Using Internet Related Economic Development Goals to Drive Open Data Strategy

January 13, 2015 Dennis D. McDonald

Overview

How do you plan an open data program when data that link open data program investments and positive economic impacts are weak or nonexistent? In this paper I discuss using Internet development activities as a possible guide to help identify where to make open data investments. While a recent McKinsey report on Chinese internet development is used as the basis for this discussion, this approach might also be relevant elsewhere as an aid to making open data program planning decisions.

Introduction

In How Are Open Data Programs Related to Investment Flows in Developing Countries? I discussed a recent EURODAD report that identified several areas relevant to open data policy that can be impacted by availability of investment resources. These areas includeaccountability and transparency, impacts on domestic politics, and contributions to sustainable development. The EURODAD report left for future volumes a discussion of how to measure the impacts these investments actually have in developing countries.

This “impact measurement” question is important. Organizations that invest in developing countries want to make sure investment money (a) stays in the receiving country and (b) has a positive impact on the people of the receiving country.

Similar questions are important for how to decide what types of open data programs have the most positive impact on the target population in a developing country (or, for that matter, in developed countries). Planners and funders want to ensure that making government supplied data open and accessible for unrestricted use and exploitation will, in fact, have a positive impact on their citizens.

One challenge is that the impacts, costs, and benefits of open data programs are dependent on availability of usable data as well as an infrastructure to support access to and use of the data. It’s also difficult to predict where — or when — data provided by an open data program will actually be used.

China as a Model for Open Data Program Planning

Despite such measurement and capacity challenges, there is still a need for planning to take place in connection with open data programs, even in situations where little direct information may exist to link users (and beneficial data usage) with open data programs.

One open data planning question concerns where in a nation’s economy to make open data investments. The approach suggested here is to focus open data program investments on economic, societal, or business areas that are known to be already undergoing rapid change or development.

I was reminded of this by a recent McKinsey report China’s rising Internet wave: wired companies. One of the most significant statements from the report is this:

China’s industrial expansion will probably slow down from its levels during the past decade, and companies are struggling with excess capacity. Many are looking to the Internet for a new set of tools to engineer productivity improvements.

Perhaps we can look to where changes are occurring in China’s internet economy to help guide decisions on open data program investments. Would it be possible to at least partially align an open data development strategy with the business or economic sectors where Internet-related developments are already helping to grow the economy?

Even though the example being used here is China I believe thisdiscussion is relevant to other developed and developing economies as well.

Internet Impact Areas

The McKinsey report describes five types of impacts that increasing use of the Internet is having on Chinese competition and market dynamics:

A burst of digitally driven productivity
Greater access to financing and lower risk
A growing base of consumers and richer interactions
Lower barriers to innovation
New competition as the Internet empowers entrepreneurs and small-business

Below are speculations on what linking open data program investments with the above impact areas might mean in a rapidly developing Internet economy like China’s.

1. A burst of digitally driven productivity

As early adopters of big data and “Internet of Things” applications in China the McKinsey report mentions auto industry supply chain and logistics, chemical industry inventory and shipping planning, real estate, and healthcare.

When government agencies are looking at ways to open up data for public use and exploitation, perhaps they should first look at these industries and applications as fertile ground for planning. Relevant questions include:

Which business and industrial sectors are adopting internet based technologies?
Which sectors would benefit from faster internet adoption?
Which sectors would benefit from access to better data related to supply chain or resource issues?
Which sectors already have the infrastructure and capacity to take advantage of data accessed from open data programs?

2. Greater access to financing and lower risk

The McKinsey report sees the adoption of Internet tools as enhancing and expanding access to financing for both investors and consumers. Better data can improve estimates of risk and therefore reduce the interest rates lenders charge. Open data planning questions include:

Are there current or historic data that would assist these industries that could be provided by the government as open data (or as products or services based on open data)?
Would better access to public information about companies streamline any aspect of the lending or business to business processes (e.g., data on size, management structure, credit status, location of vendors, location of business partners, description of competitors, etc.)?
Would better public access to corporate financial or tax information reduce fraud or industry corruption?

