*CDO: A new and evolving role*
*CDO: \A new and evolving role*
A Bloomberg L.P. Report
*Finding our way in the data*
By Bradley Foster, \Global Head of Content at Bloomberg L.P.
In the modern marketplace data is king. It is omnipresent, growing, and a key differentiator for those who know how to interpret it. The challenge now for businesses is to determine how they will successfully manage and analyze this expanding universe of data.
Enter the CDO. Within the last decade, businesses—particularly in the financial industry—have seen the role of the Chief Data Officer (CDO) originate and begin to evolve. Many firms have established the position as a beachhead for combating rapid data expansion. Yet the newness of the position has led to some confusion. What does a CDO do? What are their best practices? What priorities and challenges do they face?
At Bloomberg we are not only intrigued by these questions, we seek to understand how we can shape the answers and lead change in the industry. How can we support the CDO’s endeavors? How can we foster a more managed and insightful world of data? How can our commitment to superior data quality support these inquiries?
It is in service to these ideas that we present the following research on The New and Expanding Role of the Chief Data Officer. While questions certainly remain, we hope this will serve as an informed starting point for an ongoing discussion. I invite you to review our research and to continue the conversation. Thank you.
Bradley Foster, Global Head of Content at Bloomberg L.P.
*What CDOs need to know in a changing market environment*
Part 1 :: Setting the Scene
Given rapidly evolving markets, technology, and regulatory concerns, how should companies be storing, analyzing, evaluating, and monetizing their data? These questions are of great consequence to leaders in tech and data, particularly as the space deepens in importance and complexity.
Data is essential to how firms innovate and deliver for clients, and it’s key to stay attuned to how changes in the landscape are affecting broader goals. With that in mind, these are trends and developments CDOs and CTOs should be aware of, based on recent conversations with Bloomberg senior leaders focused in tech and data.
The terminology surrounding technology and data science, including data lakes, data warehouses, golden copies, etc., is often conflated, confused, or used interchangeably. When considering these terms, it’s important to keep the broader applications behind data management in mind.
“This is a very fluid space, especially when speaking about data lakes versus data warehouses. Clients are storing data in different areas within their firms: transactions, fixed income, and equities, among others. They’re trying to get all of it into a single place because there are other things they want to do with this data,” said Naz Quadri, Global Head of Enterprise Data Science.
“It’s our position to take the initiative to centralize and democratize the data because there are people who can get value from it and take us in new directions.”
Since there are more stakeholders than ever influencing decisions around tech and data, it’s also important to note who is using what terms and why. CDOs and CTOs come to their roles from a variety of backgrounds, and someone coming from the world of compliance will have different concerns than someone in the front office. How this information is monetized is still very much in flux, and it’s critical to understand individual motivations.
As the tech and data landscape changes, so do clients’ concerns. Being more targeted in how data is referenced and analyzed is key in anticipating future challenges and opportunities, such as leveraging alternative data technologies.
“We need to ask ourselves: what is being done differently now, as opposed to what was done in the past? Clients are seeking out predictive analytics, either to generate alpha or manage risk,” said Gerard Francis, Head of Enterprise Data. “To predict the future, you need a lot of the past, and that’s why you need data history.”
In capitalizing on data history, the rise of predictive analytics and how they’re used to generate alpha will be crucial in offering new options to clients.
“Clients need consistent data in all areas, and we think predictive analytics will come to matter greatly in the future. For the core data that people use, they’ll still want one vendor, but they’ll always be looking for something else to give them alpha,” explained Francis. “Which is why people seek out alternative data. It’s important to segment core financial operations and the supplementary data that will give additional value.”
New developments in how data is consumed and analyzed necessitate a rethinking of how teams are built. Automation is making it possible to streamline previously manual and time-consuming tasks, freeing data scientists and analysts to put more of their efforts towards revenue-generating decisions. Does the hiring process need to change as a result?
