At the Centre for Economics and Business Research (Cebr), we have conducted two studies looking into the value of big data to the economies of the United Kingdom and the Republic of Ireland – perhaps the only studies of their kind to date. It is difficult to estimate the true value of big data using traditional accounting norms, but you need to look at three things:
- The cost to collect it
- Its saleable value
- What you can earn with it
In the case of Internet trading companies and IT concerns, the value of the company is essentially the value of the data. But coming up behind them are traditional retailers, telecoms, banks and other companies that tailor their sales and marketing to customers based on their knowledge of customer behavior – insights that big data reveals at a high level of granularity.
This detail makes it possible to offer products and services based on relevance to the individual customer and in a specific context – or to put it in plain English, offering the right product to the right person at the right time, and in the right place.
So what sort of numbers are we looking at? Billions.
In the UK we identified GBP 216 billion (US$322 billion) worth of economic benefits by 2017 and 58,000 jobs. In Ireland we identified EUR 27 billion worth of cumulative economic benefits by 2017. The share of this aggregate cumulative benefit accounted for by gains in business efficiency is by far the largest at €15 billion. Innovation opportunities are projected to contribute €7 billion, whilst the increased prospects for small business creation are projected to be worth €5 billion.
In Ireland, a total of 6,000 deeply analytical roles are forecast to be demanded by businesses by 2018, with additional demand for wider managerial and analytical roles of 55,000, making a total of 61,000 new jobs.
The largest benefits will come from improved business efficiency (estimated in the Cebr report at GBP 149 billion in the UK). Big data will also drive innovations with an estimated value of GBP 24 billion while new opportunities for SMEs are projected to be worth GBP 42 billion. The industry sectors with most to gain are retail banking, manufacturing and retail – and there are also big gains projected for government, with perhaps GBP 2 billion to be saved through fraud detection and a further GBP 4 billion through enhanced performance management.
In Ireland, the largest 2012–17 cumulative economic efficiency gains are realized through customer intelligence (€7 billion) and supply chain management (€4 billion). Overall, the sectors within the Irish economy receiving the large majority of total data equity benefits are the manufacturing (€10 billion) and telecoms sectors (€7 billion), which both have high levels of product differentiation and data intensity, and account for a significant proportion of the Irish economy (33 per cent of total annual GDP).
Companies are increasingly aware that data is a potential asset for them. When they see the enormous ROI their competitors get out of big data, they will invest in their own. But for the moment, many are risk averse. To some extent this is because they still remember the dot-com bubble when pretty much everybody lost their shirts because they were unable to monetize the Web.
The new scenario
The large amount of data coming in from the public is making information highly valuable. Some people are already seeing a return, and you will soon find other companies wanting to follow.
In truth, the value of big data is largely predicated on the public’s continuing willingness to give data about themselves freely. If some external social pressure, scandal or regulatory obstacle means that the tap is turned off, many of the economic opportunities will dry up.
To avoid this scenario, companies should be doing what they can to demonstrate the value of big data applications to their customers now. If people see that the benefits massively outweigh any risks they will not want to see these benefits withdrawn – much as they continue to embrace Facebook and other social media platforms despite some recent concerns. Volunteering personal information on such a mass scale was unheard of not long ago – but it is what people want. From an entrepreneurial perspective, this is just too good to miss.