Talent Management

5 reasons why CEOs need to hire a chief data officer

why you need a chief data officer

The world changed on Nov. 30, 2022. That’s how significant Dave Nelsen believes OpenAI’s release of ChatGPT was. The chatbot that uses large language models to respond to users and other generative artificial intelligence (AI) tools brought this technology to businesses of all sizes. At the same time, it reinforced why CEOs need a chief data officer (CDO) in their organization.

“AI is here now, and what is the rocket fuel that powers AI? It’s data,” says Nelsen, president of Dialog Consulting Group based in Cranberry Township, Pennsylvania. “We’ve all got a lot of data. We’ve never really treated it as an asset.”

Nelsen believes a company’s data is more valuable than the company itself, more valuable than its products and services, and more valuable than its processes.

And for an organization to see that value and realize its power and potential, it needs a CDO. A CDO is responsible for collecting, managing, maintaining, integrating, and analyzing all the data across an entire company. Leveraged correctly, a CDO can help CEOs make data-driven decisions, enhance customer experiences, mitigate risks and ensure compliance, drive innovation and business growth, and optimize operational efficiency.

“To have someone who is focused exclusively on data is a huge advantage,” says Tara Kinney, CEO of the Wellesley, Massachusetts-based Atomic Revenue. “Having that person who can own that and inform all the different departments, all the different leaders, and all the different users of technology — that’s a great resource.”

The rise of data in business

Data has been relevant in business for generations, but its prevalence and impact have skyrocketed in recent years, with AI and its influence on organizations being just the latest example.

How much data is there? Unless you’re used to talking about zettabytes — that would be a number followed by 21 zeros — just know it’s a lot. Or, consider that in 2022, new metric system unit measurements were created in part to keep up with the amount of digital data being generated.

In case you’re wondering, the additions were ronna (a number with 27 zeros after it) and quetta (a number with 30 zeros after it).

Consider the number of emails you send in a day. Or when you open a specific app on your phone. Or what type of movies you watch on a streaming service. Each of those bits of information can be a valuable data point for a business.

The sheer amount of data at a company’s disposal can quickly become overwhelming. It also can be hard to do anything with because often different programs generate different forms and formats of data.

“When you first try to bring together two systems, it’s like one is speaking French and the other one’s speaking Spanish, and they don’t talk to each other,” Nelsen says. “It’s not clear how the data comes together. That kind of translation is one of the many challenges as we look at all the different data we have in our business.”

Trying to manage that translation while overseeing and managing all that information can be overwhelming for a CEO who should be focused on driving their organization forward.

“It’s very difficult for a CEO to be the person who combines the data across all of the departments to get value out of it,” Kinney says. “It requires a depth of understanding about where the data comes from, how clean the data is, what process sources the data, if the data is required, how often it is updated, and how multiple software platforms integrate to provide the data. All of that is just too in the weeds for a CEO.”

Understanding the role of a chief data officer

That is where a chief data officer comes in. A CDO should be focused on all of the different data sources within an organization and understanding how they fit together.

Often, data within a company is siloed. The chief financial officer has a pulse on the company’s accounting data but likely knows little about, for example, performance review data collected by human resources.

“It’s difficult for me to think about what data lives within my department that a different department in the organization needs to make decisions or improve their operations,” Kinney says. “The CDO gets to bridge that gap.”

Nelsen agrees.

“The chief data officer has to look at all the different flavors of data we’ve got,” he says, “and (that person) is the point of potential and alignment and cleansing and everything that has to be done with data to make it that rocket fuel we need.”

5 key reasons CEOs need a chief data officer

A chief data officer brings far more than just data management and collection to an organization. Put bluntly, they quickly can become one of the most valuable team members in a business.

1. Data-driven decision making

When a company does not have a CDO, it falls on individuals to determine what data matters. Most likely, those employees were not hired to handle such responsibilities.

“When you don’t have a chief data officer, everybody gets so bogged down in the data, they’re not doing the everyday tasks or improving the operations that produce the results everyone wants because they’re operating outside their zone of expertise,” Kinney says. “Every single person and department gets caught up in the weeds, and it creates a lack of clarity.”

A CDO brings clarity to an organization.

They can provide an outside perspective and talk with department leaders about what information could help make better decisions. With that knowledge, the CDO can identify how to access that data, be it in-house or provided by a third-party supplier.

By providing that information, the CDO is delivering the tools necessary to make data-driven decisions that can impact the business at a micro or macro level.

