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As data floods into organizations, they face increasingly important questions about what to do with it. Data is a resource, and many companies are discovering that they need an executive-level role that deals primarily with the problem and opportunity of data.
This role is usually called the chief data officer (CDO), and in this Q&A, Kristin McMahon, SAP's senior director of product marketing for database and data management, discusses why organizations need a CDO and what functions they perform in the organization.
If your organization doesn't have a CDO yet, it almost certainly will in the next few years, according to McMahon.
What is the chief data officer role, and why is it important these days?
Kristin McMahon: The chief data officer role is getting much more attention now because data is converging to be the center of everything -- it's literally how the world runs these days.
Data used to be a component of maybe the data warehouse, an application or a report, and data was kind of a supporting actor that was fairly unreliable, untimely and inaccurate.
Today, companies are running digital businesses, and data transformation is the lead actor in this movie these days. Because that's so important, the chief data officer role is rising, and it's becoming more formal and more important regardless of whether or not you actually have somebody called a CDO in your organization, or whether someone is just acting as the data transformation strategy lead in the organization.
Are companies creating full-time CDO roles or are executives from other groups taking on CDO functions in addition to their primary roles?
McMahon: It depends on if there's some kind of tipping point happening in the organization. If they know that they need to become a digital business or if they know that data is going to be the center of everything that they're doing, the people at the top are asking if the company is ready, and if there's a tipping point to redesign their data transformation strategy. So, in some cases, they are identifying a champion, an executive-level sponsor who knows the most about what should happen and what needs to change.
The other thing that can happen is a bottom-up thing from either line of business or IT, who have been collaborating a lot more over the last few years. So they're talking, and maybe they've already built a data governance council and have started to put in some policies, definitions and structure around what it looks like to be data-driven or data-transformative. They're tying that to business value and get the attention and ring the bell for someone on the top to say, 'We have to pay attention to this.'
What are some of the main reasons organizations are creating a chief data officer role?
McMahon: It varies; it depends on the type of industry, on the maturity of the organization in terms of what you're doing with data strategy, and on if your business model is in flux.
If you are a taxi company, for example, your business model has changed drastically over the last few years, so you have to be in a position to respond to changes or drive the changes in the business model.
What's really driving a lot of this is that, for any organization that has customers, which is all of us, there's a digitization of that customer experience, and organizations have to ask themselves how they see a unified identity of the customer. How do you personalize their contact with us externally and through social? What's your stand on data ethics and using that type of data?
There's also a lot of interest in the digitalization of resources, as well, with data as the new asset. It's something that everyone in the organization can use now and wrangle it; it's not just the people around the executive boardrooms. With all this data that's coming in, organizations have to ask if they are going to openly share that data or are they going to monetize that data.
Take John Deere for example. Do they sell the information that they're collecting from the sensors on their machines about the soil conditions or the weather conditions? Or do they openly share that data with customers and partners and have that value-add? That's a business model thing that they have to think about, as well.
It's coming from employees, as well, as they're demanding changes in the way that the organization uses data because they want it to be easy to use with their mobile [devices]. So you want everyone to have trust and ownership in the data quality, and you have to think about things like crowdsourcing data quality.
You need a role that says you're a data steward, you understand the context of the data and you'll put your trusted data stamp on it to let everybody know that it's good data.
What does a CDO do?
McMahon: First, they have to think strategically about their internal and external data strategy and what the organization needs to do in order to be a digital enterprise. What's your data acquisition story? How do you know that data's fit for use? What kind of assessment are you going to put on data? What are your external data partnerships?
Not only do you have data from inside the organization, but you're bringing it from your networks and partners, so someone in a CDO role will have to decide how that works. What are the rules and policies that you're going to put around that? And what automated decision-making tools are you going to equip users with to do that?
The second thing is not sexy, but they have to figure out their internal data management capabilities. What's your master data management program? What's the process, what's the governance, what's the quality, and what types of tools do we need?
The third thing is that they have to do that same thing for the more challenging data, like IoT [internet of things] or social data. It's the same discussion, but they may have to figure out a different strategy to handle that type of data versus regular traditional data that you have in the organization.
Fourth, you'll need to address your data ethics policy, like how you are going to treat customer data and figure out how to make it private and secure.
Finally, the last is the big question that should go to every person in the C-level suite: Do you make money on this or do you openly share your data? Where are the opportunities where we can leverage this data to make more money? That's a really strategic part of the CDO's role.
Where are CDOs coming from in an organization, and what backgrounds do they have?
McMahon: Typically, they come from an IT background, mainly because IT has wrangled with data issues for a long time, and might have been tasked with doing the data management strategy.
But I don't discount the line-of-business people who have a passion for data and understand how data has such an impact on customer satisfaction or experience programs. If you find a very passionate person in the line of business who gets the technical information and can drive it to business values and outcomes, they could be really successful there, as well. Right now, I'd say it's about 75/25 for IT versus LOB.
What's the future for the next few years? How many organizations will have a formal chief data officer role?
McMahon: In terms of a formal role for the CDO, I would say that definitely more than half of organizations will have something like this soon. Let's say by 2020, only three years from now, how can any organization not have someone directly responsible for and accountable for their data transformation strategy?
So I would say definitely -- hopefully -- more than half of organizations will have signed up to appoint someone to be their leader in data transformation.
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