From cloud computing and mobile apps to the Internet of Things and automation, the digital disruption revolution is changing how the world does business.
All of these new areas are producing vast torrents of data – a staggering 2.5 exabytes of data are created globally each day. IBM estimates that 90% of the data ever generated has been created in the past two years.
Businesses need to manage big dataOpens a new window and their digital transformation effectively if they are to outstrip their rivals and prove their fitness for the future, from analyzing customer transactions for trends and new audiences to creating personalised offers for different groups of consumers.
So having a single designated board member responsible for data strategy makes sense. That’s why one of the hottest issues in business is whether to appoint a chief data officer.
Abbreviation to the acronym CDO risks confusion with another related role, that of chief digital officer. But while that executive deals with the issue of digital transformation and digital strategy, the chief data officer role focuses solely on creating strategies for data across the business.
Big Data, Bigger Budgets, More Staff
Some 4,000 organisations across the world have a chief data officer, according to Gartner research director Valerie Logan. She predicts that by 2021, 75% of large enterprises will have a data office comparable in size and scope to human resources, IT or business operations. Companies from Fannie Mae and Wells Fargo Bank in the US to Sainsbury’s, Barclays Bank and the government in the UK have all made the leap and appointed a chief data officer.
According to Gartner, chief data officers are getting bigger budgets and employing more staff. The average data office budget was up 23% from $6.5 million in 2016 to $8 million last year, and the average number of employees within the organization grew from 38 to 54.
Oversight of data analytics has often been the role of the chief information officer, although in some organizations the chief marketing executive has been charged with looking after data. But there is a strong argument for having a dedicated C-level executive to oversee the collection, storage, profitable use, compliance and safeguarding of data.
Many businesses have long had data processing managers, but these tended to have narrow and tightly-defined roles. The idea of a chief data officer is that he or she has an overview of the business and can step back from the everyday task of micromanaging data in order to forge a comprehensive strategy.
Managing the Data Blizzard
Financial services organizations such as banks are in the vanguard of hiring chief data officers, since regulatory compliance is critical for them, but other sectors such as retailers, airlines, hotel groups and manufacturers are also in the frame.
Any company that conducts a significant portion of its business online or via mobile apps needs to consider hiring a chief data officer. The growth of the Internet of Things and artificial intelligence will spin off ever greater streams of data, making management of this information blizzard even more crucial.
Compliance Gets Critical
Compliance is becoming a huge issue. Keeping data safe, secure and clean has never been more important as new legislation comes online, such as the European Union’s new General Data Protection Regulation, which raises the stakes for companies that fall short.
The regulation lays down strict rules on consent: All data used must have consent for each individual use. Any data breach must be reported to the authorities within 72 hours, and compliance failures can result in fines of up to €20 million or 4% of global turnover. The legislation applies beyond Europe to everywhere that a business operates.
Judging by the recent furor over Facebook’s failure to control its data – an outside firm was able to access data on 87 million users without permission to promote the interests of political clients – loss of control over data may significantly damage a brand’s reputation.
The responsibilities of a chief data officer include ensuring compliance with regulations and checking that the data is not sold or transferred without explicit permissions in place. They’re also in charge of ensuring that the data is kept “clean,†current and de-duplicated.
Becoming Agents of Change for Business Intelligence
But there’s much more to data than simply protecting a brand from regulators and public opinion. It has a central role in planning and improving business operations, engaging with customers and satisfying their needsOpens a new window , sharpening the targeting of marketing messages and responding to customer feedback.
Monetizing data is a key strategy in businesses – it’s behind the success of businesses ranging from Amazon and Google to Walmart.
Says Gartner’s Logan: “Early CDOs were focused on data governance, data quality and regulatory drivers, but today’s data and analytics leaders are impactful change agents who are spearheading data-driven transformation.â€
Where should businesses turn to find a chief data officer? Surprisingly, fewer than 10% come from an IT background, according to Gartner, while 37% lack experience in data or analytics. Many transfer from strategy, marketing or sales.
Leading Data Science
In the future, chief data officers will become ever more important for companies as they oversee teams of data scientists, who are active in one of the most crucial and cutting-edge disciplines in business intelligence.
Data scienceOpens a new window has grown out of companies’ business intelligence function and is concerned with finding powerful ways to leverage data. It requires an understanding of technology but also insight into business strategy and operations. Data scientists use predictive analytics, artificial intelligence and machine learning to analyze data and draw conclusions about how their companies can boost sales.
Breaking Down Silos
One of the benefits of digital transformation is that it requires breaking down silos within the organizationOpens a new window . Traditionally, data has been handled and owned by the different departments with access to it – the search team would control search data, the sales team would oversee sales data, and marketing would hold data on prospects and targeting.
But under a chief data officer, all the various sources of data are overseen by a single department. Because data can deliver insights into any part of a business, it makes no sense to divide it up between different departments.
How this operates in practise will depend on the types of permission that people give for the use of their data. But having a single executive overseeing all data entails the breaking down of data silos and will encourage departments to obtain as wide a spectrum of permissions as possible from the data owners.
Data-driven Cheese Makers
While many businesses are still at the beginning of their journey into advanced data-driven technologyOpens a new window , it’s worth putting the structures in place now to benefit in the coming years as the technology advances.
Hiring a chief data officer is not just about taking data analytics strategies more seriously. Rather, it’s a statement of intent to transform the business through the application of data, which is rapidly becoming the key enabler and tool for all businesses whether in the technology sector or elsewhere. For example, IBM has advised cheese makers – not a sector usually associated with bleeding-edge technology – about how data can be used to authenticate Parmigiano-Reggiano cheese.
All business intelligence will eventually become data-driven. Once data has become embedded in an organization and all staff are attuned to the digital transformation, it may no longer be necessary to have a chief data officer, since in a sense everybody will be a data expert. But that’s some way off. In the meantime, the advance of the data executive gathers pace.