Size Matters

Touted as “the new oil” a couple of years ago, (big) data is perhaps one of the most-talked-about yet least understood commodities. But in which ways can data and oil be compared?

The oil of the digital economy…

When harnessed properly, both oil and data have the power to transform economies. Just as the discovery of oil forever altered the trajectory of the Middle East, Estonia has proven extremely adept at navigating the digital data landscape to increase economic prosperity.

Surprisingly, one of the first to adopt e-government services and invest heavily in digital innovation back in the 1990s, Estonia is now hoping to become the global leader in health research and AI.

In 2000, only 28.6% of the Estonian population was connected to the internet; 16 years on, this figure increased to 91.4%. During the same period, the country’s GDP more than quadrupled from USD5.69 billion to USD23.34 billion.

The Baltic country is now pioneering a data embassy in Luxembourg, and the Estonian government will also back up its data in the world’s first foreign data embassy to mitigate risks of outages, equipment failures, and cyber attacks. The city-state host is also the digital back-up location for NATO and is looking to use its competitive advantages in cyber security to benefit from the data boom.

…or an altogether new commodity?

But, since being identified as the oil equivalent of the digital economy, several observers have been quick to point out that data is, in fact, quite different from oil. The most notable difference being that oil is a finite, single-use resource, whereas data is exponentially increasing and can be reused, reshaped, and re-shared. Oil’s value comes from its scarcity; data’s value derives from its abundance.

The Amazon, JP Morgan Chase, and Berkshire Hathaway joint venture to lower healthcare costs and improve outcomes in the US simultaneously shows the value of data for increasing transparency and democratization.

The power of data

While the three parties in the abovementioned JV are private sector giants looking to shake up a largely government-provided service, governments are also trying to tap into the potential of data. Entirely new metrics, such as the World Bank’s statistical capacity score, have been created to quantify government’s ability to collect data, analyze it, and apply insights. Statistical capacity is also a key consideration for international organizations, such as the UN, when lending development funding.

E-government and smart city initiatives abound, and nowhere is this more obvious than the UAE. According to UNDESA’s E-Government Development Index (EGDI), which records the provision of open government data and adoption of other ICT measures, the UAE was one of four countries to move up from a high-EGDI score (0.5-0.75) in 2014 to very high (above 0.75) in 2016.

The UAE’s data revolution is crystallized in its Smart Dubai program, which ultimately aims to make Dubai the happiest city on earth. Part of Smart Dubai is the Dubai Data initiative, which aims to guide the city in mining the greatest value from data to create opportunities for governments, the private sector, and investors.

Data is Dubai’s catalyst for becoming a smart and prosperous city. At the municipal level, cities that have adopted open-data policies in the public sector alone recorded a 1% direct impact on GDP. Dubai strives to augment this even more by reaching both the public and private sectors through its initiatives.

Interestingly, of those countries with high and very high EGDI scores, the correlation between income level and e-government development was not as strong. However, countries with an index below 0.25 almost perfectly corresponded to the lowest income countries.

And its limitations

The GovLab at New York University set out to determine if data could be used to empower developing countries. The general conclusion: data alone is not enough for economic development. Supportive frameworks and conditions such as legislation, rule of law, infrastructure, and education are a few important factors to consider when exploring data’s power and limitations.

For example, Portugal’s success in its e-government procurement activities is a result of supportive legislation and communication plans for implementation, as even among OECD countries, effective implementation of e-government initiatives has sometimes proven elusive.

Almost all OECD members announce tenders, provide tender documents, and deliver notification of bid awards via e-procurement systems, however only 10 members measured improved efficiencies thanks to the use of e-procurement.

As one of the 10, Portugal noted savings in terms of time and transaction costs thanks to the legal countries legal framework, Public Contracts Code (2008), and requires e-procurement with special criteria for bid selection—technical, innovative, and sustainable aspects—that increase SME participation and innovation.

And even then, sometimes government commitment is not enough; a digital, data-driven economy requires digital infrastructure.

Investors and incubators see potential in Lagos’ Yabacon Valley too, but many startups prefer other neighborhoods in Nigeria’s megacity or even different cities all together because of digital infrastructure woes in Yaba. Flutterwave, Nigeria’s fintech poster child, actually operates out of San Francisco. Outside of urban areas, the lack of digital infrastructure is felt even more, and broadband penetration targets 30% in 2018. Internet access is just beginning to reach the country’s 75% rural population.

Should Nigeria unlock this data potential, the economic impact would be huge. Nigeria is both Facebook’s biggest market in Africa and a location in which Google Maps service numbers doubled in the past year. And these data behemoths are trying to do just that.

Facebook CEO Mark Zuckerberg first visited Africa in 2016, and he chose Lagos over other prominent African tech hubs, which include Cape Town, South Africa and Nairobi, Kenya. Over a year later, in November 2017, Zuckerberg announced that Facebook’s first tech hub in Africa will be located in Lagos.

Facebook’s future presence in Nigeria follows Google CEO Sundar Pichai’s announcement to establish its first Launchpad space outside the US in none other than Lagos, Nigeria.

Dubai may have been most accurate in calling data a catalyst. Oil was a literal and figurative fuel. Data, on the other hand, is not sufficient by itself. If added to the right environment, with the right mix of several other ingredients, it has the potential to transform not just whole industries, but entire economies.