2. Enhanced customer experience

CDOs use data to help personalize customer interactions and create strategies that target improving customer satisfaction.

One of the benefits of a CDO is they can look across an organization and recognize when a shift that one department makes can positively impact another part of the business.

Imagine a company’s marketing and sales team uses new data to identify a new way to attract customers, but this information doesn’t reach the customer retention team due to separate departments and isolated data.

CDOs help CEOs and their businesses break down those silos.

Nelsen says chatbots are a perfect example of this siloed reality. A company may deploy a chatbot to help answer common questions from potential customers but not offer a similar feature to existing customers. That is an oversight, but it also reiterates the need for a CDO. While the chatbot creation is relatively simple, aggregating the information the chatbot must cull through is a massive undertaking.

“The actual process of making the chatbot is 10 minutes,” Nelsen says. “The process of getting your hands around the data that would drive that chatbot could be huge. It’s just another example of why data, and therefore the chief data officer, is way more important now that AI is here for all of us.”

3. Mitigating risk and ensuring compliance

A chief data officer can and should be responsible for making sure the organization has robust data security measures in place and ensures compliance with data protection regulations such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA).

The CDO should also constantly be focused on mitigating risk whenever possible. That includes ensuring the data an organization relies on is accurate.

“So many times as business leaders, we’ll make a decision based on data that validates our opinion,” Kinney says. “Then you realize the data that you received was incomplete, inaccurate, short-term, outdated, or any number of other factors. The chief data officer should stop you from making those biased decisions because data has a bias in it.”

Mitigating that bias and risk is of considerable importance right now as more organizations turn to AI for portions of their business operations. Companies should be particularly mindful of this risk mitigation so that private data they possess does not accidentally become fed to organizational AI systems.

“AI can make mistakes, it can do unethical things, and yet we’re the ones responsible for the ethical application of this technology,” Nelsen says.”You’re going to have to understand what technology is out there to help drive your business forward. That should be a little daunting to any business leader.”

4. Driving innovation and business growth

While there may be concerns about incorporating AI into a business, there is also incredible potential for innovation and business growth. A chief data officer can help identify new business opportunities through data analysis and use AI to identify new insights.

A CDO can recognize new opportunities that frankly are harder to see for someone not looking at the breadth of an organization.

“I appreciate someone who is monitoring the data and that is their sole focus because then they can inform the different teams within the organization or the leadership team as a whole,” Kinney says.

You’re not looking for them to be the CEO and drive direction based on the change. You’re looking for them to identify the change and bring it to our attention so we can make business decisions.

Sometimes those decisions are small, but other times they can have massive implications. Imagine, for example, a CDO discovers that your customers are becoming more interested in sustainably-produced products. Your company will need to restructure to produce its product more sustainably, costing millions of dollars and brief delays in the production process.

However, because that preference was identified early, you gain a competitive advantage over your competition — and gain customers.

“You can beat competitors to the transition or just avoid getting left behind when your competitors make the move and you haven’t seen the data that tells you to make the same move,” Kinney says.

5. Optimizing operational efficiency

Nelsen likes to say that every company is a technology company, even if it doesn’t produce a technological product or service. He believes that because of how data can drive decision-making in an organization.

CDOs can help streamline processes and reduce costs. They also can improve supply chain management, resource allocation and workforce productivity.

For example, consider a small business with employees at multiple locations who historically only communicated by email. That type of correspondence can lead to lag time. If that business chose to use more of an instant messaging platform like Slack or Microsoft Teams, it could improve productivity.

“If we’re not using that technology because we didn’t think of ourselves as a technology company — so we don’t try to adopt these things that change how we do business — then we’re less competitive going forward,” Nelsen says. “That technology may not be what you sell, but it is where you can achieve lower cost, higher productivity, and faster and better decisions.”

Unlocking business potential with a chief data officer

A chief data officer is just one person within an organization, but that person has the power to be a transformative figure for any business. CDOs use data to drive decisions, improve customer experience, mitigate risk, drive innovation and optimize business growth and processes.

The amount of data generated in the world and available to organizations has never been greater. As that number approaches “ronnabyte” levels, there has never been a more important time to integrate a chief data officer into your organization.

“The amount of opportunities to collect data within your business has increased exponentially,” Kinney says. “With all of those complexities, you really need someone to focus on weeding through the abundance of information so that you don’t get lost.”

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About the Author: Vistage Staff

Vistage facilitates confidential peer advisory groups for CEOs and other senior leaders, focusing on solving challenges, accelerating growth and improving business performance. Over 45,000 high-caliber execu

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