In this blogpost, we look at what policymakers need to factor in when evaluating interventions aimed at unlocking the value of data. Responsible data use and data sharing can create economic gains for society – in 2019, an independent assessment of the ODI’s work on data trusts noted how sharing data can create value by enabling new innovations, raising productivity, and increasing competition. The UK government’s National Data Strategy aims to ‘unlock the value of data’ by creating an environment where data is usable, accessible and available across the economy. But government interventions often come with associated costs or trade-offs – whether that’s a cost to the government (for example, through funding subsidies), or a trade-off between impacts or benefits for different sectors of the economy. Unlocking the value of data in the UK economy will require balancing different considerations and trade-offs to ensure that these costs don’t outweigh the benefits. To do this, policymakers need to make reasonable estimates about the total value to be unlocked for society, and the costs of unlocking that value. This is important for policymakers thinking about how different interventions – such as choices about government investments or reforms to the data protection regime – can help or hinder value creation. But quantifying the potential value of increased data sharing and data use to the economy is a complex challenge.
Quantifying the value of data sharing
One way the value of data sharing and data use can be measured is by looking at the benefits that data collectors, data intermediaries and data users may gain from it directly. For example, a 2017 study conducted by Deloitte found that by sharing data in an open way, Transport for London (TfL) saves £1 million per year in customer support costs that they would otherwise have to bear. However, this is only one part of the economic benefits of TfL sharing the data they steward. The same study found that by using apps that combine this data with other resources passengers save time worth £70m–£90m on average per year. The TfL example illustrates that the value that data holders may get from their use of data is likely to be lower than the value that same data may generate for wider society when opened, combined with other datasets or re-used in different contexts. The key concept here is ‘opportunity cost’ that is, the potential benefits that are lost, rather than just the ones that are gained. In the TfL example, the opportunity cost for TfL of keeping the data closed was around £1 million per year, but the opportunity cost for society was 70 to 90 times that. Crucially, there is no sure way to quantify this opportunity cost in advance. TfL, a public body, opened its data to maximise societal benefit. However, under normal market conditions, profit-driven stakeholders may not have incentives to share or open their data for the public good. As a 2019 OECD report notes, data access and sharing normally creates far more value for the wider economy than for individual data holders, who are the ones with the power to make the data accessible. In other words, when it comes to the data, its value is more than just the sum of its parts – and most of that value might not be for by those who control access to the data.
It’s not just numbers that count
When quantifying the potential value of data and data sharing for the economy, looking at what costs it can reduce for specific organisations or how it can increase their economic output offers only a partial view. Assessing the economic case for government intervention also requires a qualitative understanding of how increasing access to data can create value for multiple stakeholders and for the wider economy. Approaching it in this way can allow policymakers to develop theories of change for assessing what kinds of government interventions are more likely to have a net positive impact on the economy and society. For example, when TfL shared data, there were at least three ways in which this added value to the economy:
- by saving internal resources from costs associated with customer services, by allowing others to to develop customer-orientated services and innovations
- by creating new business opportunities for intermediates who use the data to develop new products and services
- by creating efficiencies for end-users through informing better decision-making
By looking at how data becomes valuable, government interventions can be designed to create the right incentives and set up the right institutional frameworks to unlock the potential value of that data. For example, several of the measures outlined in the open consultation ‘Data: A new direction’, published by the Department for Digital, Culture, Media and Sport, point towards reducing the costs incurred by organisations to collect, use and share data. However, cost-cutting is not the only way in which data sharing can be incentivised or supported. Our data institutions programme is exploring how the creation of independent bodies in charge of data stewardship can increase responsible data sharing and use, and therefore unlock more value.
The hidden costs of data sharing
It’s also important for policymakers to look beyond the immediate value that can be unlocked from data, and to take into account the indirect and long-term consequences of changes to the way data is collected, shared and used. For example, while making it easier for data stewards to share data may allow some consumers to benefit from better service offerings, doing so may also increase the risk of certain social groups being unfairly denied opportunities or targeted for surveillance. From an economic perspective, although increasing data sharing generally leads to better economic outcomes in the short term, in the medium or long term, collective harms may damage public trust. A report by Frontier Economics for the ODI found robust evidence that trust is a key determinant of data sharing, and therefore also of value creation from data. Interventions that weaken trust in data ecosystems in the short term also reduce the amount of value that may be generated from data sharing in the future, by reducing willingness to share data in the long run. So it is important that policymakers trying to unlock the value of data in the economy factor in the potential ways in which interventions may directly or indirectly affect public trust in data sharing in the medium and long term too.
