When I speak about big data with government leaders in our client countries around the world, I often find that many have some awareness of big data, but for many, that's where the story ends. Most are not sure how it is going to affect them or what they should do. Most leaders are largely unaware that the impact of big data is likely to be broad and deep. What governments do (or fail to do) will likely shape up the competitiveness of their countries' businesses for the next generation.
In countries further along on its adoption curve, big data has already started to transform not only the information technology sector but almost every business in every industry. Incorporation of big data today is analogous in many ways to the transformative effect of electricity on industries in the 19th century. While electricity production and distribution became an industry in itself, it also led businesses in all sectors to redesign their processes to take advantage of this new resource, leading to unprecedented productivity gains of the Second Industrial Revolution. It isn't surprising therefore that at the recent World Economic Forum in Davos, there was much talk about the global economy being on a brink of a Fourth Industrial Revolution, fueled by big data enabled innovations. Governments in emerging economies cannot afford to be left out of this conversation.
In this blog I hope to show how big data, as a new resource – one that is abundant and rapidly growing – is transforming the business environment and changing the way companies compete with each other. I will also offer suggestions for actions and policies that governments can initiate to position their economies for the advent of the so-called Big Data Revolution, and show that if they don't, they risk losing market share to more digital data-savvy competitors. Finally, I will share a new tool: Open Data for Business (OD4B) Assessment and Engagement Tool, that the World Bank has launched to help governments lay the foundation for the use of one type of big data – open government data – by the private sector.
How big data is affecting businesses and competitiveness
Big data is a multibillion dollar industry in itself, with three main value chain component areas:
- Generation and collection,
- Storage, transmission, and security, as well as
But big data is much more than this. It is also a source of innovation that generates new goods and services. And perhaps most critically, big data is fundamentally changing how companies do business by transforming core business functions and the very nature of competition.
If you studied business some years ago as I did, you learned finance, accounting, marketing and strategy. Today all of these disciplines are being transformed by digital data. Accountants ponder ways to reflect data as a new asset class in balance sheets. Auditors embrace big data analytics to spot fraud. Marketing gurus are using new digital data to understand customers in unprecedented, business transformative ways. And strategists look for ways to leverage data-enabled competitive advantages, as business is becoming less about transactions and more about engagement, less about making and selling things and more about designing experiences.
Michael Porter describes the paradigm-shifting role of data for businesses very succinctly: "Data now stands on par with people, technology, and capital as a core asset of the corporation and in many businesses is perhaps becoming the decisive asset." Products, increasingly enabled with sensors, become a means for delivering continuous value to consumers rather than an end in itself. Consider a tennis racket made by Babolat, a 140 years old manufacturer of rackets and related tennis equipment. Its "Play Pure Drive System" puts sensors and connectivity in the racket handle, and now the company offers a service to help players improve their game through the tracking and analysis of ball speed, spin, and impact location, delivered through a smartphone application. Traditionally non-technology businesses, such as the finance giant Capital One, have even gone as far as redefining their very identity as a digital technology company and their core product not as credit card lending but as data and software. Jeff Immelt, the CEO of General Electric, recently said "if you went to bed last night as an industrial company, you're going to wake up this morning as a software and analytics company.'"
At the company level, digital-data driven innovation can boost levels of productivity, profitability and competitiveness. 63% of respondents to a survey conducted by IBM and Oxford University reported that the use of information technology, including big data and analytics, is creating a competitive advantage for their organizations. The same survey showed that big data analytics was 15% more effective than traditional business analytics. Businesses that figure out early how to harness big data to increase value to customers will likely gain market share from their less data-competent rivals. An MIT study found that firms that adopt data-driven decision making have output and productivity that is 5% to 6% higher than what would be expected given their other investments and use of information technology.
