‘Liquid’ Data Seen as Engine of Economic Growth
The free flow of data, especially government data, on open platforms could generate more than $1 trillion in annual U.S. economic activity, according to a recent global survey. That forecast depends however on greater investment in data analysis tools and regulatory safeguards that would make data more “liquid.”
The report released earlier this month by global management consulting firm McKinsey & Co. predicts that global open data platforms could generate more than $3 billion annually in “additional value” for key economic sectors. Of that, an estimated $1.1 trillion would benefit the U.S. economy.
McKinsey said it sought to quantify the potential value of open data on the seven sectors: consumer products, education, electricity, finance, health care, oil and gas exploration as well as transportation. The likely benefits of open data include increased efficiency, development of new products and services along with cost savings, convenience, higher-quality consumer products.
“The benefits of open data can be self-reinforcing: they will increase as individuals perceive the advantages and help to improve the accuracy and detail of the information available,” the report concluded.
“However, this cycle can gather momentum only if private industry and public agencies cultivate a vibrant open-data ecosystem and implement policies to protect stakeholders.”
The report also stressed that open data “enhances the potential value of big data analytics” by combining information from public sources with proprietary data. Among the enhancements identified in the report were:
- Transparency needed to uncover information that could be used to make better business and governing decisions.
- Exposing variability and enabling experimentation that could lead to innovation.
- Segmenting demographic groups to tailor applications like targeted advertising.
- Augmenting human decision-making.
- Defining new product, services and business models.
“About one-third of the estimated potential value from open data comes from benchmarking, an exercise that exposes variability and also promotes transparency within organizations,” the data analytics section of the report added.
Still, data privacy and security issues remain, obstacles that regulators say may require new rules of the road on how open data is used. Hence, the McKinsey report acknowledges that open data creates new risks, including “loss of control over confidential information.”
For example, “Opening information such as electricity use or school performance to create aggregated views of population behavior raises serious concerns among consumers who fear that their data will be tied to them and could harm their economic or social standing,” the report warned.
Hence, the study concludes that the government should act as a regulator as well as a source of open data. Indeed, regulatory agencies like the U.S. Federal Trade Commission have cracked down on data brokers that have been slapped with seven-figure fines for discriminatory use of open data to offer, for example, higher-interest credit cards to minorities.
“Thoughtful policies which protect intellectual property and ensure privacy and confidentiality will be needed to give consumers and institutions confidence to move forward with open data,” the study stressed.
The authors also call for greater investment in big data tools needed to collect and create open platforms for responsibly sharing information along with new analysis tools to glean insights. These tools along with new standards would help speed the flow of open data, or what the report refers to as “liquid information.”
Weekly reports of new venture funding for big data startups along with mergers and acquisitions indicate that those investments are being made.
Michael Chui of the McKinsey Global Institute, which oversaw the open data study, said open, or ” liquid” data would be accessible to more analysts and institutions. Moreover, machine-readable data would also leverage growing computer processing power. Chui cited the release of government weather data that can be used by airlines to plan fuel-efficient routes or by the agricultural sector when deciding what crops to plant and when.
“I think were going to continue see more and more datasets being made more open, data becoming more liquid,” Chui predicted. “You get a powerful multiplier effect when you have more data being made more open.”
That multiplier effect translates into more economic value being created by open data, he argued.