Even though estimating the potential value of data sharing and data use in the economy is difficult, it’s something that policymakers need to include in their assessment of proposed policy interventions. Here are some of the key reports in this area that we’re aware of, and the estimations they make. Is our list complete? What else should be included? Let us know by emailing [email protected] or by getting in touch on Twitter @ODIHQ.
McKinsey (2021), Financial data unbound: the value of open data for individuals and institutionsEstimates that a broad adoption of open data ecosystems in the finance sector can have a positive impact of 1–1.5% of GDP in the UK, and up to 5% of GDP in developing countries. It’s referenced in the OECD article ‘Open data for finance as an emerging source of GDP growth’Frontier Economics (2021), Economic value of trust in data ecosystemsFinds that there is robust quantified evidence that greater trust consistently leads to increased data sharing, a 25% increase in trust is expected to unlock between 0.7% and 2% of GDP in value.European Commission (2020), The Economic Benefits of Open DataConsiders that open data contributes between 0.4% and 1.6% of Europe’s GDP.The ODI and the Bennett Institute for Public Policy (2020), The Value of DataDoes not quantify the potential value of data, but finds that access to data is intrinsic to its value. Generally speaking, the more accessible data is, the greater value it has.OECD (2019), Enhancing Access to and Sharing of DataSuggests that data sharing can create 20 to 50 times more value for the wider economy than the value it creates for data stewards. London Economics (2019), Independent assessment of the Open Data Institute’s work on data trusts and on the concept of data trustsNotes that sharing data can create value by enabling new innovations, raising productivity, and increasing competition.Zhu et al, Science Direct (2019), Benefits of the free and open Landsat data policyReviews existing evidence on the benefits of sharing satellite imagery data openly in the US.Loomis et al, Science Direct (2019), Valuing Geospatial Information: Using the Contingent Valuation Method to Estimate the Economic Benefits of Landsat Satellite ImageryEstimates that sharing Landsat satellite imagery collected by the US Government has created a benefit of US$1.8 billion for US users.HM Treasury (2018), Getting smart about intellectual property and intangible assetsEstimates that knowledge assets in the public sector could generate £5 billion financial, economic, and social benefits per year at leastHM Treasury (2018), The economic value of data: discussion paperCites research that estimates that firms adopting data-driven decision-making can increase their output and productivity by 5–6%.European Commission (2017), Enter the Data Economy: EU policies for a thriving data ecosystemEstimates that limited use of big data analytics solutions by the top 100 EU manufacturers could boost EU economic growth by 1.9%. Some of these benefits are only realisable through having access to data held by others.Deloitte (2017), Assessing the value of TfL's open data and data partnershipsEstimates that sharing the data held by TfL saved the data holder £1 million per year, contributed £12–15m of gross value added per year to London’s economy through facilitating the work of data intermediaries, and saved passengers’ time £70–90m per year by allowing them to plan their journeys better. The ODI (2015), Open data means businessAnalysed 270 UK companies that use, produce or invest in open data as part of their business. Together, these companies have an annual turnover of over £92bn, and over 500k employees.The ODI (2015), The economic impact of open data: what do we already know?Surveys existing literature on the economic impact of open data.World Bank (2014), Open data for economic growthReviews existing evidence of the economic impact of open data, and recommends governments to consider how to use open data to enhance economic growth.Department for Business, Innovation & Skills (2013), Independent Shakespeare review of public sector informationBased on the ‘Market Assessment of Public Sector Information’ report developed by BEIS and Deloitte. States that the economic benefits of releasing just public sector information to the UK are ‘conservatively’ estimated to be around £6.8bn a year, and recommends developing a National Data Strategy for economic growth that encompasses public sector information.Department for Business, Innovation & Skills; Deloitte (2013), Market Assessment of Public Sector InformationEstimates that the value of public sector information to businesses, consumers and the public sector in 2011/2012 was approximately £1.8 billion, but it could have much larger downstream impacts through its use and re-use.McKinsey (2013), Open data: unlocking innovation and performance with liquid informationEstimates that open data can help unlock US$3 trillion to US$5 trillion in economic value annually, worldwide.