“Clients are at different points along the maturity curve when it comes to how they’d like to operate in the future,” said Quadri. “Do I need to build teams? Are the teams that I have now redeployable? Do I need to hire from different pools than I was previously?”
These advancements raise larger questions that speak to how data can be used, and human resources reallocated, to anticipate future needs.
“How do they use data to come up with the answers to questions they’re not asking?,” continued Quadri.
Data quality & storage
Bloomberg has historically focused not just on measuring data quality, but also how best to store and deliver that data to clients.
“Both our historical and ongoing data are in the same format and structure, so clients don’t have to program it twice, which would be an added cost,” explained Matthew Rawlings, CDO and General Manager of Data License. “We don’t tend to change the structure of how we deliver the data over time, and it works. So, for someone using it, it feels very consistent. That’s less work for clients to do.”
While incomplete and fragmented data has incentivized firms to use multiple sources in the past, the quality and completeness of the best-in-class data have rendered this approach unnecessarily scattered and ultimately unwarranted. Bloomberg’s response to ongoing challenges, the One Data One Source solution, ensures storage is streamlined and quality is the best available.
“Our most powerful tool is our data history,” said Francis. “That’s our value added.”
*Diving into the regulatory roots of the Chief Data Officer*
Part 2 :: Origins
While the word “data” leads people to think of new high-tech approaches such as analytics, machine learning, natural language processing and artificial intelligence, it’s worth remembering that the financial industry has always been based on it. Information such as instrument prices, bid/ask spreads, price/earnings ratios, indices and, of course, P&L have always been at the business’s core. But in the last decade or so have advances in technology allowed the financial markets to use data in increasingly sophisticated ways, globally and at remarkable speed.
Inevitably, regulators began looking for ways to ensure that market players adequately measured, reported and mitigated the risks involved in the use of data. The most well-known results are the Basel Committee on Banking Supervision’s regulation 239 (more commonly known as BCBS 239) and the U.S. Federal Reserve’s annual Comprehensive Capital Analysis and Review (CCAR).
In the last decade or so, advances in technology allowed the financial markets to use data in increasingly sophisticated ways, globally and at remarkable speeds.
Implemented in 2013 and 2012 respectively, these regulations are designed to ensure that financial firms don’t use data to take positions they can’t sustain as economic conditions—and capital requirements—change. Their strict requirements and stiff penalties spurred firms—mostly on the sell side and particularly in the U.S.—to create the role of Chief Data Officer to ensure the new regulatory strictures were being met. The situation was particularly challenging in Europe, where even today fewer CDOs are in place as the regulatory landscape continues to evolve.
Not surprisingly, many of the CDOs appointed around that time were the first at their firms to take on the job. Equally unsurprisingly, their initial focus was on compliance. CDOs came from a variety of backgrounds, including operations, risk, analytics, compliance and regulation. While some had backgrounds in technology or data quality, companies looked for CDOs well-versed in areas where regulators often focused their attention: areas that used the data rather than simply compiled, scrubbed and stored it.
Most early CDOs took on their new jobs despite industry-wide uncertainty about how to meet their responsibilities, or even how to describe them. After all, the regulatory regime was new and the market’s technical capabilities were changing fast.
“We were forced into a defensive posture because of regulations and frankly, I think the regulators were brilliant at that,” says one former CDO for a U.S. firm. “They got the industry to move.” According to the head of data strategy at a European investment bank, the creation of a CDO role “was really to get our house in order for data management from BCBS 239."
What is your greatest challenge going into 2018?
- Data quality
- Data management architecture
- Modernization of systems
- Standardizing common internal processes
- Centralized regulatory data repositories
- Data integration into applications
An uncharted landscape—that’s changing
Even as CDOs moved forward to keep up with regulatory mandates, they began to recognize that data could play a deeper role in their organization’s business. The mission of first-generation CDOs was to ensure their companies met regulatory requirements, a focus often referred to as “CDO 1.0.” Now that they’re meeting those demands, many CDOs, especially in the U.S., are moving into a “CDO 2.0” role, where they extract business value from data by, for example, using it to identify market efficiencies or other insights.
