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You don't have to sell Michael Chui on the importance of big data. He knows the amount of data worldwide is exploding, that use of big data is becoming a key basis of competition and growth -- and that we're on the cusp of a critical shortage of data scientists.

Chui is one of the authors of what is arguably the most quoted source of information on big data, a 2011 report from McKinsey & Co. And now he's pushing the envelope on our understanding of a data-driven world with a new report that focuses on the economic potential of open data. "The open and liquid use of data is becoming more and more prevalent," Chui said. And that's a good thing.

Making data more "liquid" -- that is, open, widely available and sharable in machine-readable formats -- has the potential to unlock large amounts of economic value, the new report maintains. Think census data, utilities benchmarking, real-time train movements and even social media entries.

A Global Trend

"It's a global phenomenon," Chui told during a recent interview. "The governments in more than 40 countries around the world now have open data portals. But it goes way beyond these national initiatives. State and local governments are also making more data available, as are businesses in the private sector."

The report defines open data as accessible, machine-readable, available free or at nominal cost and with few limitations on its use, transformation or distribution. More and more people seem to be both monitoring and embracing the concept.

Just this week, Tim Berners-Lee, founder of the World Wide Web, characterized big and open data as the next big things. Berners-Lee was in London to promote his Open Data Institute (ODI) project, which encourages governments, individuals, companies, groups and organizations to be more open with the data they control to create a more efficient world.

But governments are still failing to provide "enough information in an accessible form to their citizens and businesses," according to the 2013 open data index published today by the Open Knowledge Foundation. The just released 2013 index gives the U.K. the best score for open data, followed closely behind by the U.S., Denmark, Norway and the Netherlands. Of the 70 countries assessed, Cyprus, St Kitts & Nevis, the British Virgin Islands, Kenya and Burkina Faso record the lowest scores.

Big Impact on Seven Sectors

McKinsey researchers focused on quantifying the potential value of using open data in seven sectors of the global economy: education, transportation, consumer products, electricity, oil and gas, health care, and consumer finance. "What we found is there is a lot of potential economic value in this data," explained Chui, a senior fellow of the McKinsey Global Institute in San Francisco.

How much value? Try $3 trillion in additional value annually. McKinsey researchers said that potential value would be divided roughly between the United States ($1.1 trillion), Europe ($900 billion) and the rest of the world ($1.7 trillion).

"Open data has traditionally been motivated by societal goals such as improving transparency," Chui said. "But it is important to recognize that by opening data, you also create significant economic value."

The report notes:

Value can arise in a number of ways, including equipping workers with the skills to raise productivity, allowing marketers to micro-segment populations more successfully, and boosting performance across segments by sharing benchmarks, market data, and best practice information. Consumers stand to gain by saving money through greater price transparency and using more information to make decisions."

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Of course, "many other things have to happen, beyond data just becoming open," Chui said. "First of all, you have to identify and prioritize and categorize the data that needs to be made open. One of the things we've observed is that sometimes institutions that can open up data simply open up the data that is easiest to open. While that is great, a quick hit, if you will, we also have to look at the overall value potential of the remaining data."

Secondly, he said, if you are going to make more data open, you need to market it: You need to make people aware that it is available. People have to use it, again and again, he explained. 

In addition, it takes people. "You need data scientists who can create visualizations and other transformations that make the data useful," he said. "And there are a host of policy issues, ranging from privacy and confidentiality to protection of intellectual property, not to mention the need to establish platforms and standards for the data itself."

Specific Benefits

How would this potential value manifest itself among various industries? Chui said the research found a number of advantages:

  • Education: 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: The greatest potential source of value is increased productivity and time saving for individuals from using open data to reduce travel times.
  • Consumer Products: Consumers could benefit from price transparency, as well as access to additional open data about products (the provenance of packaged food, for example) and suppliers (such as environmental and labor practices).
  • Electricity: 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 (e.g., streamlining permitting processes) and operations.
  • Oil and Gas: Openly sharing benchmarks can improve investing processes and operations. Sharing consumption data can help consumers make better-informed decisions about energy use (reducing natural gas consumption, for instance).
  • Healthcare: 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: In banking and insurance, there are significant opportunities to increase value through the 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 business (worldwide, half of adults have no banking relationships).

What do you think about open data? Do politicians, businesses and the public in general really understand the benefits -- or are they still struggling to grasp the concept?