Why Chief Data Officers Must Assume Leadership for Data Success

Chief data officers need to be equipped with the right tools and support so they can execute on the company’s data vision.

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The New Leadership Mindset for Data & Analytics

This MIT SMR Executive Guide offers new insights and strategies for how leaders can help accelerate their companies’ data efforts, from identifying the type of talent they need to shaping a company vision that supports a data-driven culture.

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In their efforts to become data-driven, Fortune 1000 companies face the common challenge of identifying the right leadership that will enable them to overcome cultural and business roadblocks. For most businesses, cultural issues manifest themselves in a variety of ways — resistance to change, antiquated business processes, a lack of clear coordination and communication of business imperatives and business value, ineffective organizational alignment, and uncertain leadership and commitment to data initiatives.

These issues all point to serious gaps between ambition and execution that most organizations confront when embarking on data transformation efforts. As companies struggle to manage data as a vital business asset, they must develop the leadership skills, expertise, and organizational structure to effectively manage and communicate the business value of data. Now more than ever, it is incumbent upon them to establish strong data leadership that will define and deliver on a data vision that supports the greater business vision of the company.

The Emergence of the Chief Data Officer

In the wake of the 2008-09 financial crisis, leading financial services companies were compelled by government regulators to address systemic issues resulting from failures in the management and reporting of financial data that were seen as a contributing factor to the financial collapse. In response, several large banks took the lead in creating the role of chief data officer (CDO) to focus on implementing standards and safeguards for managing data. The driving motivation was to mitigate risk and avoid future systemic financial failures.

The rise of the CDO as a corporate risk function happened in step with the emergence of big data in the early 2010s. Although a few intrepid organizations had designated executives to function as CDOs earlier, a new combination of defensive drivers (compliance, risk mitigation) and offensive drivers (revenue generation, business growth), based on the promise of big data, resulted in a sudden and dramatic increase in chief data officer appointments. The percentage of major companies with a CDO rose from 12% in 2012 to a peak of 67.9% by 2019, according to an annual executive survey by NewVantage Partners.

Today, the chief data officer role has emerged as a standard for most Fortune 1000 companies, but it comes with serious issues and challenges as companies struggle with how best to shape the role to achieve successful business outcomes. While a majority of CDOs — 54.6% — are now focused on revenue initiatives (offensive), a significant minority — 45.4% — remain focused on risk factors (defensive). Only 12.3% of CDOs have assumed direct revenue responsibility thus far, suggesting that moving into an offensive business-generation role will take some time.

Alarmingly, less than 30% of executives report that the CDO role is successful and well established within their organizations. It should therefore not be a surprise that the CDO role has one of the highest turnover rates in the C-suite, especially when compared with more established positions like the CFO or CIO. Several major banks are on their fourth or fifth incumbent in the CDO role, and others have paused to rethink the role, highlighting the challenge that CDOs face.

The Need for Business-Driven Data Leadership

Data challenges remain an issue for most companies — with only 37.8% reporting that they have established a data-driven organization, and only 26.8% saying that they have forged a data culture. Because there has not been an established tradition or consensus on how data should be managed as a business asset, most organizations are charting new territory as they go. Companies are actively seeking leadership to move their organizations forward in an area where they continue to struggle and where most companies remain at an early stage of maturity.

Among the constituencies that have been grappling with and thinking about data leadership for the longest time is the MIT Chief Data Officer and Information Quality (CDOIQ) Program, led by Richard Wang, who previously held the role of deputy CDO and chief data quality officer for the U.S. Army. He was instrumental in spearheading the launch of the MIT CDOIQ Symposium, which is now in its 15th year.

I have had the good fortune to host and moderate a panel focused on the CDO role at the symposium for the past six years. In 2020, due to COVID-19, the event was held virtually for over 1,000 participants, approximately 25% of whom identified themselves as current CDOs. This year I was joined by CDOs from American Express, Bank of China, Bristol-Myers Squibb, CVS Health, and Mastercard, who shared their perspectives on data leadership and their recommendations on specific steps organizations can take to ensure data success:

1. Develop and execute a data strategy that mirrors your business strategy and vision. Mastercard CDO JoAnn Stonier advised that for companies to be data-driven, “the data strategy of a company must follow the business strategy.” Since each organization is different, embodying its own business objectives and culture, companies must commit to a data strategy that reflects the relevant use cases, supply chain of data, and data consumption patterns that drive business outcomes particular to them. As American Express CDO Danielle Crop put it, “Data is like air. It is everywhere.” Value is derived from data only after it is organized, analyzed, synthesized, and presented. Data becomes relevant in the context of the business strategy and goals. Bank of China CDO Richard Goldberg concluded that to be effective, CDOs must support the business.

