Rethinking the Rules in a Data-Driven Economy

During the pandemic, much of daily life and the economy came to a halt. However, the digital and technological transformation did not stop. Moore's Law, an oracle of extraordinary technological advances that predicts the doubling of transistors on a microchip every two years, is being outpaced by even more impressive growth in other digital segments, particularly data.

How to handle the "data paradox"

Recent estimates showed that the world could make more data in the next three years than it did in the last 30. The rapid growth of data isn't just because of "human" actions. Up to 40% of internet traffic is made by machines talking to other machines. This trend is likely to keep going and speed up in the years to come. By 2030, the world is expected to have 125 billion networked devices, which is a huge number.

This can be hard to handle. It is. Many citizens agree with Umberto Eco that we live in an information society, not a knowledge society. In the private sector, companies are dealing with something that some people call the "data paradox." A recent survey by Forrester of 4,036 high-level executives found that 70% of those who make decisions based on data collect it faster than they can analyse and use it, but 67% of them always need more data. Capacity limits make it hard to take advantage of the huge opportunity that comes from making decisions based on data. Sometimes, this problem is made worse by the fact that most stories about data governance and policy are "defensive," even though accountability, transparency, and privacy should be the most important things.

So, the trillion-dollar question is: How can companies get around this mismatch between demand and supply and adopt a more "offensive" strategy to get the most value out of data while making sure it is safe and legal? Our short answer is that to unlock and use the data opportunity, we need the right people, institutions, and culture. Companies cannot do this on their own. No more, no less.

How to unlock and use the data opportunity right now

1. Companies need to put their data strategy in place at a human level.

Formalizing a Chief Data Officer (CDO) role would be a good place to start. A CDO should be a real data scientist and a visionary, with clear roles and responsibilities. The CDO, along with other people, would be in charge of

a) Creating, implementing, and managing a complete data strategy that helps business units and decisions (from data collection to data analysis to data monetization);

b) Making it easier for data, insights based on data, and management decisions based on data to flow freely both inside the company and with outside partners and regulators;

c) helping HR find new employees or train or retrain old ones.

This centralised CDO role often overlaps with other positions, such as the Chief Information Officer, the Chief Privacy Officer, and the Chief Economist and Strategy Officer. But it should combine everything in a way that makes the most of data for business and regulatory purposes, cuts down on efficiency losses and information silos caused by problems with jurisdiction or capacity, and protects privacy.

In some cases, the successful creation of a Chief Data Officer (CDO) role should be a milestone in and of itself, since, according to the survey mentioned above, 70% of companies still haven't gotten their boards to agree with their data and analytics strategies.

2. Institutions need to step up and do their jobs.

With data as a new strategic asset, the economy of today and tomorrow encourages the smart and responsible creation, exchange, and use of high-quality, interoperable data. To do this, institutions must be updated. This includes rules, regulations, agreements, and governing bodies that deal with data, both inside and outside of national borders.

Pioneering efforts like the Digital Economy Partnership Agreement (DEPA) started by Singapore, Chile, and New Zealand, the EU's General Data Protection Regulation (GDPR), and the World Economic Forum's Data for Common Purpose Initiative (DCPI) have been looking into the possibilities and limits of next-generation data governance and making data more widely available and open. One of the most promising international initiatives to use smart regulation to support the healthy growth of this field is the recent global agreement on the ethics of artificial intelligence that UNESCO put together.

On a national level, governments should improve their data and digital readiness in general. Internationally, some kind of "IMF or WTO of data" could be helpful, since data flows happen all over the world, for example.

Could it be helpful to think of data as a new economic sector? According to the 2008 revision of the International Standard Industrial Classification of All Economic Activities (ISIC), a few data-related activities were thought to be subsectors of the "Information and Communication" sector. But it's clear that this can't show how much data has changed the economy, government, and society in the last 14 years. A possible change in sector could spark lively discussions about widely used tools, like how to define relevant markets. But ignoring these only makes things worse.

3. All participants in the data ecosystems must support and spread a culture that is truly data-driven.

Latin America and the Caribbean, for example, have less digital connectivity and investment than countries that are good with data. They also have a shortage of people who know how to work with data. These countries can't wait until universities and formal education catch up with the times and offer 3- to 4-year programmes on the economics of data. They need programmes that teach them digital and analytical skills over the next three to six months. This can be done by the private sector as well as by the government and educational institutions.

Data as a change agent

We know that the job is huge. Changes at the individual and organisational levels are needed to turn data from a raw material into a real factor of production and an engine of innovation. And we didn't talk more about the different kinds of data or the many ways it can move between people, businesses, and governments.

The good news is that COVID-19, with all of its terrible events, has helped bring about this change in culture. For example, aggregated non-personal mobility data has been a good way for the public and private sectors to work together in several countries to respond to pandemics. The G20 has backed this effort.

Since 5G, AI, and other technologies are making both the supply and demand for data stronger, now is a good time to change how we think about data in a more forward-looking way. We can build the economies of the future and use data as a force for good if we have the right people, institutions, and culture.