Aided, if not driven, by new technology, they’re moving remarkably fast—so fast others within the organization are having a hard time keeping up. Educating colleagues about their role can take up a notable amount of a CDO’s time. While many see their role as establishing and implementing data quality and governance frameworks across their organization, they often must explain that it doesn’t include the actual aggregation of data or scrubbing it to ensure consistency and quality.
The job is “really more about making sure that the organization understands data better,” explains the head of data support at a European investment bank who says that companies need to build a culture around knowing their data, then demonstrate why that’s important and how everyone contributes to the effort.
CDOs in particular have to drive this conversation with executives so that data quality and reliability becomes a shared responsibility. Part of legitimizing that conversation is building the use case for how the CDO can add value to the business through savings, efficiency and revenue.
The title “should probably be a verb and not a noun because it’s a role that’s under evolution, and it’s under evolution at every organization,” said the head of industry engagement at a U.S. financial firm.
And while different companies may place their CDOs in different parts of the organization—some in IT, others in operations—many believe they’d be better off working between business and IT, developing expertise in both areas and advising them on data-related issues. This is especially true for buy-side firms, where client reporting requirements are encouraging firms to consider creating a separate CDO role for data issues instead of defaulting to Chief Operating Officers, Chief Information Officers or Chief Technology Officers.
Wherever they sit, successful CDOs require a unique mix of experience to succeed: line-of-business knowledge, risk expertise, a collaborative nature and an understanding of technology in a role that relies on—but isn’t about—technology. As one former U.S. CDO puts it: “It’s a very separate and discrete discipline.”
*How data governance gave CDOs a unique perspective on business and IT*
Part 2 :: Origins
When financial firms began establishing the chief data officer role in response to stepped up regulation in the early 2010s, their focus was on compliance. The CDO’s immediate tasks involved setting up rules for data governance and building platforms to implement them. Their mission was relatively simple: satisfy regulatory requirements, reduce business risk and ensure that data was transparent. As one U.S. commercial bank’s CDO put it, his job was to “keep the regulator happy and as far away as possible.”
While setting up an approach to meeting regulatory requirements was technically challenging, once the proper systems and procedures were in place, the work became more about compliance than strategy. In the U.S. especially the more CDOs settled into their roles the more they recognized just how tightly data was knitted into their company’s business. The information they’d been concerned with from a regulatory perspective offered great value in and of itself.
In short, they realized their data could be monetized. It didn’t take long for CDOs to grasp that data could identify efficiencies that reduced expenses, or even generate revenue by using its insights as a product. Many believed that not exploring these new paths would damage their firms. Focusing “purely on the end result on the regulatory side has really hurt the industry,” says the former CDO of one U.S. investment bank. “What they really need to do is focus on the base data. If you get that right, then it’ll flow through.”
The situation differs somewhat in Europe, where a more challenging business environment and still-evolving regulatory landscape has led few firms to put a CDO in place. While the role is still in its early stages, it’s development does mimic the U.S. in that European CDOs mostly work on the sell side.
What aspect of data management is most essential for running your firm?
- Complete data sets that support the full instrument lifecycle
- Timeliness of data delivery
- Achieving (straight-through processing) targets
- Data integration
Keeping the focus on data quality
Whether in Europe or stateside, however, getting the data right is easier said than done — especially when the CDO’s thinking has outpaced the organization’s. Many CDOs believe that internal stakeholders don’t understand how data governance and its supporting infrastructure offer business value. Making things more complicated is a lack of understanding about the CDO’s role and the importance of their strategic voice.
That lack of understanding often puts CDOs in a position that lessened their effectiveness. Most are housed within either IT or operations, though many believe they’d be better situated between the business and IT. The best CDOs understand the business, the importance of data governance and how the firm can put data to use. Without that knowledge, improperly handled data represents not only a regulatory risk but a missed business opportunity. “A lot of technologists, they’re not prepared to ensure that the technology delivers the appropriate data quality or even to know what questions to ask to figure out what data quality is necessary,” says the former CDO of another U.S. bank.
