54% of organizations now have Chief Data Officers, but should mine?

Wednesday, 18 January 2017

54% of organizations now have Chief Data Officers, but should mine?


With Big Data becoming such a big deal in the world of business, it is no surprise that the Chief Data Officer (CDO) has managed to wriggle its way into an extra seat around the boardroom table. Increasingly more organizations, in both the private and public sector, consider data to be a strategic asset, and for this reason, the most forward-thinking companies are appointing CDOs. In fact, according to this survey, 54% of firms now report having appointed a CDO, up from just 12% in 2012.


Until the appearance of this new role, Business Intelligence (BI) and Big Data initiatives had often been remotely dispersed throughout organizations, working in isolated departments - even if there was supposedly a central BI department keeping tabs on the overall company data strategy.


Figure CDO
Figure 1: Where should the CDO be in my organization's structure?

So, what kind of of questions will an organization be asking themselves ahead of appointing a CDO? We thought of a few:

  • How far should the CDO be from the CEO? CEO-1 or CEO-n?
  • If it is CEO-1, how does the CDO relate to the other officers, in particular the CIO and CTO?
  • If it is CEO-n, to what Officer should the CDO report to? The CIO, COO, CMO, CFO, the Chief Transformation Officer, or the Chief Digital Officer?

To leverage the full potential of data, the CDO is best placed in an area whose mission is cross-company and that represents a large chunk of the business. In this way, the value creation is not limited to one specific area (e.g. marketing), and the value is relevant for the business. Doing otherwise, creates a bias towards creating value only from data in a specific area, or in an area that doesn't really matter.

Therefore, many argue that the best place to be for the CDO is at CEO-1 or at CEO-2 under the COO, which is cross-company. Having the CDO directly reporting to the CEO gets him or her a seat on the Executive Committee, which delivers a strong message both internally and externally. There are two alternative Officers who also ensure cross-organizational application and relevance: the Chief Transformation Officer and the Chief Digital Officer. While by nature those two roles have a temporary role (albeit for several years), they work in a cross-organizational manner and are tasked with the mission of adapting their business to the digital world, of which data is a pivotal part.

Of course, having the CDO directly reporting to the CEO is not necessarily suitable for all organizations at all times. It requires a level of "data literacy", and is likely to be reserved for the more forward-looking organizations who really know and embrace the fact that they have to adapt to the digital world in a data-driven way.

So why may organizations not yet want a want a CEO-1 position for the CDO?

  • Some companies may be too immature from a data perspective (i.e. not fully data-literate) and therefore might want to place the CDO under the CIO with IT to make sure that there is sufficient quality data before starting to exploit it.
  • Some organizations have a very clear idea of where to start exploiting data, so they place it under the corresponding department. For example, companies in sectors such as FMCG with a strong interest in improving their consumer marketing might place the CDO under the CMO. Those who want to innovate with data might even place it under the CTO (R&D), whilst organizations which want to save money, might place it under the Global Resources Officer.

In general, if the CDO is placed within a specific area, it normally implies that the CDO inherits some of the objectives of that area. If  it is under marketing, then objectives will probably be phrased in terms of sales or revenues. If it is under Global Resources, then it will likely be related to savings. Helping areas outside of their specific area then becomes a best-effort thing, rather than a core responsibility - depending on the bandwidth of the area of the CDO. However, experience teaches us that it is challenging to see this kind of cooperation beyond the day-to-day corporate limits of KPIs.

So, if an organization decides to place the CDO under one of the Officers without a cross-organizational responsibility, they create an unnecessary limitation to value creation from data. But why then are most CDOs not CEO-1, but -2 or sometimes even CEO-3 or -4?  Below, we briefly list the pros & cons for why an organization might do it this way:

Pros & cons of CDO under:

Pro`s and Con`s of a CDO position
Figure 2: The Pro's and Con's of a CDO's position in the org chart

Of course, whether a CDO is successful in his or her job does not only depend on how the role is placed in the organization, but it is an important factor. Other relevant factors are discussed in this article, such as business sponsorship or a lack of clarity on the role.

In Telefónica, the CDO function was introduced to the Executive Committee at the end of 2015 and is currently held by Chema Alonso, whilst 5 years ago it was between CEO-5 and -4. Three years ago it became -3, then two years ago -2 and now it is CEO-1 - showing just how fundamental data is in our strategy going forwards in our quest to put customers at the center of everything we do.

Chema Alonso, CDO of Telefónica
Figure 3: Chema Alonso, CDO of Telefonica

Of course, this discussion is much more relevant for those organizations who are on their journey to becoming data-driven.  However, there are many companies who are already data companies (i.e. their business is the data) and in their case, the CDO has very different requirements. Gartner wrote a report on the four types of Chief Data Officer Organizations highlighting that in data companies, the CDO is even more critital. We think that in such companies the CDO might even be the CEO. We may not know what the future holds for big corporates, but we do know that it will be driven by data.


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