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The CDO: Do We Really Need Another Chief?

Posted by Indraneel Mukherjee on April 18, 2019



3144_SM_CDO_Blog-2How many of us have heard the metaphor “data is the new oil”? The extractive nature of a trapped asset like oil seems like an apt metaphor for the boom in data driving business impact. Medtech companies are not insulated from this wave. Most medtech companies realize that they must become better at leveraging their data for competitive advantage, especially given the relatively low product differentiation in many key categories. The big question in front of them is how?

Following already well-established practices in pharma, payer, provider and other life sciences, medtech executives are wondering if creating a CDO office would solve the conundrum. When medtech’s healthcare peers were in this situation a few years ago, we observed their response, and noticed their tendency to invest in CDOs without first developing a comprehensive data strategy. A recent executive survey by New Vantage Partners looked at more than 60 Fortune 500 companies, and suggested that 68% of those companies now have a chief data officer in 2019, up from only 12% in 2012. However, many organizations lose their CDO not long after they’re hired. Gartner estimates suggest that most CDOs stay in the role for 2.4 years on average.  

The research from New Vantage Partners suggests that this attrition may be caused by a growing lack of faith or clarity of expectations from CDOs. 45% of the surveyed companies believe that the CDO is an executive position, down from 50% in 2018. 18% have phased out CDO roles in 2019, compared to 12% in 2018. In my experience, a big part of why CDO tenure is short lived is due to the misalignment between expectations from the CDO and the realities of the job.

Whether you need an executive CDO or not depends on your data strategy.

Are You Playing Defense or Offense?

HBR authors Leandro DalleMule and Thomas H. Davenport created an excellent framework for thinking about two types of data strategy: defense vs. offense. A defense strategy is for minimizing downside risk to the business, while an offense strategy is for generating more revenue, market share, profitability and a better NPS. Data defense is all about control.  

I truly believe that having an executive in a CDO role is not ideal if his or her primary responsibilities will be helping the company overcome foundational data management and governance challenges. The decision to bring in a CDO boils down to a value-effort tradeoff. Organizations struggle to justify the investment required to drive incremental revenue improvements from data defense activities unless these activities are critical to the business (for example, data privacy in financial services). Most business value from investments in data defense activities drive operational efficiency. However valuable, gains from operational savings rarely make a strong business case for an executive leader to run data management.

A large pharmaceutical client we worked with hired an executive leader as CDO with a defensive mandate to address foundational challenges. The argument was that foundational problems needed to be fixed first before the company was ready for new ideas. A few months into his tenure, after a heavy investment, fellow executives began to question how much incremental business had been gained. The answer was not much, because this CDO had been involved in fixing data governance, security and access to data. Gradually, budgets were cut, future investments were deprioritized and eventually the role was dissolved. My perspective is that departmental, middle management roles work well to lead data defense, armed with senior leader sponsorship.

Data offense on the other hand is all about data democratization. Personalized analytics deployed to a sales team is a classic example of data offense where timely, personalized, on-demand customer data is provided to reps to elevate the effectiveness of engagements. A capability such as this requires an offense mindset, using data to drive transformational business outcomes through advanced analytics.

For companies to maximize value from data offense, the data leader needs to procure newer sources of data (internal or external), develop new analytics capabilities and potentially create new products and services that enable the rest of the organization to consume the data. Typically, such activities would necessitate significant change management efforts that need to be shepherded through an executive leader, typically a CDO.

Innovative Medtech Companies Could Use CDOs

Many medtech companies are realizing how analytics can bring transformational change in business outcomes. Several medtech companies are investing hundreds of millions of dollars into their data infrastructures to fuel innovation in payment models, patient care and product development. Winning in this complex world requires a balance of strategic thinking and organizational muscle. An executive CDO is the ideal choice to generate organizational excitement, secure funding and inspire the kind of strategic patience that is necessary to wait for such investments bear fruit.

We believe that companies need to balance between both data defense and offense. An executive leader of data at a CDO level is the right choice to lead the company through a data offense strategy and show how data can drive transformational value in business outcomes.


RELATED CONTENT 

BLOG POST: Gut Feeling, Instinct, Anecdotal Evidence: Why Can’t We Just Use Data for Commercial Decisions?

BLOG POST: Stop Waiting for Data in Medtech. It's Already Here 

BLOG POST: It's Time for Medtech to Turn Digital


 

 

Topics: cdo, organizational alignment, data strategy, leadership challenges

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AUTHORS
Brian_Chapman_thumbnail
Brian Chapman
Principal,
ZS Associates
Tobi_Laczkowski_thumbnail
Tobi Laczkowski
Principal,
ZS Associates
Will_Randall_thumbnail
Will Randall
Manager,
ZS Associates
Matt-Scheitlin-London_thumbnail
Matt Scheitlin
Associate Principal,
ZS Associates
Andy-kach_thumbnail
Andy Kach
Associate Principal,
ZS Associates
Bhargav_Mantha_thumbnail
Bhargav Mantha
Associate Principal,
ZS Associates
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