Data 4.0 – Rethinking rules for a data-driven economy

While much of daily life and economic activities came to a grinding halt at some point during the pandemic, the digital, technological transformation did not stop. Moore’s Law—an oracle of extraordinary technological advances predicting the doubling of transistors on a microchip every two years—is being outstripped by even more impressive growth in other digital segments, especially data.

Recent estimates showed that the world could generate more data in the next three years than over the past 30. The explosive growth of data owes not only to “human” activities, since as much as 40% of internet traffic is being generated by machines, between machines. This trend will likely continue and accelerate in the years ahead, with the number of networked devices in the world projected to reach a staggering 125 billion by 2030.

This can be overwhelming. It is. As citizens, many argue we live in an information, not a knowledge society, echoing Umberto Eco. In the private sector, firms are facing what some consider the “data paradox.” A recent Forrester survey of 4,036 high-level executives showed that 70% of data decision makers are gathering data faster than they can analyze and use it, yet 67% constantly need more data. The massive opportunity brought about by data-driven decisions is being hampered by capacity constraints. Sometimes, this challenge is further amplified by the predominantly “defensive” narrative on data governance and policy, which rightfully places paramount importance on accountability, transparency, and privacy.

Hence, the trillion dollar question: how can firms overcome this demand-capacity mismatch and adopt a more “offensive” strategy to maximize value from data, while ensuring safety and compliance? Our short answer: we need the right people, institutions, and culture to unlock and harness the data opportunity. Importantly, companies cannot do this alone. No more, no less.

1. Firms need to institutionalize data strategy at a human level

A starting point would be to formalize a Chief Data Officer (CDO) role: a real data scientist and visionary with clearly defined responsibilities. The CDO, with a supporting cast, would be responsible for

(a) designing, implementing, and overseeing a holistic data strategy (from collection to analytics to monetization) that informs business decisions and units;

(b) facilitating the free-flowing of data, data-driven insights, and data-related managerial decisions both internally and with external partners and regulators;

and (c) supporting HR in recruiting or upskilling/reskilling employees.

This centralized CDO role often overlaps with various positions such as the Chief Information Officer or the Chief Privacy Officer, and the Chief Economist and Strategy Officer at present. But it should combine all, in ways that capitalize on data for business and regulatory purposes and reduce efficiency losses and information siloes caused by jurisdiction or capacity problems, while ensuring privacy compliance.

In some cases, the successful creation of a CDO role should be a milestone by itself as, according to the above mentioned survey, 70% firms have yet to ensure boards’ buy-in on their data and analytics strategies.

2. Institutions need to rise to the challenge

With data as a new strategic asset, present and future economy incentivizes the smart and responsible generation, exchange, and use of high-quality, interoperable data. To this end, institutions—including data-related rules, regulations, agreements, and governing bodies within and across national borders—must be modernized.

Pioneer efforts such as the Digital Economy Partnership Agreement (DEPA) initiated 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 exploring the prospects and limits of next-generation data governance and of making data more widespread and open. The recently adopted global agreement on the Ethics of Artificial Intelligence led by UNESCO is among the most promising global effort to guide smart regulation towards healthy development of this field.

Nationally, governments should increase data and broader digital readiness. Internationally, some sort of “IMF or WTO of data” could be an asset, given the international nature of data flows for instance.

Could it help if data were to be recognized as a new economic sector? According to the International Standard Industrial Classification of All Economic Activities (ISIC) 2008 revision, a handful of data activities were considered subsectors of the economy within the broader “Information and Communication” sector. But it is clear that this cannot contain the depth of the economic, political and social change brought about by data in the last 14 years. A potential sector change could open vivid debates on widely accepted instruments, notably the definition of relevant markets. But ignoring these creates even more harm.

3. All stakeholders in the data ecosystems must embrace and promote a truly data-oriented culture

Latin America and the Caribbean, for instance, currently are not only facing a digital connectivity and investment gap compared to data-savvy countries, but also a data science skills shortage. These countries cannot wait until universities and formal education adapt to changes and offer 3–4-year programmes on the economics of data. They need 3-6 months training programmes on digital and analytical skills now. It’s the private sector, along with governments and education institutions, who can deliver that.

We know, the task is enormous. Transforming data from a raw material into a genuine factor of production and engine of innovation requires changes at the individual and organizational levels. And we did not get deeper into the different types of data, or the multiple directions it can flow among citizens, businesses andgovernments.

The good news is that COVID-19, with all its tragedy, has been a catalyst for this cultural change. For example, aggregated non-personal mobility data has been an effective area of public-private collaboration in pandemic response for several countries, an undertaking endorsed by the G20.

As 5G, AI, and other technologies reinforce both data supply and demand, this is the time to update our approach to data in a more forward-looking way. With the right people, institutions, and culture, we can build the economies of the future and use data as a driver of change for good.

Source: WEF