The drive to make data open—free to use, reuse, and redistribute—is not new, but it’s changing by finding new potential business applications as data technology evolves. Companies are finding that making their data open enables complementary businesses to develop around that information. That openness to other businesses can enhance companies’ own businesses and increase overall transparency. Recent growth in the power of data manipulation, visualization, and storage technologies continues to transform the whole concept of open data, spurring business innovations from medical diagnostics1 to expanded job opportunities.
The open-data movement, a loosely affiliated group of public officials and academics whose early adoption of open principles and protocols for scientific data gave the movement its start, now counts private-sector businesses among its supporters.
Major adopters of open data
Broadly speaking, the move toward the use of open data has split among three main groups, each of which is rapidly evolving open data’s uses. Governments and public bodies continue opening up vast amounts of data. Public open-data sites such as data.gov.uk (the open government data portal of the United Kingdom) and data.gov (the open government data portal of the United States) now contain many thousands of data sets. Some address topics with huge applications to both public- and private-sector audiences—such as supplier-level public-spending data—and some, like, say, data on tree species distribution in national forests, have a more specialized appeal. Some companies now make selected data available to enhance their business performance, such as Nike’s sharing of data to promote transparency in the company’s supply chain.3
Companies have also begun sharing detailed transaction data to help customers make complex market comparisons and manage their consumption. Some banks let customers download detailed transaction data so customers can analyze their spending and make meaningful comparisons between how much their accounts cost versus the competition’s.
Direct and indirect benefits
Successful uses of open data expand business opportunities and improve customer engagement in new and innovative ways, often by enabling complementary businesses and services to develop. For companies considering how to harness the power of open data so they can boost performance, senior management should consider the following points. Open data offers companies with physical outlets significant opportunities to better understand their customer bases.
In the United Kingdom, for example, government open data, which would otherwise be inaccessible, enables retailers to profile their customers in great detail. It can help answer such questions as, What types of jobs do customers do? Do customers own their own houses? How much do customers earn? When combined with proprietary information such as point-of-sale data, loyalty card data, and anonymized mobile phone data, open data can create market-shifting opportunities for gaining valuable customer insights. And that could lead to a data-rich analysis that guides decisions about which items to stock, what to promote, and what to charge, which can represent an advantage over competitors that don’t have the same array of information to back their decisions.
Offering selectively open data does more than project an image of corporate social responsibility. As companies compete digitally, those that create ecosystems will likely generate the largest profits. Think of Amazon and the retail ecosystem it created by opening much of its data to collaborative competition—a sort of “co-opetition”—that allows other sellers to offer merchandise on Amazon sites.4 Opening data and platforms is part of the path to creating ecosystems. Nike started publishing open data as a means of promoting its sustainability credentials and then developed a publicly available open-data app based on its in-house index on the sustainability and environmental impact of materials used in its products to be used by other designers.
That approach is currently the least developed of the three types of open-data use, and it’s understandable that senior management might worry that company data could be used by competitors or could cast the company in a bad light. Those are indeed valid concerns, but the private sector continues to mirror government and public organizations in increasing its use of open data. Transport for London, the publicly funded organization that runs London’s underground trains and buses, admits it took a leap of faith in 2007 by making its real-time train, bus, and bike data openly accessible to app developers.6 But the vast array of third-party apps and other services that that decision spawned has transformed passengers’ experiences for the better while costing the organization very little. Estimates put the annual value of time saved through these apps at $83.7 million.7 Other companies and organizations could launch similar initiatives and realize similar benefits. The practice of giving customers access to financial and billing transaction data is well established—and expanding.
Many banks and telecom companies now allow customers to download their full, personal transaction data in a standard format, such as Excel or .csv to see how they’re spending their money. In the United Kingdom, work is well under way to standardize the banking data interface, which means customers will be able to access real-time transaction data from many financial products—most likely by way of third-party-designed apps hosted on their personal devices. This continues to offer greater insight into consumer behavior, which in turn enables those banks and telecoms to improve the customer experience and possibly lower costs.
Opportunities outweigh threats
Business leaders might first see the increasingly open nature of company data as a threat, but those who fail to adapt may be missing potential opportunities. As consumer expectations grow beyond access to personal transaction data and the options consumers have for its use, companies that don’t get on top of the open-data trend risk being outpaced by competitors. Even though embracing open data in specific contexts may appear to sacrifice proprietary competitive advantage, we already know that information is power, and companies that can harness vast amounts of data could emerge as genuine outperformers.
Compliments of Alix Partners – a member of the EACCNY