One reason CDOs can recognize these opportunities stems from the regulation that concerned them in the first place. “Every Fed examiner asks the same question,” said the CDO of an investment bank in Asia. “’What are you doing to ensure the quality of the data that goes into this report?’ I would like to demonstrate for them our entire model of how we acquire, process, persist, render and integrate data.”
Some CDOS are thinking about how to solve business problems by setting benchmarks. For one head of reference data at a U.S. investment bank, it’s about the number of incidents they have: “The number of exceptions that we generate are aging, particularly over 30 days. It can range anywhere from pricing exceptions to product variance issues or lack of capability. [For example] how long it takes for us to set up a request to trade.”
The varied traits of a successful CDO
Because of their unique perspective, demonstrating—really evangelizing—the value of data quality has fallen to the CDO. Since the role is so new, regulations so challenging and the potential value of data itself so enormous, successful CDOs require a range of common traits to effectively tell their story: they understand their firm’s core business processes; they’re able communicators; they’re flexible and willing to learn and adapt as regulations, technology and business practices evolve; and they keep up with industry and technology trends.
They’re also helped by their own track record. Many CDOs have worked at their company for years, which gives them credibility as well as experience. Not only do they know where data can be found, they understand its purpose. That kind of foundational knowledge makes them uniquely suited to identify which information has value to the market.
Just as important, their credibility helps them get their message out. CDOs must raise awareness about data and its importance, and their own role in exploiting it, educating employees and clients about why it’s valuable and how its quality can be assured. That communication becomes the driving force in changing the organization’s culture, so that it recognizes the role data quality and governance play not only in its operations and compliance efforts, but in its continued efforts to grow.
*Evolving to CDO 2.0*
Part 3 :: Evolution
The regulatory-driven origin of CDOs creates certain challenges as the scope of the role evolves and expands.
The initial challenge—to generate clean, accurate data to comply with new regulatory standards—still casts a long shadow over the CDOs' role. That can obscure the exciting potential for using insights from data to extract business efficiencies and even develop new revenue streams.
One respondent to the Bloomberg CDO survey uses a software analogy: “So CDO 1.0 was ‘where the hell is the data?’ Let me inventory it; let me do everything I need to do on the back end of supporting risk and regulation and compliance. While this was going on, biting at our heels so to speak, [so too] was the offensive business case that is the analytics, or CDO 2.0. The role of the CDO now is starting to expand a bit.”
The challenge for CDOs is to move towards the potentially more powerful ‘CDO 2.0’ role—acting as a strategic business partner—while the internal view of CDOs is still one that centers on compliance.
The new focus of CDOs is to monetize the value of the organization’s data (combining it with externally-sourced data where appropriate). The potential for CDOs to drive better business performance is vast: from improving reporting processes to identifying other operational efficiencies that can have significant cost savings.
The use of new technology is also driving powerful insights that can boost revenue at financial services companies—from identifying CRM or ‘cross-selling’ opportunities to helping create new revenue streams by sharing these insights with marketing and sales and new product development.
Advances in the technology of data storage and analysis are driving the evolution of the CDO role. This somewhat breathtaking advance, coupled with the role’s recent regulatory origins, is generating ambiguity around the CDO’s current role. Low internal awareness about the CDO’s potential to add business value through data governance and management creates a huge internal communication challenge. One response in Bloomberg's survey of CDOs typified a common complaint: “What’s quite surprising is the level of education that you have to provide. I completely underestimated the amount of time that I had to spend with the users to educate on data, not just in business, but business and technology.”
The challenge for CDOs is to move towards the potentially more powerful ‘CDO 2.0’ role—acting as a strategic business partner–while the internal view of CDOs is still one that centers on compliance.
