Building Trust: The Role of Regulation in Unlocking the Value of Big Data

SCOTT BEARDSLEY LUIS ENRIQUEZ FERRY GRIJPINK SERGIO SANDOVAL STEVEN SPITTAELS MALIN STRANDELL-JANSSON McKinsey & Company “Data is a precious thing. . .” and “...that’s why I’ve called data the new oil. Because it’s a fuel for innovation, powering and energizing our economy.”1 These were the words of Neelie Kroes, Vice-President of the European Commission responsible for the Digital Agenda, when speaking about the value of big data earlier in 2013. As Kroes noted, data comprise a fuel we have only just begun to tap. This “new oil” is certainly plentiful. Trillions of bytes of data are generated by companies that capture information about their customers, suppliers, and operations. Networked sensors and software embedded in devices and appliances are further energy generators, as are the growing volumes of media content. These sources of data do not even include the billions of individuals around the world generating the same fuel on their smartphones, personal computers, and laptops. And the volumes of data are exploding. McKinsey recently estimated that the data collected globally will grow from some 2,700 exabytes in 2012 to 40,000 exabytes by 2020.2 To put this into context, a single exabyte of data equals a hundred thousand times all the printed material of the Library of Congress. Definitions of big data vary greatly. Rather than put a number on what qualifies as “big,” McKinsey defines it as datasets so large that typical database software tools are unable to capture, store, manage, and analyze them. Such a definition allows for the fact that the size of datasets regarded as “big” will also grow with the advance of technology.3 Whatever the precise definition, big data is widely acknowledged to create value in four ways. It creates greater transparency by making more and better information available more quickly. It helps organizations create highly specific segmentations, enabling them to tailor products and services more precisely. It helps improve decision-making by providing better tools for analysis. And it supports innovation in the form of new products and services. Big data can create significant value for the whole economy. McKinsey research shows that companies that use big data can deliver productivity and profit gains that are 5 to 6 percent higher than those of competitors. The private sector is not the only beneficiary, however. Big data can also enhance productivity and effectiveness of the public sector and create economic surplus for consumers. For example, the McKinsey Global Institute estimates that US healthcare expenditure could be reduced by 8 percent by using big data to drive efficiency and quality. No wonder, then, that governments and political institutions are promoting big data on their agendas and adopting initiatives such as the European Union’s open data directive, which aims to give both citizens and member governments access to a raft of government