The Role Of Open Data In Business Innovation

Importance of open data in modern corporations

Discuss about the Government data Opportunities and Obstacles.

In today’s competitive business world, organisations are constantly struggling to generate a competitive advantage over others in order to sustain their future growth. Companies are facing fierce competition from local as well as international organisations due to globalisation and digitalisation. In fast pace and rapidly changing industries, corporations rely on an innovative approach to generate and maintain their competitive advantage. Incumbents in industries are threatened by challengers because they use innovation to create a competitive advantage over them (Autio et al., 2014). In order to stay relevant and match industry demand, corporations invest in new technology to ensure that they satisfy customers’ requirements and improve their operations. Along with the popularity of internet which is fuelled by the growth rate of smartphone users, the popularity of open data has grown as well. Open data is referred to an idea which provides that some data should be freely available and accessible to everyone to republish and use without any restrictions on copyrights or patents (Kitchin, 2014). Open data which include government data and machine-readable information that is available for everyone has generated a great deal of excitement among people across the globe. In business sectors, individuals and organisations rely on open data since it open new ways for innovations. This report will focus on open data and analyse how it is used in organisations. This report will evaluate how businesses can innovate by using open data. Further, different recommendations will be given in the report for businesses to use open data for promoting innovation.

The primary objective of this report is to analyse the importance of open data in modern corporations. The report will evaluate how open data has become popular in organisations and how they utilise it to generate a competitive advantage. The goal of this report is to analyse how companies use open data for business innovation. Examples of different corporations will be given in the report to evaluate how businesses use open data for encouraging innovation. The secondary objective of this report is to provide recommendations for organisations to use open data for business innovation.

The scope of this report is wide, and it will evaluate different literatures in order to analyse the role of open data in business innovation. This report will include examples of different organisations that use open data for business innovation which assist them in finding gaps in markets and developing new products or services to generate a competitive advantage. Secondary research will be included in the report based on journal articles provided by researchers on the topic. The scope of this report will not include primary research on the topic.

How open data is used in organisations for a competitive advantage

The role of innovation is growing between organisations, and they implement strategic policies for encouraging innovation in order to improve the efficiency of their operations and generate a competitive advantage. Pioneering, diverse corporations use open data in order to create innovative products and services that fill the current market gap and generates income and bring a number of social, economic and environmental benefits. According to Kitchin (2014), open data defines an idea that some data should be freely available and accessible to everyone to use or republish without restrictions of patents or copyrights. The requirement of open data is growing parallel to increase in intellectual property rights. Janssen, Charalabidis and Zuiderwijk (2012) provided that the open data is gaining popularity with the rise of the internet and online based services. The launch of different open data government initiatives includes Data.gov.in, and Data.gov resulted in increasing popularity of open data. Barack Obama sworn as US President on January 2009 and the next day he issued a Memorandum on Transparency and Open Government which focuses on endorsing transparency in government data (Yankova, 2016). These initiatives promoted open data for general public use and along with public, organisations started using them for promoting business innovation.

The UK based Open Data Institute conducted a study in order to analyse and identify 270 corporations which use, produce or invest in open data as a primary activity for their business (Open Data Institute, 2015). The annual turnover of these organisations is over £92 billion ($121 billion). These companies provide employment to more than 500,000 people that show the potential value of open data business (Open Data Institute, 2015). Organisations of all shapes and sizes use open data to innovate new operations that address their operational issues which assist in improving their efficiency. It shows that only start-ups and young companies did not use open data, but large enterprises rely on it as well in order to generate business innovation. The study shows that more than one third (39 percent) of companies using open data are over ten years old (Open Data Institute, 2015). The company use open data to find gaps in markets in order to identify business opportunities. It assists organisations in creating new products and services and developing new business models. As per Ding, Peristeras and Hausenblas (2012), primarily, open data is used for business innovation by start-up communities and young entrepreneurs who are challenger, innovator and critical disruptor in open data. This community uses open data in order to develop new processes or products and exposing new diverse business opportunities by finding niche markets.

