We are seeing an increasing number of Fortune 1000 companies invest in a Chief Digital (or Data) Officer. Some assume that when a company hires a Chief Digital Officer (CDO), it means some other technology leader isn't doing his or her job. Another school of thought contends that a CDO is a smart complement to the evolving role of the Chief Information Officer (CIO) and that creating this position is an excellent method for improve corporate alignment and client experiences.
Which of these ideas is right?
An evolving C-suite
Typically, the C-suite reflects an organization’s investment in its future. In other words, the commitment to a certain resource in an organization’s C-suite can be seen as a sign of its commitment to growth in that area. For instance, the growing reliance on IT gave rise to the CIO in the 80s and the growing complexity of distribution and transportation gave rise to the Chief Supply Chain Officer (CSCO) in the 90s. Today, both the CIO and CSCO are well-established roles in nearly every organization.
With the advances in technology, we can see how the influx of data, the adoption of cloud computing and the democratization of analytics as a strategic source of insights have naturally resulted in the creation of a new relevant role: the CDO. While the role is relatively newer than other C-level executives, it is following in the footsteps of its predecessors in the C-suite.
One thing is certain: today's CDO is more important than ever before as businesses focus their efforts on developing and implementing strategies to maximize their most precious asset – data. A proliferation of data propelled the CDO to the top of the corporate ladder. While only 12% of surveyed Fortune 1000 corporations had a CDO in 2012, nearly 68% had one by 2019.
The emergence of a data-centric culture
A data-driven culture is becoming increasingly prevalent in the business world. Companies in all industries are gaining the capacity to make data-driven decisions, thanks to advancements in technology and access to real-time data. Given the vast volume of data available to businesses, it's become increasingly necessary for them to make data-driven decisions rather than relying on assumptions.
Big data analytics has become an important part of this approach since it helps businesses collect and transform data into actionable information. As businesses grow, they realize that a database-centric approach to data isn't working, and it doesn't help them make the types of decisions they need to make to ensure they're getting the most out of their data.
The grey areas between the CDO and the CIO
Now let's look at the possible reasons for friction between the roles of the CIO and CDO.
According to Forbes, while most firms consider the CDO’s job important for a modern data-driven organization, they can’t agree on exactly what the CDO’s role should involve. More precisely, there is no apparent agreement, even among CDOs, on:
- How much technological expertise do they need?
- How much data governance responsibility should they have?
- To whom should they report?
One of the reasons CIOs and IT regard the CDO warily is because of the ambiguity of the CDO's responsibilities. Conflicts can arise depending on the department from which the CDO originates. If a CDO transitions from IT, he or she is seen as a technologist, which can make the relationship smoother, but he or she may still struggle with the new role and have disagreements about who has decision-making authority over data. If the CDO originates from marketing, things become more complicated, as data relates to IT – and tensions can develop.
Another source of C-suite friction is that data governance was traditionally delegated to the CIO. But then many companies decided they needed a specialized function that could give the proper data outcomes, rather than just someone who was theoretically accountable for it.
Yet another concern is budgetary. If data efforts are funded from the CIO's budget or if the CDO receives funds to accomplish things the CIO used to do, the CIO loses control, which may exacerbate tensions.
The position of the CDO in the chain of command is also a point of contention. Many believe the CDO should report to the CEO or CMO. Others believe the CDO should report to the CIO or a senior technology leader.
On the ground, CDOs may be underequipped
Most firms aren't data-driven right now, and they won't be any time soon. As a result, the role of the CDO is still unclear, which means they may be ill-equipped to effectively address difficulties. ISG research shows that only 48.1% of firms consider the CDO to be the primary data custodian, while 28.4% believe there is no single point of accountability and 17.5% of CEOs still consider the CDO position to be temporary or unneeded.
Who owns data?
Although there appears to be some ambiguity about the breadth of the CDO's responsibilities, budgetary share and controls, position in the chain of command and business mandate, one thing is clear: data control is neither pure tech nor pure business. Although some CIOs regard the CDO as intruding on their turf, the distinctions between the two roles are very evident. Simply put, the CIO oversees the information systems that allow data to move and be kept. The CDO oversees how data in the systems are managed and used to make smarter and more effective business decisions.
There is room for coexistence and cocreation
Many business strategists believe the two jobs work best as partners, with the CIO responsible for the technical infrastructure and the CDO responsible for connecting the data and insights acquired from the infrastructure.
As companies transition to a modern data-centric business model and culture, the CIO must be more willing to share tasks with the CDO. Future CIOs should commit to a cloud-first, AI-ready infrastructure supported by agile, collaborative, and controlled data management. Even though the CDO role is still in its infancy, analysts are optimistic that it will gain deserved prominence at the C-suite table as business units increasingly rely on data to function and that the two departments will work more harmoniously together.
The ISG view
ISG helps businesses design the best-fit digital transformation strategy, anchored in the belief that the CIO and CDO should work together to provide the best results for the company. We advise enterprises in their digital transformation, including building value propositions, operating models, end-to-end business processes, IT and business integration, sourcing, partner models, insights and data monetization. We have designed and implemented data and analytics centers of excellence for our clients to help them to distinguish between technical roles that fall under the purview of the CIO - including data/cloud engineering, ETL, data lakes/warehouses and insights – and business roles, including data sciences, AI/ML and insights aligned with the CDO. Contact us to learn more about how we have helped both large and small businesses in bridging this gap and achieving hyper-growth.