The C-suite may need a bigger boardroom. As organizations expand their executive teams with new C-level titles that underscore their digital transformations in-progress, the role of chief analytics officer is gaining traction.
Driven by organizations' desire to turn big data into a strategic asset, the CAO is finding a home in data-rich industries such as financial services and healthcare. Although still not as prevalent as two other newish C-suite roles -- the chief digital officer and chief data officer -- the CAO may represent an inflection point in an organization's digital journey, signaling a move from managing data to applying it more strategically across the business.
The CAO role "is certainly not in the mainstream yet, but momentum is building," says John Reed, senior executive director at staffing firm Robert Half Technology (RHT). "The pioneers see the power in data and the power in harnessing that data for competitive advantage."
Not every organization hiring a CAO is a digital pioneer, but many have matured to the point where they need to take a more strategic approach to analytics. Often, these businesses have deployed pockets of analysts and data scientists across the organization -- in marketing, IT, operations or finance -- but they aren't yet harnessing the collective wisdom or economies of scale. These companies are the prime candidates for a CAO.
"When you start thinking about how to organize your analytics better and how to get more bang for the buck, you'd better be thinking about hiring a chief analytics officer," says Bill Franks, CAO at data-services firm Teradata. "You can't take analytics where you want to without someone who's accountable for those strategic decisions."
There's plenty of upside in adopting a more strategic approach to big data. In a recent study by management consultancy EY, for example, 69% of companies said customer experience was vital to their growth strategies, but just 12% said they take full advantage of analytics to extract customer insights and deliver better customer service.
"We've seen many firms mature into a need for leadership," says Jack Phillips, CEO of the International Institute for Analytics, a research and advisory firm. "They reach a point where senior leadership says that this is so important to us from a competitive standpoint that it's time to dedicate investment and create a standalone, centralized [analytics] function."
From insights to action
Edmunds.com, the consumer auto website, reached just such a point last year, with a half-dozen analytics teams reporting into different parts of the organization. In January 2014, the company promoted its head of software architecture, Paddy Hannon, to CAO.
"We had all of these analytics groups that were spread out," says Hannon. "There was a lot of duplicative work going on, and there was no cohesive strategy for how we were going to move forward. The best solution was to merge the groups into one unit."
Hannon says he's already seeing results from integrating Edmunds' analytics teams into the centralized Analytics and Insights group, which serves in a consulting role for internal customers. "It's becoming more of a partnership rather than a job shop," he explains. "We're moving from using data for insights to using data for action."
For example, an analysis of vehicle sales and dealership data, combined with advanced forecasting techniques, persuaded Edmunds' management team to make changes to its dealer recruitment program. Combining and analyzing a mix of clickstream and transaction data wouldn't have been likely in the previous decentralized structure, Hannon says.
"It's a much more sophisticated model now for the sales team," he says. "I don't think they would have pieced all of those data sets together on their own."
Adding a strategic layer
Many organizations are investing enough money in big data projects to justify the creation of a CAO role. IDC predicts that the market for big data technology and services will grow at a 27% clip annually through 2017 -- about six times faster than the overall IT market. With the building blocks in place, many organizations are looking to scale their analytical approach to drive more value across the business.
Catamaran, a provider of pharmacy benefits management services, has made a significant investment in analytics capabilities. Senior leaders knew there was a lot of intrinsic value in the clinical and patient data the company was collecting, but they weren't sure how best to utilize it to improve its services and create a better consumer experience. In May 2013, Catamaran hired Andrea Marks as its first CAO. Marks, previously a chief informatics executive at Blue Health Intelligence, has an extensive background in analytics in the healthcare industry.
"When I joined, we had a lot of analytically sound rules engines that we embedded into our clinical products and services," says Marks. "We had some good reporting tools. It was really about taking it to the next level -- how do we build on this to drive improved outcomes and cost efficiencies across the system."
