Five Ways CDOs Turn Data into Dollars
The number of people in the C-suite has grown, often including the addition of the Chief Data Officer. If an organization doesn’t have one yet, it likely will soon. By one estimate, roughly 25 percent of all global corporations will have CDOs by 2015. The CDO is the visionary behind a company’s overall data strategy and responsible for the integrity and security of the data, as well as its monetization.
The title may seem faddish, but it’s not. In fact, it’s almost neglectful not to have someone with oversight of an asset as critical as data. There are now an estimated 100 CDOs worldwide, including at Ogilvy & Mather, Samsung Telecommunications America and the City of San Francisco. Given the increasing number of security breaches and customer protests over privacy policies, it’s become clear that more businesses need CDOs.
The resume of the CDO is very unusual. Unlike other C-level officers, the CDO must have fairly extensive experience with both technology and business. He or she must have worked firsthand with data design and infrastructure; have a keen understanding of the market and internal operations; and work well with people throughout the organization. And because the CDO lays out the guidelines for how data is stored, secured and monetized, he or she must have a strong sense of ethics. In short, the CDO is a rare breed.
Broadly speaking, though, the CDO is tasked with designing and overseeing the data analytics system that identifies patterns — even seemingly trivial patterns — that can be monetized either by growing sales or reducing expenses. But to achieve these financial benefits, he or she must first have a cohesive strategy in place that often focuses on five key areas: data leverage, protection, upkeep, monetization and enrichment.
Data Leverage: Use What You Got
Many CDOs have made great things happen using only the data sets that existed when they started their work. In our conversations with 12 major CDOs, seven said they had success with the low-hanging fruit. In some cases, they even created new business models and revenue streams by selling or leasing out non-sensitive data, or using existing data to create enterprise offerings. A CDO’s greatest value may be his or her ability to infiltrate corporate culture — that is, to demonstrate ways that everyday decisions can be driven by data.
“Businesses need to think about data in new ways,” says Ursula Cottone, Chief Data Officer at KeyBank in IBM’s Institute for Business Value CDO Executive Perspective. “People often think of data as technology, but getting them to think of data in business terms can be a challenge.”
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Data Protection: Keep It in the Vault
For many businesses, data is the most valuable asset and greatest liability. The risks of a breach are colossal. In fact, the responsibility is so great, CDOs often collaborate with another security executive (possibly the Chief Information Security Officer or CISO) to ensure data is kept in a safe environment.
The cost of security breaches has escalated dramatically — this year it climbed 15 percent to an average total cost of $3.5 million, while the average cost paid for each lost or stolen record jumped to $145, up 9 percent from $136 last year.
The risk of not having properly secured data is tremendous. Data protection must be well funded and should not be an afterthought.
Data Upkeep: Health Is Wealth
Bad data is worse than useless. Duplicate data sets, for example, are expensive to store and slow down access speeds. Due to the rising number of data sources and data forms, it is vital that data is scrubbed, integrated and organized as part of a cohesive strategy. Equally important, it must be widely accessible to anyone who needs it. The CDO is accountable for maintaining data integrity, veracity, value, semantics and overall health of a business’ data.
Given that the volume of data collected is increasing at an astronomical rate, it’s essential that databases are constantly backed up, scanned for corruption and checked repeatedly for duplicate data sets. A data analytics system can be a business’ most important investment. If it is not properly maintained, it will not deliver a significant return.
In order to secure funding for data-related projects, some CDOs have gone so far as to tap money allocated for compliance and regulatory projects to consolidate data, conform tools, align processes and establish data policies.
Data Monetization: Fruits of the CDO’s Labor
The CDO ultimately wants to see profit growth as a result of his or her data strategy, but it may be equally important to use data analytics to improve branding, customer service or to reduce administrative expenses. While it’s not unreasonable to expect immediate financial rewards from a new data strategy, many changes are long-term and won’t be visible in the next quarterly statement.
Still, some companies can use the information gleaned from their data analytics systems to grow new revenue streams. A grocer, for example, could supply anonymous data to local television networks, so that TV ad space would sell to brands that are actually relevant to customers.
Data Enrichment: New and Improved
Once a strategy has been laid out and the goals have been clearly defined, a company can use external data (e.g. untapped data from partners, government agencies, social media) to enhance existing offerings. External sources would presumably provide additional geographical, psychological, behavioral or demographic information, so businesses have an even more detailed understanding of every customer.
We talked to a CDO from one major retailer, for example, who used a social sentiment analysis (based on data from social networks) to more accurately forecast the demand for certain goods. The socially-adjusted forecast was 24 percent closer to actual sales than previous models, which allowed the company to reduce markdowns and grow revenue.
The specific duties of the CDO are still being established, but the importance of the role cannot be overstated. The availability of clean, secure and accurate data could dramatically cut costs, create new business models and help grow new revenue streams.
One way or another, decisions must be made about a company’s data and it’s in a company’s best interest to make sure those decisions are part of a well-designed strategy — a strategy laid out by an experienced Chief Data Officer.
About the author: Glenn Finch is the Global Leader for Technology and Data in the newly formed Strategy and Analytics Practice within IBM Global Business Services. Mr. Finch’s emphasis on integrating strategy with analytics and technology is focused on the most challenging and transformative engagements which IBM undertakes. Those engagements have leveraged broader Customer Centricity and Customer Experience work across the Customer Acquisition, Customer Management, and Servicing processes. He has over 25 years of experience with such organizations as WellPoint, RIMAC, Banorte, Vodafone, H3G, Maybank, JPMC, HSBC, Bank of America, Capital One, American Express, Citibank, Wells Fargo, Barclays, LTSB, GE Capital, The Associates, State Farm, Norwich Union, First Interstate Bank, North American Mortgage, Household, and GM.