Encouragingly, some respondents are reporting progress. “People are recognizing it is a unique role in and of itself, it requires a different set of skills. It is a discipline, and I think the need to move to digital and what big data can provide is compelling for adoption,” says one respondent.
The skill set is itself another challenge. CDOs—and their teams—need to have a dizzying range of abilities: from deep understanding of the taxonomy of data itself to the technology of very large data (such as Hadoop and open source storage, relational databases and retrieval techniques, and the latest advances in machine learning).
CDOs also need to have a regulatory mind-set to be able to maintain a focus on a bewildering array of regulations (such as Dodd-Frank, KYC and AML, BCBS 239, G-Sibs, and MIFID). Now the demands of the ‘CDO 2.0’ role requires people with analytical and business-focused skills to turn all of this data into insights that can drive operational efficiencies and generate new revenue streams and business opportunities.
As there are very few people that encompass all these skill sets, the CDO also has to be an effective manager. At the same time, misconceptions about the potential benefits of the role can lead to questions about investment costs.
As one respondent articulated: “Upper management doesn't really understand why you have to spend to make something work: why do you have to spend money to get this thing done, or why do you have to hire people to get this done to get quality assurance? It costs money and I think that's the biggest misunderstanding.”
Along with challenges from the top of the organization’s hierarchy, the evolution of the role creates considerable internal obstacles as CDOs need to collaborate and get the support of peers throughout the business. This is a particularly acute issue given the all-pervasive nature of data within organizations today. As CDOs ‘follow the data’ they cut across all departments, which creates huge practical challenges.
“Some have called it Chief Diplomacy Officer,” says one respondent. “The keys to success are building relationships within the firm and retaining a business focus, but also having enough depth and knowledge of the topic to have really strong arguments as to why we need to do this.”
What is the top capability you look for in a data vendor?
- Completeness of coverage
- Highest quality
- Integration including API
- Consistent data models
- Data dictionaries
- High service levels
The survey shows that a common response from CDOs to this structural challenge is to make incremental steps in evolving their role. CDOs can achieve this steady progress by working within existing structures and policies and by making improvements within their organization’s current day-to-day structure.
CDOs are also spending time educating and influencing other departments through creating a deliberately small footprint for their Enterprise Data Management (EDM) team. By focusing on training or placing key representatives within each business unit—and then waiting for those units to come to the core team— CDOs can improve the performance of their own team as well as that of others. In this way the CDOs keep a highly impactful but nimble team that functions in an advisory role. “It’s almost like an internal consulting group where you can call on demand to help you get things done,” says one respondent.
The survey reveals that most CDOs’ have responded to these practical challenges by evolving the role—advising and steering other departments, rather than directly participating in other areas. But the survey also reveals a growing recognition that, were internal constraints removed, the intersection of data and technology could and should be having a more fundamental and disruptive impact on their organizations.
*Internal disruption \requires a culture shift*
Part 3 :: Evolution
CDOs can see better than anyone else the disruptive, transformative effect that harnessing data can have on their organization’s costs, revenue and operational efficiency.
However, evolving the CDO role far beyond regulatory compliance into one that drives business performance and informs operating strategy requires organisations to undergo a cultural shift. This new culture will among other elements require that all departments place data quality—the foundation of all this new potential—at the centre of their day-to-day focus.
Bloomberg’s survey of CDOs reveals significant divergence between the views of CDOs and their colleagues elsewhere in the organization about the importance of data quality. For CDOs, data is the foundation of compliance and the ability to surface business insights, and is a collective responsibility.
This view is seldom shared outside of the CDO’s team: “I think the assumption is if you’re a CDO that every data quality problem is your fault," says one respondent. "When if fact, very often, you’re just the vehicle that’s shedding light on the fact that there is a data quality issue.”
Shifting perceptions about shared responsibility regarding data is a significant internal education challenge, as one respondent says: “It's really more about making sure that the organization understands data better and I don't think [we’re] sufficiently good at explaining the know-your-data culture and where – why this is important and how everybody has contributes to this.”
