Jad Hajj, partner with Strategy& Middle East; Alice Klat, director of the Ideation Center, and Jana Batal, senior fellow at the Ideation Center, the think tank for Strategy& Middle East

Throughout the world, data are being used increasingly to glean insights and extract value. Despite clear signs of progress, however, the data economy is still relatively undeveloped in the GCC region. Companies and governments both have a major role to play in accelerating progress.

Organisations can create value from data in two ways. The first is through business optimisation, using data to improve internal operations and productivity, the quality of products and services, and customer service. The second avenue for value creation is data sales. This is focused outside the organisation, through building new revenue streams by making data available to customers and partners.

The potential for the data economy from these two avenues is significant. The topic is now high on economic agenda around the world. For example, the European Union (EU) is pushing for favourable policies and legislation, together with increased investment in technology, to support the data economy.

In May 2019, the EU passed a regulation to allow the free flow of non-personal data and remove any related obstacles. For example, the regulation helps companies to switch between cloud service providers more easily, to store and process data anywhere in the region, and transfer non-personal data across EU borders. Together with the General Data Protection Regulation (GDPR), this new regulation is set to reduce ambiguity for businesses as they seek to produce value from data. Partly as a result of this greater clarity, the value of the EU data economy is expected to reach €739 billion ($825 billion) by 2020, comprising 4 per cent of the bloc’s total gross domestic product (GDP).

The volume and quality of data in GCC are growing rapidly, and this trend is expected to continue. However, capturing value from this data remains a work in progress. Strategy& estimates that the value of the GCC data economy totalled $4.7 billion in 2018, constituting just 0.3 per cent of GDP, a much lower proportion than in the EU.

Only a few organisations in the region have been exploiting their data reserves to extract value. In the UAE, Dubai Airports has migrated its operations from legacy software to automated solutions and to predictive, data-based analysis. Some of the solutions they are using include sentiment analysis, queue reporting and analysis, and flight scheduling algorithms. Similarly, regional telecom operators are using data to optimise processes. For example, they are prioritising investments by analysing traffic forecasts, and modeling various social circles to predict churn.

A lack of organisational know-how and the absence of local data analytics solution providers are both discouraging companies from using data more actively. According to the Crunchbase database, fewer than 15 such providers are operating in the UAE, and they are practically non-existent in the remainder of the region. This void is now gradually being filled by the likes of the US-based Alteryx, a data science and analytics company, a general development that is expected to have a positive impact on the regional data economy.

Government-backed sector development programmes, such as Smart Dubai and the National Digitisation Unit in Saudi Arabia, also have a key role to play in accelerating the move towards a data-centric economy. Moreover, these programmes need to invest heavily in various initiatives, for example by encouraging the local uptake of emerging technologies, such as artificial intelligence and blockchain. To this end, Smart Dubai has launched the “Data First” challenge, which seeks to encourage government entities to embrace and share data.

More can be done by sector developers, and GCC governments should take inspiration from leading nations such as the UK and Singapore. In 2018, the UK launched the Institute of Coding for digital skills training and retraining to tackle the digital skills gap. In Singapore, the Infocomm Media Development Authority is encouraging the widespread deployment of 5G, which will support the increased use of industrial applications that rely on very large volumes of real-time data.

The data policy landscape (and that for related fields such as artificial intelligence) is still in its infancy throughout the world. Europe’s GDPR, and the California Consumer Privacy Act (expected in 2020), are early examples of regulation, as is Bahrain’s Personal Data Protection Law which entered force on 1 August 2019. While there are differences between them, they both provide rules on how personal data should be handled by organisations.

Similarly, regional regulators need to put in place the appropriate legislation to ensure that data use is properly safeguarded and to provide more clarity for individuals, companies and solution providers on data storage, use and exchange.

Given the rapidly changing nature of this market, they could also establish regulatory testing environments, known as sandboxes. Using a sandbox, governments can test innovative regulations and models in a market environment. This approach also helps regulatory bodies stay up to date with changes in technology. Singapore’s regulatory body has used such a sandbox to test possible updates to the country’s Personal Data Protection Act. 

Regional governments need to propel the sector towards rapid growth by attracting international solution providers, encouraging adoption of emerging technologies, and testing new regulations for increased data use and sharing. Companies must in turn move quickly to take advantage of an increasingly helpful environment, and make full use of their data’s potential to gain competitive advantage.