Examples of corporations using open data for innovation

As per Manyika et al. (2013), open data can assist in generating $3.2 trillion to $5.4 trillion in economic value in seven major sectors (Figure 2). Many companies are also embracing open data culture by opening their data for others to access. For example, in 2014, BBC launched a program called ‘BBC things’ which provide everyone access to organisation’s access. This program encouraged developers to use the data of BBC programs by using linked data and semantic technology which power up BBC’s linked data platform which enables developers to create or combine new application with other open data sources (Yankova, 2016). The program was highly successful in proving the potential of open data technology. The research conducted by Horrigan et al. (2015) provided that more than 84 percent of US citizens use mobile applications that rely on open data which fuel business innovation. The advancement of technology has made it easier than ever for companies to collect, manage, use and share open data.

However, along with advantages, there are a number of disadvantages of open data as well which affects a firm’s operations and its profitability. Roberts (2012) argued that open data is likely to increase social inequality and digital divide rather than reducing it. He stated that simply declaring data sets to be open for public access is not any practical use for the public. After release of a data, it is not open for general public, instead, it is open to a small group of technical specialists who poses the skills to interpret such data and use it for innovation. Therefore, simply providing data uncritically to people is more likely to increase “data divide” along with economic and digital divides (Roberts, 2012). According to Cerrudo and Spaniel (2015), open data also increases the risk of cyber-attacks on organisations since along with the public, cybercriminals are also able to access the data which they can use in order to hack into the firm’s database. Cummings, Zagrodney and Day (2015) argued that the popularity of government based open data increases the risks of national security since terrorist groups and cybercriminals can easily access government data relating to housing, transportation, healthcare, and criminal justice. Therefore, there are a number of risks associated with open data for businesses as well as general public.

However, it assists enterprises in fuelling innovation in the business which overcomes its limitations. There are a number of companies which are already using open government data in order to fuel business innovation and anticipate changes in demands and needs of customers. For example, Starbucks collaborated with Esri which is a geospatial technology firm in order to develop a business intelligence system called Atlas (Poddar, 2016). This system is based on government data, and the company use it to develop highly sophisticated consumer marketing policies. As per Poddar (2016), Starbucks use demographic data which is collected from a number of smartphones in order to determine which mobile application discount is more impactful. Similarly, the firm uses weather data for synchronising rising temperature along with Frappuccino promotions. Zuiderwijk et al. (2012) stated that open data is extremely important in health care sector and a plethora of healthcare firms rely on it for further research and finding new solutions for healthcare issues. For example, Aidin uses the open government data to collect information about hospitals and the company help hospital patients in finding better post hospitalisation care (Gurin, 2014). Similarly, ClearHealthCosts was founded based on Medicare data from the federal government which assist them in offering competitive healthcare prices for customers (Fortis, 2017).

Recommendations to use open data for business innovation

Another good example is CVS Health; the company developed an online tool called myhealthfinder which uses open government data to provide users personalised recommendations for preventive health care services. The corporation collaborated with the US Department of Health and Human Services (HHS) in order to leverage government data for providing services to customers (Ross, 2015). In retailing sectors, Best Buy use open government data to development in innovative market segmentation strategy that assists the company in expanding consumer electronics brand. The firm use proprietary sales data and government data and use advanced analytics for defining group and consumer by personas which define their purchasing habits. This data enables the enterprise to create business policies that are targeted for specific customer base, and its results in increasing the company’s overall sales and profitability (Accenture, 2018). These examples show how companies can use open data technology to fuel innovation at the workplace which results in increasing their profitability. There is a wide variety of open data which is used by companies in order to drive innovation in the workplace. Mostly, open data is collected from two primary sources which include government data and non-government data. As per the study of UK based Open Data Institute (2015), around 57 percent of companies in the United Kingdom uses geospatial open government data (Figure 1). It is most commonly used open data by organisations and the most frequently cited data provider was Ordnance Survey.

