Better use of data will be a crucial driver of economic and societal progress in the future. Widespread adoption of data analytics and artificial intelligence is expected to contribute hundreds of billions of dollars to U.S. GDP in the coming years in sectors such as finance, transportation, and manufacturing, while unlocking new opportunities to improve outcomes in fields such as education and health care. A new report analyses and ranks which states in the United States are best positioned to take advantage of the data-driven economy.
The five top-ranked states are Massachusetts, Washington, Maryland, California, and Delaware. They are thriving hubs of data-driven innovation and show that a sustained commitment from policymakers to supporting the data economy pays dividends. Some states benefit from certain characteristics that make them well-positioned to take advantage of data-driven innovation, such as being home to many universities. However, leading states have all taken proactive steps to unlock innovation, like supporting STEM in public schools, investing in e-government, implementing robust open-data policies, and promoting the deployment of health information technology.
The five lowest-ranking states in the index are South Carolina, Alabama, Louisiana, West Virginia, and Mississippi. All fail to significantly promote data innovation through public policies. For example, West Virginia ranks 49th overall because it has not made a significant effort to provide public access to information, increase adoption of e-prescriptions for controlled substances, or encourage the deployment of smart meters, to name a few indicators where it scored poorly.
“Decisions that policymakers make today to encourage data-driven innovation will have long-term implications for states’ future growth and their residents’ quality of life,” said Daniel Castro, the Center for Data Innovation’s director and the report’s lead author. “Early adopters will benefit immediately from using data to make headway in addressing social challenges from energy efficiency to affordable health care. By positioning themselves at the forefront of data innovation, states will also be able to grow and attract the right kinds of companies to become hubs of the data economy.”
The center’s analysis assesses states’ relative strength in 25 indicators covering three categories of assets critical to encouraging and enabling data-driven innovation:
- Data: the extent to which key datasets are available, including data about the government, education, health care, and energy.
- Technology: the availability of key digital infrastructure, such as broadband, smart meters, and electronic health records.
- People and companies: human and business resources, such as the number of open data companies in the state and the size of the data science community.
State policymakers should support all three areas to successfully enable data-driven innovation.
First, states should take steps to guarantee that data is available for use, such as by ensuring government agencies collect and release high-value datasets. Open government data promotes transparency, encourages citizen collaboration, and creates value through innovation and efficient decision-making. Making data available can also provide the private sector with the building blocks necessary to develop new products and services. For example, the Chicago-based startup SpotHero, which makes a mobile app to help drivers find and reserve parking spots, relied heavily on open government data for its initial development.
Government agencies can also use data to improve their services and be more efficient. For example, with no additional investment, Oregon’s state marine board used its state’s open data platform to replace its biennial boating handbook, which cost $150,000 to produce every two years, with a live, interactive map with location-specific regulations, docks, service stations, and navigation instructions for boaters.
The U.S. Department of Commerce estimates that the private sector uses government data to generate annual revenues of as much as $221 billion annually. And, globally, the McKinsey Global Institute estimates that open data has the potential to create $3 trillion to $5 trillion per year in additional value across education, transportation, consumer products, electricity, oil and gas, health care, and consumer finance sectors.
Second, states should enable the deployment of the technology platforms that underpin success in the data economy. This includes facilitating the deployment of digital infrastructure, such as fixed and mobile broadband internet, plus data platforms such as intelligent transportation systems, electronic health records, and smart meters. In addition, states should consider how they can support the development of the internet of things (IoT), particularly the development of smart cities that use data collected by sensors on physical infrastructure and digital transactions with government agencies.
Third, state economic development efforts should include a focus on the data economy and helping transform existing industries to make better use of data. For example, better use of data and analytics in health care—to allow doctors to make better medical decisions and provide better preventative care—could slash costs by up to $450 billion.
Reforms can start with developing the human capital necessary for data-driven innovation to thrive, and supporting businesses participating in the data economy. Virtually every sector of the economy can benefit from better use of data. But the growth of data-driven enterprises will be limited by the availability of workers with in-demand data skills. To this end, states should promote the growth of data-driven businesses by improving educational offerings in data science and related fields.
This begins at the K-12 level, where strong math and computer-science training can equip students with the skills necessary for advanced data literacy, and continues through higher education, where degrees in technical fields can provide the highly skilled workforce needed to participate in the data economy. States should also strengthen connections among businesses, government agencies, and universities to encourage collaboration and learning among those working on data-related projects across a diverse range of industries.
The full 85-page report (PDF file) with rankings, analysis and recommendations can be downloaded here.