The GCC’s data economy opportunity
Jad Hajj and Pierre Peladeau, Partners at Strategy&, part of the PwC network and Theodoros Evgeniou, Professor of Decision Sciences at INSEAD talk data economics
The data economy in GCC countries has lagged behind other parts of the developed world. Governments, companies and individuals all have their part to play in rectifying this situation and unleashing the power of data in the region.
Data create value in two ways. First, companies use data to improve internal operations and productivity, along with products and services and customer experience. Second, organizations can sell the data they produce, either in raw or analyzed form.
The volume and quality of data in GCC are growing rapidly, fueled by improved technology and connectivity. For example, the consumption of data in Saudi Arabia grew by 35% from 2014 to 2018, faster than in the U.S. or U.K. This trend will only accelerate, with the market intelligence firm IDC predicting a five-fold worldwide increase in the volume of data between 2018 and 2025. Yet despite this growth, we estimate that the value of the GCC data economy was just 0.3% of GDP in 2018, at US$ 4.7 billion. By contrast, the data economy in the EU was worth 1.9% of GDP in 2015.
This underperformance results from various factors. Organizations have not fully grasped the true commercial potential of data, while companies and individuals are wary of sharing their data, fearing risks to their privacy. The lack of appropriate government policies and regulations means that data use is not properly safeguarded. Moreover, expansion is hampered by a shortage of the right human and technical capabilities.
Governments can respond by investing heavily in the sector, incentivizing key players to establish operations in the region and encouraging the formation of start-up companies. They could also promote training and academic programs that can equip companies and state-sector bodies with the required digital skills.
Given that this market is new and changing constantly, governments should also establish testing environments to examine new regulations. For example, mandatory data sharing could improve the data analytics function of smaller organizations by providing them with access to existing datasets. In Germany, for example, insurers are required to make available sets of statistics which smaller companies would not be able to accumulate on their own.
Likewise, companies should launch pilot projects for use cases rather than waste time and resources on formulating a complex data strategy early on. In this way, they can steadily build their knowledge on how to benefit from data insights. Cross-functional teams should lead these projects, with coordination between departments.
Data governance should become a priority for companies so that they maximize the data’s value in a controlled way. A center of excellence is the way to start, although large companies could move to a decentralized model of data governance as they acquire the necessary capabilities and better understand the value of data. Part of this process will involve building the data skills of all employees to embed a culture which recognizes the importance of data.
In the GCC, telecom operators have been exploiting customer data through implementing several use cases, such as improving their sales footprint, proactive maintenance, call center workforce planning and network planning. One large retail and entertainment company in the region has also made great strides in exploiting data to improve operations and the customer experience.
Selling data is another significant and largely untapped opportunity in GCC countries. Companies with their own large volume of data tend to venture into direct sales themselves, whereas smaller companies monetize their data through aggregators and brokers.
Again, telecom operators have been at the forefront of this development. Regional operators already offer such services as traffic alerts about congested roads and alternative routes, as well as tracking of human activity in specific locations, including the movement of Hajj and Umrah pilgrims. Outside the GCC, several sectors, such as financial services, automotive, retail and healthcare have been turning to data sales and analytics as a new source of growth.
Meanwhile, individuals will need to be more aware of the data they share, sometimes unintentionally. With this awareness, they can then start to safeguard their privacy, and demand a share of the value of the data. To realize this value, they might use emerging data sharing platforms which help data producers to control what is being shared and with which entities.
With such developments as government investment in smart cities and the growth of the IoT market, the volume of available data in the region is set to proliferate rapidly. It is up to the various actors to respond and take advantage.