The reality is that many CDOs need to expend a lot of energy driving a shift in organizational culture to one that acknowledges the importance of data and data quality.
CDOs also need to highlight the fact that data quality cannot improve without people adhering to the right controls, standards and policies.
According to one respondent: “There's an element of the role where you also have to help change the culture of the firm so that everyone and not just the 50 people that have the formal designation of data management officials are responsible. It's a firm-wide initiative. So in the last three or four years, we've seen new heads of data management come in and their first mandate to the board of directors is to help implement a culture where data management is the responsibility of all employees not just an inside, interior group.”
CDOs also have to counter misconceptions about data technology. Technology companies such as Google have made underlying technologies such as Hadoop and concepts such as data lakes commonly used terms in business today, but this, too, can create problems. “The challenge [has] always been [the] desire to change that for the shiny ball … let's go build a data lake! Let's go build a Hadoop environment!” says one respondent. “But a data lake is just another way of referring to the same warehouse in my opinion. And a data lake can quickly become a data swamp. And if you put bad data into the data lake, it's not miraculously going to fix it.”
Widely-held views such as these feed into persisting misconceptions about the CDO’s role—that it is responsible for creating or cleaning data or is alone responsible for the evaluation and implementation of third party data.
CDOs need to concentrate on achieving a cultural shift before an organization understands and accepts that everyone shares responsibility for data and data accuracy.
"We've seen new heads of data management come in and their first mandate to the board of directors is to help implement a culture where data management is the responsibility of all employees."
However, one obstacle to making that cultural shift comes from some CDOs themselves. The evaluation of data quality used by some when asked for tangible internal measurement of their performance often reinforces the old notions of data and the CDO’s role. For example, one CDO responds to a question about how to measure data quality with the response: “The first success measure is we haven’t gotten fined yet, unlike a lot of other banks. That’s a pretty basic measure.”
Clearly the respondent was aware that this was a rudimentary (if important) assessment of data quality but if the challenge is to effect a cultural shift around the use of data and the maintenance of data quality then better measures need to be found. Fortunately, as the CDO role becomes more proactive, new measurable outcomes around how data can lead to cost savings, operating efficiencies and even new products and revenues will become available.
As one former CDO says: “The high level dimensions are accuracy, completeness, and timeliness. The most important thing is you always have to measure it in the context of a business problem or a business imperative.”
Some CDOs already have these stories to tell: the use of big data in retail banking is leading to measurably better service (via customer satisfaction scores) as banks combine geospatial data from smart phones (for example) to automatically enable debit and credit card functionality when clients travel abroad. Also in banking, improved insight from data on previous transactions is enabling banks to customize offers made by third-party companies, improving their relevance to clients and increasing sales revenues. Meanwhile, a CDO at an insurance company mined its claims data finding correlations between spikes and enabled preventative initiatives that have lowered payout rates.
These are still early days, and many CDOs are faced with a fundamental scenario, however. A cultural shift is needed to build these outcomes, but still the outcomes themselves are the most powerful catalyst for that cultural change—even if through small and incremental progress.
Squaring the circle will require the active participation of senior management.
*CDO outlook: Bridging the gap from education to strategy*
Part 4 :: Outlook
CDOs are confident that in the longterm their role will be elevated to a very senior level—if not all the way to the C-suite then just one reporting level below.
This belief, expressed by the majority of respondents to Bloomberg’s CDO survey, is largely based on a view that the role of data—and its potential to improve many disparate organizational functions—will lead CEOs to demand more and more from those in charge of managing data and using it to generate insights.
CDOs anticipate that this increased focus from the C-suite will lead to sponsorship of their role and pave the way for it to evolve within both the organization and the industry.
Many respondents say that ultimately change comes from the top: “To be successful in this role you absolutely need CEO-down support,” says one. “I'm lucky enough to have it in this role, but where you position the CDO in your organization is critical. I report to the COO and he sits on the board.”
