In the age of data, why are there so few Chief Data Officers?
Our quantitative global study of Chief Data Officers (CDOs), the first of its kind, shows that companies are increasingly talking about data. Yet less than one quarter have a CDO at senior executive level, and these are concentrated in a few sectors and regions.
Over the past decade, data has begun to transform every area of social, economic and corporate life. The scale of data available for businesses to harness is growing exponentially, driven by the rapid adoption of cloud technologies and the proliferation of connected personal and work devices in homes, stores, offices and supply chains.
Companies seeking to capture lasting value from this transformation need to understand, process and manage data and algorithms intelligently and efficiently, while addressing public ethics and privacy concerns and complying with regulatory standards. Yet most businesses have found adapting to this reality harder than anticipated, especially when introducing artificial intelligence (AI) applications.
Against this background, a new senior executive role has emerged over the past five years – the Chief Data Officer (CDO). Much has been written about the role a CDO can play in maximizing the operational and commercial potential of data. Ironically, though, there has been a dearth of data tracking the rise of the CDO.
To understand the situation better, we have conducted a detailed, quantitative study of the prevalence and role of CDOs at the world’s 2,500 largest publicly listed companies. We defined CDOs as a single person at C-suite level or one level below, with responsibility for the company’s strategic approach to data. This definition reflects our belief that appointing a senior level CDO is essential for leadership teams seeking to maximize the potential of data as a strategic asset throughout the organization.
We also investigated the prominence of data on corporate agendas, and the corresponding influence of CDOs, using natural language processing searches across the past five years of annual reports for 1,000 companies worldwide.
Our keyword analysis of annual reports for 1,000 companies confirms that data features more strongly in presentations to investors today than it did five years ago. That confirms our expectations, given that all companies need to keep pace with the wider proliferation of data across society.
To understand this trend, we measured data frequency - the number of times a company referred to data or data-related terms in their annual investor reports, including the terms analytics, machine learning and AI. Our analysis showed that a typical company now refers to data 48 times in their annual report, although the frequency ranges widely between companies, from as low as one or two mentions, to as high as 200 times per report.
We found that two-thirds of all companies in the study have driven an overall growth in data references since 2017. Data frequency at these companies has increased by 78% since 2017.
This small proportion can be seen in a positive light, given that even five years ago, the position was relatively rare. Furthermore, three out of five CDOs are now members of the C-Suite with oversight of enterprise-wide data, suggesting that boards and CEOs are beginning to make a single executive accountable for data success.
Nearly half of our identified CDOs were appointed in 2019 and 2020. Given the trajectory in the first few months of 2021, we expect a further 175 CDOs to have been appointed by the end of the year. In the aftermath of Covid-19, the question is whether the upward trend continues or subsides over the next five years.
CDOs are also a distinctly trans-Atlantic phenomenon: one third of companies in the study that are based in North America have a CDO, as do one quarter in Europe. Globally, more than 80 percent of CDOs work for companies in North America or Europe, including around half in the US.
Given that the US remains in the vanguard of the global data revolution, it is easy to understand the attraction of US companies to ambitious CDOs looking to make progress in their career. The increasing prevalence of CDOs in Europe may in part be due to some of the world’s most stringent data protection regulations – notably, the EU’s 2018 General Data Protection Regulation (GDPR).
Companies based in the Asia Pacific region are five times less likely to have a CDO than companies in North America. In China, an increasing proportion of state-owned and private sector companies do have a senior executive with business-wide responsibility for data management and oversight.
We found that companies with a CDO on average referred to data 10% more frequently in a defensive manner than other companies, while the frequency of innovation references was the same. This makes sense, given the increased public and regulatory scrutiny of the use of data by businesses, with clear financial consequences for businesses which breach data privacy and security rules. CDOs can use the need to reassure markets and the public regarding the company’s strong oversight governance of data to gain credibility in the C-suite.
The CDO role is starting to gain proper traction in some key markets, against a background where data is proliferating, and data-based technologies are evolving at pace. More and more companies are “talking the talk” on data more frequently with shareholders, which in turn is a potential driver of demand for new CDOs with wider executive remits.
Overall, we believe that the rise in CDO appointments in the last two years suggests that the CDO role will continue to grow in the near term - but by how much, and for how long, is uncertain, especially given that companies are still absorbing the unprecedented impact of Covid-19. Based on the results of this first CDO study, we recommend that companies should address a series of critical questions, regardless of whether they have already appointed a CDO or are just examining how to define this role. We have also identified key questions for current and aspiring CDOs to consider.
Rebecca Chandler, John Studley, and Siddarth Kalasapur also contributed to this article.
We have carried out the first-ever study of the prevalence and role of CDOs at the world’s 2,500 largest publicly listed companies. We included only CDOs at C-suite or C-1 level in the organization. We also used natural language processing searches across 1,000 of these companies’ annual reports to investigate whether there is a link between organizations that employ CDOs and the prominence of data on their corporate agenda.