Investments in Data and AI Initiatives Continue to Grow

Organizations are investing in data analytics and AI initiatives as they start to realize measurable business benefits from the technologies.

These were among the findings from NewVantage Partners' latest annual survey on data and AI leadership, which found that 97% of participating organizations are investing in data activities and that 91% are investing in AI initiatives.

The broad plans for investment follow organizations' realization of tangible returns on investment, which the survey found have grown to more than 92% of organizations, up from 70% in 2020 and just 48% in 2017.

Randy Bean, CEO of NewVantage Partners, said investments in data and analytics have become "nearly universal," with 88% of companies indicating they increased their investments in 2022.

Related: How Artificial Intelligence Will Evolve in 2023

He noted that a slightly smaller percentage — 84% — expect to increase data and analytics investment again in 2023.

"The big question is whether companies will pull back on their investments if they are not delivering sufficient business value," Bean said. "We may very well see greater scrutiny of investments in data and AI capabilities that cannot be tied directly to successful business outcomes. This is not a bad thing."

Adjusting to the Reality of the CDAO

While the percentage of organizations that have appointed a chief data and analytics officer (CDAO) continues to increase — up to 74% in 2022 from just 12% a decade earlier, businesses are still feeling their way forward when it comes to the CDAO.

From Bean's perspective, the most interesting finding from the survey is that only 40% of companies report the CDO/CDAO role is well-understood within their firms.

"It should not come as a surprise given this perception that there is such a high turnover rate in this role, with the average CDO/CDAO tenure ranging from 20-24 months," he added.

Related: Role of Chief Data Officer: Essential so Why the Turnover?

Bean pointed out that 35% of companies report that the CDO/CDAO role is well-established, a figure that declined since 2022.

"In sum, the CDO/CDAO is a new role, and we have work to do to enable its success," he said.

Until recently, most CDOs and CDAOs reported to the CIO within their company, according to Bean.

This has changed in recent years, as 43% of CDOs and CDAOs now report to a CEO, COO, or president, and only 27% report to the CIO.

"This has been driven by the notion that data is a business asset and needs to be tied directly to business outcomes," Bean noted.

However, using data is dependent on issues ranging from data capture and data cleansing to data access, which are functions that require technology investment and capabilities.

"Successful companies ensure that the CDAO, CIO, and digital transformation functions are joined at the hip and working in collaboration to deliver successful business outcomes," he said.

Making an AI Development Plan

Developing an AI investment and implementation roadmap must begin with the business stakeholders, Bean said.

"These are the executives who are held accountable for company performance, client satisfaction, and business growth," he said. "Data and AI leaders and technology leaders must forge strong partnerships with key business stakeholders."

That includes identifying likely business sponsors, as well as the most critical business questions that data and AI will assist with.

"Build trust and credibility — that is the path to the most successful business outcome," Bean said.

Creating a Data-Driven Culture Requires Change 

Fewer than half of the survey respondents replied that they are competing on data and analytics, and just four in 10 said they are managing data as an enterprise business asset, indicating organizations may be facing a long road ahead of them in their efforts to become data-driven.

"Change is never easy for any organization or the people that comprise an organization. It requires doing things differently," Bean said, noting transformation efforts take time.

The report found that more than 90% of executives pointed to culture as the greatest impediment to achieving this business outcome, while just 8% cited technology limitations as the primary impediment.

Organizations that plan for the long term establish business processes and practices that will be implemented over time, Bean said.

"They proceed one step at a time to establish quick wins and build organizational support and credibility," he said. "No two organizations are exactly alike. There is no magic blueprint for success."

Bean suggested that companies must develop a transformation plan based on their unique organizational culture, and these are the companies that will most likely succeed for the long haul.