In case of non-government sources, the data is used by OpenStreetMap which is an openly licensed map of the world which is created by a number of volunteers. This is a good example which shows how people are taking advantage of open data and launching new innovative businesses. The second most used open data in the UK is transport data which is used by 43 percent of companies (Open Data Institute, 2015). This data includes government data which is issued by the department of transport, non-government transport data from Traveline, data from Association of Train Operating Companies (ATOC) and Highways Agency live traffic to CO2 emissions. The third most commonly used open data is environmental data which is used by around 42 percent of the companies (Open Data Institute, 2015) (Figure 1). This data assists businesses in using renewable energy sources and launching new environment-friendly processes for reducing their carbon emissions. These examples show how companies use different types of open data for creating new innovative businesses which provide different benefits to society as a whole.

However, as discussed above, many factors hold companies back from using open data in their business processes which creates new barriers in front of them. As per Janssen (2012), one of the primary disadvantages of open data is that the data is not always accurate, easily accessible in machine-readable formats and up-to-date. Generally, the open data does not always allow organisations to use it for commercial purposes, and corporations often face difficulty in tracing it back to where it came from. Bertot et al. (2014) provided that organisations want more and up-to-date open government data but the publishing of the government is not consistent. However, companies are more concern due to lack of open data rather than inconsistencies of the data. Barry and Bannister (2014) stated that there are a number of factors that should be considered by the companies in order to address these issues and effectively using open data for business innovation. The Kellogg Company follows four key steps in order to use and apply open government data for fuelling business innovation. The first step is formulating the question and hypothesis for the use of open data in business operations. For example, the data scientists at the Kellogg Company use the open government data for exploring the impact of cold weather conditions on consumer spending behaviour (Accenture, 2018).

The company developed a question which asked that whether harsh winter condition has any effect on consumer sales. The matching hypothesis could provide that due to cold temperature, shopping trips of consumers have reduced which result in reducing their cereal consumption. The second step is the identification of relevant datasets. Sieber and Johnson (2015) argued that companies should look for both proprietary and government open data. For example, for hypothesis on winter sales, the Kellogg Company can combine the open government weather data (by zip code) along with its own point-of-sale data (by zip code, month and over three years). The third step focuses on conducting analytics in order to develop insight. For example, the Kellogg Company can use the open data for identifying the sales patterns and developing models which show their correlation with weather patterns. The corporation discovered that sales of cereals dropped when temperatures are below 20 degrees Fahrenheit. However, sales did not drop on Friday which shows that payday effects outweigh the effect of weather. The final step requires companies to apply finding to business strategy and using this process to enhance business strategy, support product innovation, improve operational efficiency, optimise customer experience and overall effectiveness (Accenture, 2018). For example, the Kellogg Company changed its digital coupon distribution schedule in order to increase customer purchases on Fridays because the study showed that it is a “weather-proof” day. Similarly, other organisations can follow a similar pattern in order to effectively use open data to fuel business innovation and generate a competitive advantage in the industry.

Conclusion

From the above observations, it can be concluded that open data is already being used by a plethora of organisations since it assists them in fuelling business innovation. The companies use open data to identify gaps in consumer markets and provide innovative policies in order to fulfil such gaps. The movement of open data is led by government initiatives for making open government data available and accessible for general public. There are many limitations of the use of open data in companies as well such as increased risk of cyber-attacks, promotion of data divide culture, national security risks, and others. However, corporations are using open data for finding innovative solutions to different business problems. A large number of companies start their business based on open data technology, and they use it to find niche markets to expand their business and launch new products/services. Examples of Starbucks, Best Buy, CVS Health, OpenStreetMap and others are discussed in the report. An example of the Kellogg Company is discussed in the report to provide recommendations regarding how corporations can use open data for business innovation. Companies should follow four steps which include the formulation of the question and hypothesis, identification of relevant datasets, conducting analytics for developing insights and applying finding to business strategy. These steps can assists organisations in using open data for business innovation which result in increasing their profitability and effectiveness which sustain their future development.

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