While the regulatory systems of the US and China are very different, similar issues regarding the benefits of improved access to business and corporate financial information are behind the recently passed Data Act in the U.S. One direct beneficiary is the US Federal Government which can increasingly automate regulatory processes involving financial data submitted by public companies. Additional benefits accrue to public and commercial uses of submitted data since pre-digitized data are easier to work with and, where appropriate, easier to exploit for commercial or social purposes.

3. A growing base of consumers and richer interactions

The McKinsey report mentions China’s increasing use of e-commerce technologies to grow business. It cites applications in both business-to-business and business-to-consumer areas including chemicals, auto industry, advertising, and healthcare. Are there ways open data programs can benefit e-commerce, assuming government agencies possess data that could be useful to e-commerce innovators?

For many types of organizations a leap into e-commerce is viewed as perilous if that move involves significant disruption of existing business models or distribution systems. Open data program planning could take such issues into account, for example:

Identify businesses with e-commerce potential and establish open data marketplaces to support these industries.
Provide data, training, and processing support to entrepreneurs interested in developing products or services to support e-commerce initiatives.

4. Lower barriers to innovation

The McKinsey report describes innovative uses in China of crowdsourcing for market feedback, creation of new service-oriented business models that rely less on hardware that on service sales, and geodata dependent apps.

Do these examples represent how businesses and business models are increasingly data-dependent? That is, are data of all kinds not only supportive of product development but are also increasingly important in all segments of the business cycle?

What are the business areas that are important to the country’s own “development goals”? Education? Health? The environment? Transportation?

Prioritizing by “sector” has long been a key feature of program funding decisions for developing countries. The relevance of such sectors to open data program planning should come as no surprise.

The McKinsey report adds the important element of focusing on Internet and web related development as being key elements in social and economic change. Making government data accessible via the web or via web-based APIs then leads us to evaluate the condition of the country’s web infrastructure and its capacity to support new data-based products and services.

This is another way of saying that, when it comes to planning and managing an open data program, regardless of whether the program is in developing or a developed country, you don’t just think about making the data available, you also have to think about making the data useful; see Looking Beyond Open Data Availability to Managing Open Data Value.

5. New competition as the Internet empowers entrepreneurs and small-business

The evolving Chinese Internet economy described by the McKinsey report is one where old business models are disrupted and small and midsize firms can potentially compete with the established “big guys.”

Making open data investment decisions in alignment with such goals implies the existence of a formal or de facto industrial policy at the national or regional level. Such a policy can help guide open data plans by identifying business or social sectors in need of innovation due to a lack of competitiveness, low wages, human resource shortages, or other development issues.

Whether or not you believe that the government should be picking “winners or losers” is beside the point here. We want investments and open data to have an impact. If the Internet is helping to grow new business models and new employment opportunities, it should make sense for governments to pay attention to such factors in open data planning.

Conclusions

Note that I haven’t addressed program governance, government transparency, or political change as a rallying point for open data. That was intentional. All I’ve really done is to discuss the proposition, “If you want your open data program to help your country’s economy, you need to focus on business or social sectors that will have the most likelihood of having an impact on your economy.”

In the case of the McKinsey China report, the focus is on the Internet as an “engine” for economic development. It’s probably no surprise that there are clear parallels between developed and developing countries in terms of the potential for improved Internet infrastructure and data access.

Even in “developed” countries there are still significant challenges in developing open data programs that deliver timely data in a form and with features that enhance usability.

While there may be significant capacity issues related to Internet and data access in developing countries, it’s impossible to ignore the disruptive and competitive landscape changes the growing Internet use offers wherever existing industries are adopting — or are being threatened by — web based developments. It make sense for at least some of open data program planning to reflect those realities.

www.ddmcd.com