2. Relentlessly communicate the context, complexity, and value of data up and down the organization. Data brings value to the extent that its benefits are clearly articulated and understood throughout the organization. Many data initiatives fail to succeed due to the complexity of managing data and the failure to communicate business value in clear ways that cut across business and technical boundaries. For data leaders, communication is key: Speak in business terms, and avoid technical jargon.

In our panel, Mastercard’s Stonier explained, “Data is an intangible representation of the world around us. How you use data and the insight that comes from data is the exciting part.” A CDO must be multilingual — that is, able to speak the language of the technologist and the data scientist and be able to translate it into the most fundamental business terms and business value for others in the organization. “There needs to be constant education to demonstrate the value of your work, reinforce the message, and communicate the imperative of data,” Goldberg noted.

3. Boldly engender trust in your data to assure business and customer buy-in, credibility, and momentum. Many data initiatives fail because business constituents lose faith in the data. Factors that might lead to such distrust include incompleteness, inaccurate or misunderstood representation, or a lack of common understanding and definitions. American Express’s Crop observed, “The future of the CDO role is about enabling trust in data and driving innovation. CDOs must engender that trust in data.”

Consumers, executives, and the public must be able to rely on the integrity, quality, accuracy, and transparency of data to make decisions. Former Bristol-Meyers Squibb CDO Krishna Cheriath offered a way leaders can frame this by asking, “How do we create a culture of digital citizenship to ensure that we are using data responsibly?”

“Data discipline must be part of the enterprise agenda,” Cheriath added. It is the mandate of the CDO to build and sustain this trust in data across the enterprise and among the constituencies of the business.

Organizations that take steps to build a robust data organization from top to bottom will have an advantage in establishing a data culture.

4. Create a compelling career path for data leadership within your organization. Bank of China’s Goldberg described the “need to create a career path to enable the business to embrace data.” This entails building systemic capabilities among all functions relating to data, including strategy, governance, architecture, analysis, and consumption. Goldberg noted that by executing consistently, an organization will come to “embrace data as a business asset.” Bob Darin, CDO of CVS Health, observed that coordinating across the enterprise is one of the biggest challenges for the CDO and noted that his role “entails a significant amount of change management — it is the biggest part of the job.”

Organizations that take steps to build a robust data organization from top to bottom will have an advantage in establishing a data culture.

The Data-Driven Business Imperative

Companies cannot be successful and survive over time if they are not effective at managing risk, serving their customers, and identifying new ways to grow and evolve their businesses over time. Those companies that have learned to harness data, particularly as part of the digital experience, have been rewarded with rapid growth, customer expansion, and dominant market share and market value. Success is not assured. The long-term outlook for the role of the chief data officer remains uncertain. In 2019, 17.5% of survey respondents suggested that the CDO role was unnecessary and would ultimately be phased out over time as organizations look to data leadership from other C-level functions or as the need diminishes as companies became more data-driven and self-sufficient. It has been noted that data-driven companies like Amazon and Google have not traditionally appointed CDOs because data is already deeply ingrained in their DNA.

The establishment of the chief data officer role represents a recognition that data matters to the organization. And organizing, governing, and delivering value from data can be one of the primary factors that differentiate those companies that seize the moment from those companies that lose their way, especially in the digital economy of the present and future. Companies must ensure that the chief data officer has the necessary tools and support for executing on his or her data vision. Only then will businesses be able to legitimately claim that they have earned the right to be called data-driven.

Topics

The New Leadership Mindset for Data & Analytics

This MIT SMR Executive Guide offers new insights and strategies for how leaders can help accelerate their companies’ data efforts, from identifying the type of talent they need to shaping a company vision that supports a data-driven culture.

Brought to you by

AWS
See All Articles in This Series

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