Companies are awakening to the realization that data is the lifeblood of the organization and it needs to be dealt with appropriately.
Editor's note: This article is an excerpt from Chapter 2, "The CDO Agenda," of The Chief Data Officer Handbook for Data Governance (MC Press, 2015).
Many companies have established centralized data management departments. These departments are variously referred to as "enterprise data management," "enterprise information management," or the "chief data office." Whatever they are called, these departments share some common characteristics. They have accountability for data as an enterprise asset, and they increasingly report into the business.
The leader of these departments often carries the title of vice president of enterprise data management, senior vice president of enterprise data management, vice president of enterprise information management, or senior vice president of enterprise information management. Increasingly, these leaders are being anointed as Chief Data Officers (CDOs).
An understanding of certain foundational terms is necessary in discussing the CDO agenda:
- Enterprise Data Management (EDM) refers to the ability of an organization to precisely define, easily integrate, and effectively retrieve data for both internal applications and external communication (definition taken from Wikipedia, http://en.wikipedia.org/wiki/Enterprise_data_management). EDM includes a number of disciplines, such as data governance, data ownership, data architecture, data modeling, data integration, database management and operations, data security and privacy, master data management, reference data management, data warehousing, critical data elements, metadata management, data quality management, information lifecycle management, and content management.
- Enterprise Information Management (EIM) is synonymous with EDM.
- The Chief Data Officer is a C-level executive with overall accountability for EDM.
- The chief data office refers to the EDM organization or department, which reports to the CDO.
- Data governance is the formulation of policy to optimize, secure, and leverage information as an enterprise asset by aligning the objectives of multiple functions. Data governance is a discipline under EDM.
Key Drivers of the CDO Role
The emergence of the Chief Data Officer is driven by four macro-trends:
- Regulatory environment
- Data monetization
- Big data
- Data politics
Many companies, especially those in the financial services industry, must comply with stringent regulations that are data-centric in nature. Banks must comply with regulations such as the Basel Committee on Banking Supervision (BCBS) 239 for risk data aggregation and the Dodd-Frank Wall Street reform and Consumer Protection Act. Insurers need to comply with regulations that include Solvency II in Europe as well as directives from regulators in each state in the United States. Broker-dealers must comply with regulations from the Financial Industry Regulatory Authority (FINRA). Many federal, state, and local governments also have CDOs to lead their open data initiatives so that citizens can freely access data without any encumbrances.
Because data is critical to regulatory compliance, these organizations have identified their CDOs as the single focal point to handle data-related issues. In other words, the CDO is answerable to the regulators if the data is not trustworthy.
Data monetization is the process of deriving quantifiable business value from information. The C-suites in large companies increasingly recognize the tremendous value of data. This has spawned an entire generation of analytics departments that are geared toward data monetization initiatives. However, these initiatives have to be tempered by the acceptable use of data in the light of regulatory compliance, privacy concerns, brand reputation, and contractual restrictions. The CDO often has overall responsibility for the tradeoffs between data monetization and acceptable use concerns.
Big data has highlighted a number of new data sources, including sensors, social media, web cookies, and data brokers. It has also driven new technologies such as Hadoop and NoSQL. Traditional IT departments may not be familiar with these technologies. In addition, corporate security and privacy departments may be playing catch-up with the latest developments around big data. Once again, the CDO may be asked to lead the overall big data initiative.
Companies have always grappled with the differing business priorities of data producers and data consumers. We refer to this dynamic as "data politics." Data governance councils have sought to align the competing business objectives of multiple business areas. However, these data governance councils have had mixed success due to their lack of political clout. The rise of the CDO is an effort to add some level of centralized control over data as an enterprise asset.
Data Governance and the CDO
Data governance is critical to the success of the Chief Data Officer. The following data governance topics are key to the CDO agenda:
- How do we organize for data governance?
- How do we drive business ownership of data?
- How do we set data policies, standards, and processes?
- How do we monitor the adherence to these data policies, standards, and processes?
- How do we enforce the compliance with these data policies, standards, and processes?
- How do we leverage technology, especially in the context of big data?
In this article, we reviewed the key trends that are driving the emergence of the Chief Data Officer. These trends include the regulatory environment, data monetization, big data, and data politics. Companies are awakening to the realization that data is the lifeblood of the organization and it needs to be dealt with appropriately. The chief data office is often tasked with establishing data as a key business differentiator by discovering valuable data, defining data policies, and managing the trustworthiness of the data as an asset.