According to a number of authorities on the subject, 2.5 quintillion bytes of data are being created on a daily basis. If this is the case, 90% of the data in the world today has been created in the last two years. This has fuelled the growing prominence of data within corporations: on the one hand, there is a growing appetite to leverage data as a critical asset from which new opportunities and value can be derived; on the other hand, however, there is increasing pressure to contain the costs associated with the processes and systems required to handle it. The appointment of a CDO can be a catalyst to addressing these challenges. There is a belief that the CDO role was created as a result of the global financial crisis in 2008, as a response to increased regulatory and compliance reporting demands and greater scrutiny over data. However, there were a number of CDO appointments outside financial services prior to this, such as that of Cathryne Clay Doss of Capital One and Usama Fayyad of Yahoo, who is now CDO of Barclays. What is clear is the growing trend of CDO appointments across all industry sectors; according to Gartner, the number of CDOs has doubled annually over the past two years. Financial services organisations have certainly seen a wave of CDO appointments in recent years.
Each organisation will have its own set of needs leading to the appointment of a CDO. However, there are common challenges, demands and themes, including but not limited to the following: (1) Simplification and optimisation: Financial services organisations of a complex and global nature can be inefficient when it comes to information management (IM). Similarly, organisations federated and/or distributed across multiple databases and systems can be highly inefficient and difficult to understand from a data perspective. A CDO can bring simplification through a singular view of data across such silos and boundaries, thus enabling organisational prioritisation and overall optimisation. (2)Bridging business and technology: Where there is disparity in the consumption and management of data, the CDO can bring synchrony by taking full ownership of data. (3) Effective response to regulatory requirements: Regulatory bodies, such as the UK Financial Conduct Authority (FCA) and the US Federal Reserve Board (USFB), now require IM to be a foundational effort across financial services organisations for the purposes of compliance reporting and risk management. (4) Paradigmatic shift to data-centricity: In addition to the regulatory requirements mentioned above, financial services organisations are undergoing a paradigmatic shift towards data-centricity having realised its strategic value. The CDO can play a major part in this transformation, demonstrating the short-term benefits of data through the delivery of simplification and optimisation, as well as long-term benefits in the form of new business opportunities realised through data.
The CDO role varies from one organisation to the next, even within the same industry sector. Furthermore, CDOs may hold an enterprise-wide remit or that of a business unit or function. Across the board, however, there are responsibilities that appear to be covered by the majority of known CDOs in all industry sectors: (1) Data governance: Ownership of standards, policies and processes to manage the availability, consistency, quality, security and usability of data. (2) Data architecture: Blueprints used to standardise how data is sourced, integrated and consumed, in-line with business strategy. Likely to encompass Big Data platforms, data integration tools and data warehousing. (3) Data analytics: A function leveraged to gain insight and perspective on data. Likely to include real-time business intelligence and reporting services. The CDO should be both steward and evangelist of data. They have a unique ability to help deliver business critical demands, such as cost reduction and response to regulatory requirements, whilst leveraging the powerful asset of data to drive innovation and find new business opportunities.
Financial services today are shaped by ever-changing economic, regulatory and technological factors. Within this context, the CDO role is being shaped by a set of common characteristics that include the following: (1) Regulatory awareness: An awareness of the current regulatory environment and its challenges is beneficial to the CDO. Knowledge of regulations and associated directives is required across multiple functions, not solely legal. Managing data effectively demands an understanding of the overall regulatory landscape as well as an understanding of operational implementation. (2) Organisational understanding: Within any organisation, data is being collected across business units and functions. It is, therefore, a common demand for the CDO to be able to view and manage data in a joined-up manner across these businesses and functions. This avoids the risks of duplication and redundancy, whilst realising new benefits and opportunities. (3) Strategic thinking: Ultimately, the CDO should have responsibility for the data strategy. They should align data strategy with all associated businesses and functions. To do so, the CDO should have a blend of subject matter expertise and the ability to operate at the strategic level. (4) Commercial acumen: There is good reason to suggest that a CDO can improve their company's financial margins. As chief of the data function, the CDO can reduce or contain the cost of data acquisition, production and storage through measures implemented across business functions and technology. Furthermore, the CDO can find new ways of monetising data through the definition of a strategic vision and an entrepreneurial mind-set that leads to the development of new offerings in the field of data. (5) Technology savviness: Skills and awareness of technology are fundamental to a CDO. It is important for them to have experience leading technology-based initiatives and an awareness of trends and innovation. Digitisation, digital disruption, and other such phenomena give rise to questions that require answers. Technology is viewed as a major mode of opportunity and a source of unrealised revenue - data may often be the catalyst.
As with the shape of the role itself, the CDO's reporting line can vary from one organisation to the next. Further differentiation can be engendered by the scope of the role - that is, whether it is business/function-focused or enterprise-wide. CDOs can be found reporting into the CEO, CFO, CIO, COO, and other C-level leaders, such as the Chief Marketing Officer or another CDO - the Chief Digital Officer. This indicates the importance of CDOs having senior sponsorship in order to have the appropriate level of credibility to act as an effective data evangelist and owner of data strategy. Cross-industry research states that a number CDOs report directly to their CEO. The rationale supporting this related to board-level engagement, specifically the need to evangelise the importance of data at the most senior level. At the same time, research states that it is often the CIO that seeks the appointment of a CDO. Within financial services most CDOs report to COOs. Deutsche Bank's CDO, JP Rangaswami, initially reported to the bank's CIO who has subsequently become COO and retains Rangaswami as a direct report. The Bank of England's CIO, John Finch (now divisional CIO at Thomson Reuters), created the role of CDO (to which Hany Choueiri was appointed) to report into the COO, Charlotte Hogg. Lloyds Banking Group CDO, David Grant, reports into the COO equivalent. Bucking the trend, however, Tesco Bank made public its desire to appoint a CDO to report into its Chief Customer Officer. Ultimately, the beneficiary of data maintained and utilised by financial services organisations is the business. Decisions regarding customers, investments, products, risk and so forth are made by the business - their effectiveness is highly dependent upon the accuracy and quality of organisational data. There is an argument, therefore, that the CDO should be business-driven and technology-enabled, and thus report to the CEO or COO and work alongside other C-level leaders, such as the CFO and CIO.
