McKinsey Global Institute Report on Unlocking the Value of 'Open Data'

The McKinsey Global Institute has just release a new report entitled, "Open data: Unlocking innovation and performance with liquid information."

According to the report, 'Open Data' has great potential to empower citizens, change how government works, and improve the delivery of public services. It may also generate significant economic value, according to a new McKinsey report.

Their report suggests that 'Open Data' can help unlock $3 trillion to $5 trillion in economic value annually across seven sectors of the global economy, i.e. education, transportation, consumer products, electricity, oil & gas, health care, and consumer finance. The report provides the following information about potential benefits for the seven domains:

Education - Using open data in education could enable approximately $890 billion to $1.2 trillion in value annually. The largest potential benefit comes from using open data to improve instruction by identifying the most effective strategies and tools for teaching specific skills and knowledge; students who acquire higher skills can expect higher lifetime earnings.

Transportation - It is estimated that $720 billion to $920 billion in value per year could be enabled by the use of open data in transportation. The greatest potential source of value is increased productivity and time saving for individuals from using open data to reduce travel times. Additional value can be gained by using open data to improve the efficiency of public transportation and freight operations,
through adjusting train and bus schedules to better match demand and optimizing operations based on industry-wide benchmarks. Open data can also inform infrastructure investments.

Consumer Products - McKinley estimates that $520 billion to nearly $1.5 trillion in value per year could be enabled through the use of open data in consumer products. Consumers could benefit from price transparency, as well as access to additional open data about products and suppliers.  Open data can help manufacturers and retailers generate sales and increase loyalty, by more finely segmenting consumer types and customizing store layouts and assortments for specific neighborhoods.

Electricity - Use of open data in the generation, distribution and consumption of electricity could help bring about value of as much as $340 billion to $580 billion annually. Significant investments in technology and operations will be required to capture the value from conservation and improved operations. By providing consumers with detailed data about their energy consumption and showing how other similarly situated consumers or businesses use electricity, customers can discover energy-efficiency opportunities. Utilities can also benefit from sharing benchmarking data to improve project management  and operations.

Oil & Gas - Across the oil and gas value chain, open data could help enable $240 billion to $510 billion a year in value, by improving investment decisions about where to explore for new reserves and build downstream facilities. Openly sharing benchmarks can improve investing processes and operations. Sharing consumption data can help consumers make better-informed decisions about energy use. Many benefits depend on companies sharing data that has been regarded as proprietary.

Health Care - Previous McKinsey research examined the potential impact of more open and 'liquid' data in health care and identified $300 billion to $450 billion in annual value that could be unlocked in the U.S. alone. Potential sources of value include enabling people to take an active role in disease prevention and treatment; helping providers determine what is the most timely, appropriate treatment for each patient; matching patients with the most appropriate providers; ensuring the cost effectiveness
of care; and identifying new therapies and approaches to delivering care.

Consumer Finance - There are three areas of consumer finance: banking, insurance, and real estate. Though the potential impact in these three areas is not sized comprehensively, McKinsey estimates that $210 billion to $280 billion can be captured annually from a few of the largest examples considered.  In banking and insurance, there are significant opportunities to increase value through use of open data to improve product design and underwriting. In particular, open data can be used to assess risks for consumers who do not have a credit history, opening up a large potential source of new. Open data can also be used in fraud prevention and detection: affiliations revealed in social media connections have been used to uncover insurance fraud rings. Consumers can also use open data to choose among a confusing array of complex financial products

With regards to the potential value, the report estimates that it would be divided roughly between the U.S. ($1.1 trillion), Europe ($900 billion) and the rest of the world ($1.7 trillion).

Although the 'open data' phenomenon is in its early days, McKinsey's researchers see a clear potential to unlock significant economic value by applying advanced 'big analytics' to both open and proprietary knowledge.  It has already given rise to hundreds of new entrepreneurial businesses.

Although more than 40 countries—from every region of the world—have established open data initiatives, there is  still much work to be done by governments, companies, and consumers to promote economic development, spark innovation, and find ways to make government work better. 

Governments also need to continue to cultivate the growth of a vibrant open data ecosystem and craft new policies designed to protect privacy and intellectual property of both consumers and companies.

To get your copy of  the full report, go to the web site of McKinsey & Company.