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.”
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.”
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.