In another sign of its growing importance, data has emerged as a discipline in its own right. Top MBA programs like Stanford are introducing courses such as Business Intelligence from Big Data, Data-Driven Decision Making and Digital Competition in Platform Markets to prepare graduates to compete in a new digital economy. In the digital economy, businesses need decision makers with multi-layered skills: subject matter expertise, mastery of data, design, and ability to manage digital delivery. Without data, decisions are guesses. Mastery of data is fundamentally an ability to tease out signals from zetabytes of new data, to fully understand the story behind the numbers and to make data-driven decisions. The research firm Gartner predicts that by next year as many as 25% of large companies will have dedicated data units to get the most out of digital data resources. Data scientists, who can use complex algorithms and computer programs to find correlations and trends in data, are in high demand; McKinsey found a shortage of between 140,000 and 190,000 in the U.S. alone. Also in short supply are managers who have a full understanding of the business context and who can interpret raw data and transform it into actionable information. The current shortage of such managers and analysts in traditional jobs is estimated at 1.5 million.
What governments need to do
The value of any resource depends heavily on the political, legal and economic ecosystem around it. This applies to digital data as well. There needs to be a carefully crafted system of policies to ensure that a country's data resources are used productively, with minimum waste or misuse, and that they are made available to businesses and entrepreneurs in a fair, competitive environment. A key challenge is to carefully implement policies that enable innovation and growth, while safeguarding against practices that are harmful to individuals (especially the most vulnerable members of the society).
Some emerging countries like Mauritius, for example, have already started exploring ways to incorporate big data in their innovation strategies to enable businesses to grow and to create jobs. Big data presents tremendous opportunities to low- and middle-income countries, which can leapfrog expensive legacy computer and communications systems and build new digital networks and businesses at significantly lower costs. However, their efforts are likely to face additional challenges of economic and human capacity nature compared to high-income countries.
The World Development Report 2016: Digital Dividends urges countries to work on what it refers to as the "analog complements" by "strengthening regulations that ensure competition among businesses, by adapting workers' skills to the demands of the new economy, and by ensuring that institutions are accountable" so that they are positioned to benefit from the digital revolution. Given how new the big data industry is, best policies and practices are still being debated by the pundits in countries that are leading the way. The following suggestions for initiatives and policies that governments may want to consider are based on the experiences and proposed approaches of countries further ahead in the digital adoption curve, and from the research conducted as part of the work on the OD4B Tool:
- Engagement:Governments may find it beneficial to engage in a national dialog with businesses and citizens with a focus on the productive aspects and benefits of data-enabled innovation (and by consequence economic growth), e.g. preventing and mitigating threats to public health, improving public service delivery – education systems, safety, as well as reducing fraud and abuse – rather than on the anxiety causing potential personal ramifications to consumers. To enable the development of innovative and sustainable data-driven business models, governments should engage industry associations, in collaboration with consumers, to develop ethical and responsible data use practices. The idea of trusteeship can be used as a guiding principle for preventing so-called "databuse". In essence trusteeship refers to an obligation on the part of businesses to handle consumer data honestly, securely, in a straightforward fashion, in a way that does not harm consumers and gives them reasonable information, control, and possibly "co-ownership" of the data they provide. There are also interesting models for public-private partnerships between the government and private sector, for example the Big Data Partnership by Enterprise Ireland.
Data Access and Quality:The value of data increases rapidly when data is shared, yet the costs of sharing are marginal. Thus policies should encourage the movement of data between organizations and functions. Free and easy access to certain types of government-collected data is of high value to businesses around the world. Open government data is public, non-personal, digital data that is explicitly licensed by the government for free (or low cost) reuse for any purpose, including commercial, and made easily available in a machine-readable format. It is one of the key sources of big data. By making it available, governments can significantly enhance the performance of businesses. A recent study by the European Data Portal confirmed that open data fosters digital transformation of organizations, especially in the areas of performance management, new digital business and customer touch points. Based on their research, as well as on the World Bank's own experience in helping over 25 countries to open their government data, to catalyze economic growth governments should publish digital data in machine-readable formats, following "open by default principle", and under an "open license". Actively seeking engagement with the open data users is of paramount importance for prioritizing those datasets which have high re-use value. Governments are advised to prioritize based on the local demand and evidence of value from other countries. Otherwise, they risk having idle open data portals and missed opportunities for deriving economic benefits for businesses and citizens.