Marks touches on two key elements of a CAO's mandate: improving operations and identifying future growth opportunities. The former provides an opportunity for some quick wins that can justify additional investment in analytics; the latter is a longer-term play that most CAOs believe holds the highest potential for driving real value across the business.
"You always want to be operationally efficient, and [analytics] can provide tangible benefits there," elaborates RHT's Reed. "But [using analytics] to create more for the bottom line is where you'll see the focus going forward."
Using analytics to drive revenue
At Dovetail Health, hiring a CAO signaled the company's desire to think more strategically about the data it was collecting through its medication management solutions. "The data they are collecting in patients' homes is very unique and extremely credible," says David Veroff, Dovetail's most recent CAO (at press time, Veroff had accepted an offer to become SVP of analytics at Silverlink Communications). "This was a rich asset they hadn't leveraged as much as they'd like to."
Veroff's initial focus was on applying analytics to help Dovetail improve patient outcomes based on the combinations of medications they take. His team made early headway in optimizing its patient enrollment processes, using predictive analytics to identify patients who are more likely to enroll and maintain their medication regimens.
But Veroff sees even more potential in using analytics to identify new business lines and other revenue opportunities. "What if they find a tremendous new insight about how certain types of patients have likelihoods of significant barriers in the way they manage their health?" he says. "That's important not only for [Dovetail's] operations, but also for its business strategy, because those insights become sellable assets, which can lead to more service lines."
In this regard, the CAO is no different from the rest of an organization's executive team, says Veroff. "Everyone is held accountable for top-line growth," he says.
Revenue growth is also one of the goals for Chris Mazzei, global CAO at EY, which has committed $500 million to building out its analytics expertise through its Global Analytics Center of Excellence. "We are interested in building our core consulting business, but we are more interested in transforming into an organization that leverages analytics in everything we do," Mazzei says. "My role is to look across all of the analytics skills and initiatives going on throughout the organization and identify what we should be doing across business units on an enterprise basis. Analytics are core to our growth strategy."
Catamaran's analytics team has already seen tangible gains from scouring cross-functional data sets to become more predictive and proactive. One recent project examined trends involving compound medications -- prescriptions that are mixed at a pharmacy. Because the FDA doesn't regulate compound medications, there are wide variations in use -- a trend that Catamaran analysts projected would drive sharp increases in costs for its clients in the near term. Senior leaders, after reviewing the findings, quickly introduced a robust clinical program to ensure the safe and effective use of these compound drugs as well as monitoring them. Clients quickly signed up for the program.
"Without the analytics team, we wouldn't have found that needle in the haystack," says Marks. "It wasn't even on the radar of our product development teams. We were able to bring those insights to light and create an offering ahead of the marketplace."
CAOs and CIOs: Allies, not adversaries
Having the CAO sit outside of IT certainly has the potential to cause friction with the CIO. But CIOs should view their analytics colleagues as allies, not adversaries.
"From a CIO's perspective, I would look at the CAO as someone I can benefit from," says analyst Reed. "While I'm thinking about analytics maybe 10% of the time, they're thinking about it 100% of the time. The work they're doing will benefit me and give me time back to focus on managing the technology environment, which is becoming increasingly complex. I see it as a winning partnership."
CAOs, for their part, see IT as a critical partner. Veroff, for example, says that during his time at Dovetail, he was "joined at the hip" with the company's chief technology officer, Doug Fleming. "In order to do sophisticated analytics, I had to have data management structures that were accessible," Veroff says. "And [Fleming] was building applications that are really going to leverage [Dovetail's] analytics. So we were probably in contact four times a day, trying to stay in sync."
One important skill for CAOs is their ability to act as a conduit between IT and the rest of the business. "One of my roles is to bridge the gap between the technology teams and business teams," says Marks. "We're not necessarily IT, but we understand the nuances. And we also understand the business needs. We're really a translator -- we turn data into a common language that both business and IT can understand."
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