Since the role of the Chief Data Officer (CDO) was created in many companies a decade or more ago, its primary responsibilities have expanded beyond defining standards and supporting data governance. Yet despite this evolution, many organizations have not achieved significant business value from their data investments. There have been two major generations of the CDO function, and it is time for a third if the goal of material business impact is to be achieved.

Starting around 2010 across multiple regulated industries, the first generation of the CDO function was primarily driven by regulatory considerations. This led to a focus on defining policies and associated standards and monitoring compliance requirements by business and technology organizations.

The evolution of the CDO

The first generation of CDOs were more focused on risk management than business value, and their efforts, while necessary and often critical, placed additional obligations and costs on business operations. Business moves to comply with new standards were usually limited to the minimal level of investment necessary. Not surprisingly, once it was deemed that the new policy requirements had been satisfied, investment to further expand the CDO was often curtailed.

The second generation of the CDO, implemented by many organizations between 2015 and 2020, was often done under new leadership and was focused on data infrastructure. CDOs implemented data cataloging software and made significant investments in data lakes and other enterprise-level technology in order to clean- up disparate and unaligned data environments. Such environments prevented compliance with enterprise regulatory reporting requirements and made it difficult to use data to improve revenue, reduce costs, or accomplish other more expansive business goals.

After spending several years solving a narrow set of regulatory or internal reporting needs, many organizations have found that the basis of the investment case has been elusive. What’s more, the infrastructure that was invested in during the second generation of the CDO is now dated and requires significant, continual investment to modernize.

The third generation of the CDO is just starting in many organizations, and the focus is firmly on delivering business value. CDOs and their teams have realized that the approach of their predecessors was not sustainable and are quickly adapting their function to embrace an alternative strategy based on three key objectives.

Leave the data with the business

Rather than attempting to centralize all data in a single infrastructure, as was done in prior generations, leading organizations are instead designing federated environments and processes where accountability for maintaining and managing data remains with the businesses that created it. Through the implementation of official data Authoritative Provisioning Points (APPs) and adherence to strict governance standards concerning what data is exposed to the enterprise, data definitions, and associated change management controls, companies can achieve the outcomes that centralized infrastructure promised but failed to deliver and anchor accountability where it belongs — with the business owners who create the data.

Emerging technologies that cache and manage federated data assets via a “data fabric” are making this model more modern, flexible, and easier to implement and evolve over time. Coupled with business-led application and technology modernization efforts based on private and public cloud technology, the vision of high-quality and accessible enterprise data to support operational processes and advanced analytics is potentially achievable at scale for the first time.

Focus on enterprise business value

The role of the CDO needs to change from a focus on monitoring data policies (although effective data governance remains as, or perhaps more, important than in generation one) to one where specialized strategists and analysts prioritize identifying and enabling business-focused use cases in which an enterprise view of data can directly drive business results.

Often one of the first areas these newly reconstituted teams are concentrating on is elevating customer data to the enterprise level. By linking together customer information files (CIFs), customer relationship management (CRM) platforms, and customer transaction repositories via a balance of federated and centralized platforms, an enterprise-level, holistic 360-degree view of an individual customer is finally becoming a reality in many companies.

Even more valuable, companies are starting to map the relationships between employees and customers, as well as between customers, with the goal of delivering improved products and services, increasing share of wallet, and cementing customer loyalty. CDO teams are utilizing emerging technologies such as graph databases for entity resolution and to surface hidden relationships, and incorporating the use of natural language processing (NLP) on unstructured data to maximize the value of customer data.

These new business outcome-focused CDO teams are partnering closely with business strategy and operations teams to identify areas in which better data can directly drive cost reduction and revenue improvements. They are also deploying joint CDO/business teams via an iterative, agile approach to prove out pilot efforts and rapidly scale.

Measure returns at every step

Finally, the third generation of the CDO needs to be focused directly on measuring the impact of everything data teams spend. By tightly partnering with the business for both strategy and implementation of enterprise data and anchoring investment in business cases that are focused on achieving the goals that lines of business have sent, the CDO will ensure its relevance for the long term. It will support the ongoing transformation of the businesses and organizations into ones that are data-driven at their core.

Accomplishing the transition to generation three requires the CDO to take a different view on its role within the organization and what it will take to achieve long-term sustainability and relevance. While it cannot abandon its important focus on data policy adherence and governance, achieving the implementation of a sustainable set of business-aligned standards that can evolve with the organization will require the CDO to partner directly with the executive leadership.

It will be critical to demonstrate how better data governance can impact both the top and bottom lines and be more than yet another tax on business operations. Only with this transition will companies avoid the need for another reset of the CDO in a few years and a fourth generation. Three times should be the charm.