Unfortunately, the quality of open data often creates a challenge. When we surveyed data-driven businesses in low and middle income countries, their number one problem was data quality. This translates into high economic costs for businesses to clean up the data to make it usable. Governments should promote common standards and procedures, including better use of metadata, to enhance data quality. Some industries like transport or construction have been developing sector-specific data standards, and governments can help promote these efforts.
- Data Literacy:Digital literacy has become a new foundational skill in the new economy, a skill children should learn starting from an early age. Lawmakers and regulators should gain fluency in benefits and risks of big data, so that they can make prudent, well-informed decisions and get the rules right. Businesses will benefit from education on the opportunities, risks and ethical use of digital data. And last but not least, consumers should have a reasonable level of data literacy, akin to an understanding of personal credit rating or how to use online banking. They will need to understand what sort of data is being collected and how and why it is being analyzed and used. Now these practices remain opaque and poorly understood, even by practitioners. Making policies known, clear and uncomplicated is becoming best practice.
- Policy:To encourage data-driven innovation and growth, while at the same time safeguarding against practices that are harmful to individuals, policies will need to address data ownership, security, trusteeship, liability for misuse, open data, data literacy, R&D, procurement, as well as data flows across borders (analogous to policies that guide the flow of goods). Developing a national strategic plan can help align public policies, resources and priorities for advancing digital data as a common good for the national welfare. A good example of this is Strategy for UK Data Capability that was introduced in 2013.
- Infrastructure:To realize the full benefits of a data-driven economy, affordable broadband is a must. I have met entrepreneurs in Africa with skills and ideas to build data-driven products that are not feasible given the current Internet speeds and prices in their countries. In addition to broadband, cloud storage and high-power computing facilities will be an important part of the digital economy infrastructure, though these can be secondary as businesses in emerging market economies can purchase these virtual services from international providers.
Open Data for Business (OD4B)
This week the World Bank, with support from the Center for Open Data Enterprise, released the Open Data for Business (OD4B) Assessment and Engagement tool. How can this tool help our clients? The purpose of the tool is to help governments catalyze the use of open government data by private sector. Last year we saw a growing number of studies that link open government data to economic benefits in terms of high ROI and contribution to GDP growth. However, we also saw that the act of opening up data alone does not necessarily results in private sector use, innovation and desired economic impact. A number of countries built open data portals, opened hundreds of datasets, and implemented open data policy, which resulted in only minimal use of the released data. We find that the roots of the low usage vary from country to country, with common issues being low awareness among potential users, mismatch between the types and levels of offered open data with the users' needs, data quality and timeliness, perceptions of reliability and sustainability, poor discoverability and metadata, lack of skills. In a recent article entitled "Out of the Box", The Economist also pointed to some of these demand side issues as a fundamental cause of the open data revolution's slow progress. These issues are likely to persist in the near future.
The OD4B tool can help governments identify and address these and other impediments, specific to private sector use in their local context, and assist them with setting up a sustainable path to increasing private sector use of open data. The tool consists of an introductory briefing on open data for business, a questionnaire for businesses, a roundtable engagement guide, as well as a scoring sheet to score some of the questionnaire responses. The questionnaire consist of three sections – general business information, use of government data, and the engagement channels. Questions focus on how businesses use government data, its importance to their business models, what are the barriers and how they interact with the government to get the data they need and share feedback.
The OD4B was designed with low- and middle-income countries in mind, based on the experience of countries that are further ahead in the process of opening up their data. We welcome interest from countries who wish to pilot the tool.
Download the Tool:
Open Data for Business (OD4B) Assessment and Engagement Tool
Use, share, and improve the OD4B Tool:
The methodology builds on Chapters 5 and 6 of the established Open Data Readiness Assessment (ODRA), the Roundtables with U.S. federal agencies and private sector led by the Center for Open Data Enterprise and featured in the U.S. Open Data Action Plan, and the World Bank research of data-driven businesses in LAC, Asia, Africa and ECA. The resulting methodology is made available as part of the Open Data Toolkit. It is work in progress. We welcome any feedback of suggestions in this online version of the methodology, which is open for comments.
For more information, please contact Alla Morrison, Digital Data Specialist, World Bank ([email protected])