In most financial services organisations, strategic implementation requires enterprise-wide change. Given the size, complexity and global nature of such organisations, this is a challenging task. Whilst the CDO may embody the definition and delivery of data strategy, these tasks are too great for one person to deliver. A broader commitment is required, from business units and supporting functions alike. Many corporations have, or are in the process of creating, a dedicated organisation in response to this. Nomenclature may vary from one organisation to the next; various organisational titles have been found, ranging from Data Management Organisation (DMO) to Office of the CDO / CDO Office. Whatever the title may be, the objective is the same - to enable the CDO to define and deliver data strategy through the support of an aligned and collaborative infrastructure, for the benefit of the organisation as a whole. Organisational models will vary between organisations. In a recent study conducted by Gartner, four CDO organisational models were identified, defined by the axes of focus (internal vs external) and orientation (operational vs transformational) - these models can be summarised as follows: (1) CDO Office as The Engine Room (internally focused operational organisation): Delivers operational data services focused on the needs of the internal users. Monitors data market developments and builds expertise in data asset usage, information management and analytics. (2) CDO Office for All (internally focused transformational organisation): Focused on the needs of the internal users with a strong push for data assets to be used aggressively by business leaders and individuals in order to break through traditional perimeters of business, drive transformation and new digital business models. (3) CDO Office as Business Service Provider (externally focused operational organisation): Delivers operational data services used by both internal and external users. Activities are expanded and integrated into a shared service organisation that runs like a business. (4) CDO Office as The Business (externally focused transformational organisation): Inseparable from the product, especially when information is one of the explicit external offerings. The CDO organisation delivers internal and external data services that drive business transformation and differentiation. In terms of structure, each organisation will have its own shape and nuances. In some instances, the CDO organisation is structured by creating teams aligned to each CDO responsibility. To use those outlined previously, one CDO organisation might consist of a team focused on each responsibility: data governance, data architecture and data analytics. Certain responsibilities, of course, may need to cut across all of these simultaneously, thus requiring a matrix organisational structure.
The CDO role has great potential but there are some major challenges that should be addressed to realise these possibilities: (1) Recruitment: Competition for top talent is fierce. The CDO role itself requires a blend of business and technology knowledge as well as the characteristics outlined above. (2) Sponsorship: The CDO requires sponsorship from the top. This means the correct organisational position and support from leadership. (3) Scepticism: Given the relative newness of the CDO role, its benefit and return on investment is currently difficult to measure. The CDO and their sponsors will need to overcome this tactfully. (4) Funding: The budget necessary to create an effective organisation, which delivers tangible short/medium term benefits whilst committing to longer term benefits. (5) Scope: The CDO's scope of responsibilities will need to be clearly defined to negotiate conflicting priorities and overlapping data ownership interests. (6) Time: The CDO will need to balance a long-term focus with short/medium term demands, as well as the potential for conflicts associated with the demand for both. (7) Technology: Whilst technology can be a great enabler, there may be barriers caused by underinvestment in technology and ongoing requirements to reduce costs.
As with any role, compensation will be dictated by the size and complexity of the organisation, the scale and challenge of the role, and the demand for equivalent talent depending on the supply. When comparing industry sectors, there is a large differential. Financial services and other regulated industries, such as pharmaceuticals and telecommunications, tend to pay the highest levels of compensation whereas the public sector tends to pay the lowest. GCHQ recently advertised for a Chief Data Scientist with a top starting salary of £90,000 - the same grade as the Deputy CTO and CISO - which would be deemed below the market rate. The Bank of England compensates its CDO more handsomely, although this will be nowhere near the high six-figure to seven-figure range feasible in leading financial services organisations. Roles within financial services organisations based in core locations, such as London and New York, command the highest levels of compensation. London-based CDO roles in the Managing Director bracket start with a basic salary of £200,000 to £250,000 and a total compensation range of £400,000 to £1+ million - the highest paid CDOs tend to have additional responsibilities. Roles based in non-core locations, in the UK but outside London, may see a regional differential, although large organisations tend to be guided by corporate salary bandings and the wider demand for top talent.
On the whole, financial services organisations realise that data is an asset, and an essential one at that. The current environment - shaped by a variety of economic, regulatory and technological factors - demands data-centricity. Compliance and regulatory requirements impose heavy burdens (which can result in even heavier penalties if unmet); pressure to reduce operating costs and improve profit margins are ongoing; and organisational data is accumulating at an unprecedented rate. The increased number of CDO appointments demonstrates the need for greater leadership as a response to these challenges and points towards benefits yet to be realised. Realising these benefits requires a good understanding of the CDO role, how it should be positioned (with potential challenges in mind) and what the CDO organisation should look like.
[Written on behalf of JD Haspel, November 2016]