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Do you need a Chief Data Officer?


keithmacbeath.jpgBy Keith Macbeath, senior principal consultant with HP Software Professional Services


Earlier in my career I spent some time in insurance and financial services. I continue to keep an eye on that industry, particularly now that Big Data is becoming so important in enterprise IT.


Banks are data businesses. I remember Walter Wriston, who was CEO of Citibank in the 1970s and early 80s, talked about the fact that a bank is really a collection of data. And Citibank invested heavily in the notion that the bank is a data provider. Investment banks have seen for decades that as much as anything they are information management companies.


Now, thanks to Big Data, many enterprises are waking up to the same conclusion. And in their rush to leverage the opportunities in data, they are hiring Chief Data Officers (or CDOs).


Every business is a data business

If you go back to the 80s, you see that banks already had become critically dependent on the data they had in their systems of record. Fundamentally, banks have statements that say this particular value is in this account. It’s a set of data in digital systems.


Today, every business is a data business. If you’re a manufacturer now in the consumer goods business, supply chain is absolutely central to what you do, and that’s software. It is all about data. That’s the back end. On the front end, social is absolutely critical if you’re in any kind of consumer facing business. This gets back to Geoffrey Moore’s notion about the implications of systems of engagement for corporations. Systems of engagement—such as Facebook, Google, and so on—generate vast amounts of information about consumer behavior.  


And this is why enterprises are hiring CDOs. The information in systems of engagement becomes absolutely critical to large-scale successful consumer businesses. If you’re not leveraging it, then your competitor will be outdoing you in terms of customer knowledge.


What should a CDO do?

I believe the CDO has two hats to wear. On the one hand, you’re responsible for securing the customer data that you have. And in certain markets, like Germany or Canada where the privacy laws are extremely strict, that’s a really important responsibility. If you’re global, you’re managing consumer data at different levels in different countries in different ways, or creating an enterprise standard for data management globally that reflects the toughest regulation anywhere, which is what HP does.


But you also have to deal with this new opportunity to exploit the much larger range of customer information that exists outside the enterprise. Your challenge is to link customer information outside the enterprise with the information that’s inside, and do it in such a way that your data doesn’t leak. You want to run your analytics externally—over on Facebook’s platform, for example, because it’s impossible to bring all of Facebook’s customer behavior information into your internal systems. So you never want to pass anything out, but you don’t want to bring everything in. It becomes a game of sophisticated integration.


And this is why you need a Chief Data Officer, because the key challenge is about purpose-specific integration between data inside the enterprise and data outside the enterprise.


The 3 strategic questions to ask about whether you need a CDO

Whether you create a CDO role is really an organizational design question. Every organizational design has upsides and downsides—here are three questions to ask so you can make a choice based on your priorities.


1. What’s the reason to do this? Investing in the CDO role is a significant structural change at a senior level. So why do it? What is it that you’re not getting now in terms of something to do with integration or analytics or the way data could be used to further your business? Start there—what are you not getting?


2. What will you get as a result? Next, think about what a new structure would allow. How would having these responsibilities brought together under a role allow you to do what you’ve been prevented from doing in the past?


3. What downsides are you willing to accept? Having a CDO will privilege certain outcomes, while making others weaker. For example, the CDO may establish data standards that accelerate cross-market analytics but which application developers for transactional systems feel add ‘one more constraint’ on how they build applications, making their job a bit harder. You need to have really clear in your mind that you’re looking for certain outcomes to be better, and you’re accepting that certain things will get worse.


Above all approach the CDO role in a realistic fashion. Make realistic choices and you’ll be better positioned to achieve the outcomes you want.


Read the Discover Performance article: What a chief data officer does and why you need one


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