Advocating for role expansion
Such senior-level sponsorship of the CDO and his or her department will enable the evolution to ‘CDO 2.0’—cutting through lingering ambiguities about the role that persist from its regulatory-driven origins.
It will enable the CDO to focus less on education and diplomatic interaction with other departments, and move beyond questions of culture and data quality o begin harnessing data to improve business performance and strategy.
“CDOs still sit at the kids' table at the C-suite,” says one CDO respondent. “I predict in the next five years the maturity of the role and the authority of the role will continue to grow to where it is a peer in the C-suite.”
"In the next five years the maturity of the role and the authority of the role will continue to grow to where it is a peer in the C-suite."
Another: “The CDO role is starting to get more visibility. I think it should be reporting to the chief marketing officer, the chief strategist—even the CEO.”
Many CDOs draw parallels with the evolution of the CIO within these same financial service organizations. That role emerged in the early 1980s as organizations began to realize the potential revolutionary impact that information technology could have on all areas of their operations.
The comparison to the evolution of the CIO is apt: all corporate departments now rely on an institution’s IT infrastructure to be able to function internally and interact with others, and the same importance is expected to be attached to those in charge of managing data in the near future. Marketing and sales will rely on internal data, often enhanced by third-party acquisitions, to implement customized, real-time offers that maximize the effectiveness of their work. Compliance (particularly in financial services) will rely on data to ensure regulatory standards are met and—increasingly—to work with professionals in risk management and trading to implement new accounting standards in a way that optimizes their institution’s capital structure.
Traders can already use big data to develop and refine new strategies that arbitrage risk premiums. Ultimately, data and the insights it provides will drive and validate all significant operations to such an extent that senior management will need to work closely with CDOs to define and review corporate strategy – if they do not come from that role themselves.
“I see the CDO becoming more important to organizations,” says one CDO. “I compare the CDO to the CIO of 20 years ago [when] CIO stood for Career Is Over. And if you think back to the CIOs of the 80s and 90s, a lot of the turnover was six months, a year. Today, CIO is probably the most powerful executive in the C-suite.”
That statement provides hope—and a warning.
The hope comes from the fact that the progression of the CDO role up the organizational hierarchy is likely unstoppable, thanks to the power that data will deliver. The warning is that it will take time and huge effort, and those incumbent in the role today face significant personal challenges in the coming years.
Where are you focusing your IT spend in 2018?
- Competitive advantage
- System maintenance
The road to CDO 2.0
During those years expect high levels of turnover for both CDOs and members of their department. First, CDOs who don’t have complete support from the senior leadership will struggle to shift the culture to make data quality a shared responsibility throughout the business. Second, the CDOs who understand all that data and advanced technology can accomplish will grow impatient with educating and persuading others in the company. Third, they will see that promotion will be slow or nonexistent.
This is already an important industry issue: “There is CDO turnover,” says one respondent. “Firms are creating the CDO function because their regulators are making them.” Firms that are maintaining CDO roles as a reaction to regulation are unlikely to support a more strategic use of data.
CDOs with the technical, business and personal skills to be effective in this broad role will be in demand by companies that are building data-driven strategies. Why stay in a company that doesn’t understand and appreciate data when the CDO, and his or her team, can move to a firm that offers greater opportunities and better rewards?
So while CDOs express confidence that their organization will eventually make the CDO a strategic business partner, they are not necessarily confident that they will stick around at their current organization until that happens.
When the importance of accurate data is understood at the top, and the CDO gains the support of senior executives, he or she can spend less time educating and cajoling and more time adding value. As data quality is reflected in compensation, CDOs will see departments across the company step up to take responsibility for their own data quality. That allows the CDO to shift from policing data quality to optimizing data to grow the company’s profitability through cost savings, operating efficiencies, higher revenue and even new products and services. As the old saying goes “What gets measured gets managed.” A corollary might be that what gets measured and managed can be rewarded.
