so by "monetizing data assets either by wrapping them into existing products and services or selling data separately," Eckerson said. "Data monetization is the new sexy place to manage in an organization."
At the heart of any successful data operation is an organization openly embracing a data-driven culture. The success of a chief data officer hinges on how ready an organization is to fully embrace data and analytics across the board. The CDO helps foster this culture as well, as it's a critical component for both their own and their organization's success.
"The most important lesson that I teach, and I emphasize to my team, is it's really important to really understand the culture, the maturity of the organization," Tsai said. "The political challenges that may be specific to the organization may determine how receptive they are to a CDO."
5. Value creation
Value creation adds a new dimension to traditional chief data officer responsibilities. The "king of data" now takes a more active role in advocating for the use of data across the organization by turning all that data into tangible value.
"I see more and more CDOs playing an evangelist or advocate or advisor within their organization to bring together the data silos across different business domains," said Lan Guan, senior managing director and global data and AI lead at Accenture. "Also having a very vocal voice in defining the technology. All this is coming from the urgency and impetus of value creation."
Culture and value
With uncertainty surrounding the economic downturn, geopolitical pressure and social unrest, data is where organizations can turn for answers, Guan said.
"Analysts are telling us data won't lie," she said. "In times of uncertainty, data is one of the few things you can trust. That kind of mindset or paradigm shift is already happening."
Maximizing data strategy is where the true value of a CDO comes into play.
"Being data-driven, making evidence-based decisions, it's not a luxury anymore," Guan said. "It doesn't mean you have to be investing millions of dollars or push aside other strategic priorities to focus on data. Data should be so invisible that this almost becomes something that's part of your daily decision-making."
In some cases, the CDO may have to be the one pushing for change and creating the culture needed to succeed. They need to utilize communication, planning and political skills to do so across the organization.
"Ultimately, it's all about managing change," Eckerson said. "If you're introducing a new way to make decisions using data, that's going to force a lot of people to change the way they do their work. That's never easy. It's hard enough to change one person."
Changing the culture and demonstrating data value is the biggest challenge for chief data officers to keep their jobs. The majority of CDOs don't make it to a fifth year at their organization, Tsai said. It's difficult because fixing tech debt and installing a program to show business value usually can take longer than five years.
"The time they need to execute is very short because the board wants them to show the results very quickly," she said. "If they don't deliver quickly enough or deliver strong relationships, they may hire another or drop position."
CDOs can tap into their wealth of industry knowledge to better articulate the value story of their data. For example, consider an organization with a customer acquisition cost that was $15 last year, and it drops down to $8 this year via hyper-targeting the customers or audience. The CDOs can use their industry perspective to help decide if that drop is good enough, Guan said.
"Bringing industry perspective -- are you happy with $8 [cost of acquisition]? If a competitor is doing $6?" she said. "[That's] something I haven't seen enough of from the CDOs."
Do you need a chief data officer?
Large organizations are accustomed to dealing with massive amounts of data and are already employing a CDO. But for medium or smaller organizations, the question of whether it's a smart business and financial decision to bring a CDO aboard is harder to answer. The culture and maturity level of the organization and what specific outcomes they want from a data strategy are crucial for CDO success.
"I believe whether or not a company hires a CDO is dependent on whether or not the org itself, regardless of the industry, wants one," Tsai said. "They need to recognize there are internal challenges with consistent reporting on the data, spending too much time processing and recording [data]."
A chief data officer will need the support of the upper management in an organization to be effective. The higher up in the hierarchy a CDO is, the better.
"Without clear recognition from other executives and board itself, the CDO won't be a sustainable role in the company," Tsai said. "It needs to have a seat equivalent to the CEO, CIO, CFO. They need to be equal. If an org is not ready or willing to make their CDO equivalent to their other executives, then their data program will fail."
Of Guan's clients, 10%-15% have the CDO reporting to the CEO and those are analytics leaders or data competitors in their fields, she said.
"I feel very adamantly the CDO should be reporting to the CEO. They should have a direct reporting line to the CEO on the corporate hierarchy," she said.
Another potential area of contention for the chief data officer in the hierarchy is the CIO. If the positions aren't equal, the relationship can sometimes sour.
"There's tension between CIO and CDO," Eckerson said. "If the CIO is territorial, then you tend to have a lot of political infighting."
In some cases, the data team may be better off when combined with the analytics team and led by a chief data and analytics officer, recommended Eckerson. It's key for the data and analytics team to work in harmony as analytics needs data to generate insights.
"If the data team is going this direction, and the analytics team is going that direction … it's dysfunctional," Eckerson said. "You really want both teams swimming along the same lane."
As this era of data and analytics continues to expand, organizations without a CDO may risk falling behind competitors and their industry. As they adapt to the impact of COVID-19, organizations are more prepared to embrace data culture than they were before making the chief data officer role viable for everyone, Guan said.
"I think all the businesses are ready for that," she said. "Citizens and institutions became more data aware. Not proficient or data-driven yet, but data aware. [COVID-19] made digital transformation a reality."