The chief data officer (CDO) is a new role that seems to be springing up across enterprise companies to oversee the processes, tools and governance around use of information. CDOs have been hired at organisations as diverse as the British Army, RBS, Aviva and Havas Media, while Deutsche Bank announced JP Rangaswami, ex-BT and SalesForce, as the bank’s first CDO this month.
What do these appointments signal? Have these companies fallen for hype, when the role of the CIO already exists? No, the CDO can play a complementary role to the CIO around the use of data across the business.
Companies collect huge volumes of information – around 2.5 exabytes worth of data was generated every day in 2012, according to IBM. This almost unfathomable number is mostly made up of voice, video and text data.
Interestingly, much of this data is created, but either not used or it remains within one business unit, rather than being available to use across the business. While the CIO has been tasked with keeping IT running and supporting the business, the role of data is not a complete overlap with IT.
Instead, the use of data across the business involved training and interpersonal skills as well that would go outside the realm that the CIO has traditionally been responsible for. Rather than adding more to the CIO’s plate, splitting these roles out can make more sense. Are you asking the right questions?
Part of the change here is due to the kinds of questions that companies are looking to answer too. Rather than looking at individual questions around sales or marketing, CDOs can get involved where the answer involves data from multiple teams and their applications. Rather than looking at “how are my sales performing?”, it’s possible to analyse which channels provide the most potential sales and how profitability compares between those channels as well. This involves business analysis capabilities, not just data manipulation skills.
This use of business information to answer questions is different to previous reporting approaches as it relies on being able to measure results across the organisation.
For example, the movement of business to online channels has meant that it’s now possible to get a much better view of marketing expenditure and how this links to sales performance.
One question here is how profitable each customer is, depending on which channel they come into the business on. Another is how much each customer represents in terms of lifetime profitability.
Looking at these questions – rather than simpler questions like how much the sale represents in pure volume terms – can help companies prioritise where they put their efforts on marketing and sales. However, it should not be looked at in isolation.
Let’s look at this as an example challenge for the CDO: marketing sees that there is a much higher percentage chance that a lead converts to a customer through one channel (online) compared to another (in-store promotion). If the CDO only looks at this set of information, the decision for where to invest should seem fairly obvious, and the marketing team might increase the spend on online marketing. After all, this increases the business’s chances of closing more business, right?
However, it might not be the full picture. Let’s now consider how much business comes into the organisation via each channel, and what these different channels represent in terms of profitability. If online and in-store are equal in terms of volume and profit delivered, then the decision to shift the emphasis for marketing spend can be the correct one. What if in-store represents a far greater profit opportunity compared to what is possible online? In-store customers may represent greater upsell opportunities compared to those that come in through online channels, where they know exactly what they want to buy and don’t take other products during the sale.
In this case, switching marketing may lead to more deals coming through, but the overall volume of sales might go down. For this example, the CDO can help guide the marketing and business leadership teams to make better decisions by knowing more about what the rest of the business is seeing. However, this relies on good, accurate data that can be used as part of decision-making.
The role of the CDO also has to be about more than just being the figurehead for how decisions are made. Company leadership teams are told constantly that they must make more use of their data, and this is leading to more investment in becoming “data-driven”. However, this misses out the biggest potential use of data across the business by everybody, not just the senior management team. For the CDO, this involves helping people across the business understand what data is, where their information is coming from and how it can be combined with other sources. Linked to this is understanding how companies encourage their staff around decision-making. Do decisions get made centrally, and the organisation’s sales or operations teams in global locations are there to simply execute on these choices?
While this ability to control the organisation’s approach is valuable, it does not reward staff well or allow them to use their own experience and local knowledge to improve their performance.
The opposite approach – letting local and front-line staff make decisions without guidance from the central headquarters – can be equally challenging. In between these two extremes, access to data can provide opportunities to support local teams without the need to implement huge amounts of IT and other infrastructure. Using and packaging that data in the right way, the CDO can take a pivotal role in blending central guidance with that local knowledge. This is not just a technology challenge, though; it’s about the process for getting the data out to more employees, and how they then use it to execute on overall business objectives at the local level.
For the CDO, this involves both management of the data centrally, but also providing training on how to use the data and reports that are provided. It can also extend further, giving people access to the data in safe and sandboxed environments, so that they can understand why decisions get made in the way that they do.
Let’s look at an example. A retailer uses analytics on its sales performance across multiple brands alongside demographic and social data for countries across the world. Based on the data, individual store managers can make decisions around which brands to stock and the volumes of those products. By providing those store managers with dashboards and reports that are easy to consume and understand, the central team can support their decision-making and help to improve overall sales performance.
The reports and analytics might be compiled and managed centrally, but the usage of that data has to be done out in the field by people who understand its impact.
The CDO’s role in this is two-fold – firstly, ensuring that the central team is able to package data in ways that are easy to use. However, the second part is equally important, and revolves around helping employees understand the data that is being provided to them, and then use it in the most effective ways.
The growth of data within businesses will continue over time. For the CDO, the goal is to help that data be understood and used throughout the organisation, rather than just within the central management team. This approach has the greatest potential to improve performance.