*The strategic side of the CDO role: how to help your Data Officer succeed*
Part 5 :: Real-world applications
Over 60% of executives now report their firm having a Chief Data Officer (CDO) – up from just 12% back in 2012 – and the numbers are expected keep growing. Data (of all kinds) is already essential to business decision making, and will only grow more significant from here.
As that happens, CDOs will prove crucial to helping companies succeed with strategies driven by data science and business intelligence (BI). Yet despite their importance to enterprises’ future success, many CDOs enter their roles amid a mountain of ambiguity.
At a Tech & Data Summit in New York, Bloomberg interviewed panelist Jon Neitzell, former CDO of Goldman Sachs’ Fundamental Equities unit, about some of the attributes that can help CDOs better strategize and succeed in their role. Neitzell mentioned that many companies are launching the role with misconceptions in mind and outsized expectations from the outset.
“I’m seeing a lot of businesses bring in the CDO function thinking, ‘Data is the new oil, data’s supposed to drive my business, so we should put someone in charge of figuring out what that means,’” says Neitzell.
“Then they’re just kind of unleashing these hires in their organizations without necessarily mapping resources to them,” he says. “So you start to get a lot of challenges, because there are multiple versions of what success looks like, and everyone has a different view of what it should be.”
Start with a strategic foundation
Creating a clear version of success requires an organizational framework for understanding the CDO role, and equipping hires to execute.
CDOs who can quickly understand organizational workflows and management structures are more primed to make an impact. As both a veteran Goldman portfolio manager and board advisor of recently acquired AI company Kensho Technologies, Neitzell brought a mix of internal knowledge and technology expertise to his role – and has applied that background to understand how his division’s models and strategies should evolve.
Collaboration also helps ensure cultural alignment.
At Goldman, for example, there are individual data and market intelligence professionals by division all communicating up to a BI group run by the firm’s CDO, Jeff Wecker. Clear reporting lines and internal knowledge-sharing are helping each division “map a consistent path” for CDOs to realize meaningful objectives.
Prioritize accuracy, utility, and scale
No two CDOs at Goldman – or anywhere else – will have identical objectives however.
To design an impact-driven roadmap and “business model” for their success in the role, CDOs must conduct unique SWOT analyses to learn where gaps and revenue opportunities exist – and ask whether the existing technology and data-science infrastructure can scale to the challenge.
A scalable infrastructure for BI and data is rarely ready-made, according to Neitzell, so CDOs tend to start working with tech teams right away.
Yet jumping straight to infrastructure investment is risky since it takes more than technology to address the full spectrum of data practices:
- The data or ‘heavy lifting’ of ETL – extracting, transforming, and loading/preparing data for analysis
- The data science (and mathematical or statistical integrity) behind the company’s processes, methods, and conclusions
- The business model framework for incorporating data signals into decisions (mindful of changing market or competitive forces)
Without all three pillars addressed, companies can’t design, inform, and create accurate feedback loops or usable hypotheses. Companies should expect CDOs to build models and make technology suggestions as they go, respecting that ROI has more to do with the utility of data for decision-making than the volume of data sets or reports.
Maintain agility to be ready for action
Building out data-driven strategies helps companies understand their customers and competitors better and faster, which is crucial to avoiding obsolescence as competitive landscapes evolve.
But these strategies also change the way firms do things – which can create resistance or competition internally.
CDOs may need to extract resources from various areas across the business or partner with younger, less proven companies to execute their strategy. Goldman, for example, invested in data-structure and storage startup Crux Informatics last year to fortify their data supply chain.
For CDOs to achieve those efforts successfully, there needs to be strong buy-in among leadership for the value of a data-driven strategy – and the resources it takes to create a winning one.
“This role is new and challenging in that you’re trying to cut across lines and unify specific areas of excellence into a cohesive strategy that can really move the needle now,” says Neitzell. “It’s incumbent on everyone involved to actually execute that opportunity.”