Data Analytics

How States Can Succeed in the Data Economy

Data-driven solutions can help states cut costs and focus resources. Here’s how to get in on the action.

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Daniel Castro is vice president at the Information Technology and Innovation Foundation (ITIF) and director of ITIF's Center for Data Innovation. He writes and speaks on a variety of issues related to information technology and internet policy, including privacy, security, intellectual property, Internet governance, e-government, and accessibility for people with disabilities.

The knowledge economy is here, and in it, data is king.

Technological advancements such as faster computing and better communication networks have made the collection, storage and analysis of data easier, faster and cheaper. Across governments, the private sector and civil society, the benefits of using data are fast outpacing the costs, and those who choose to invest time, effort and resources in leveraging data to boost productivity are already seeing results.

In fact, 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.

Similarly, states that are early adopters of data-driven innovation stand to gain economically and socially by positioning themselves as hubs of the data economy.

To determine which states are getting it right, the Center for Data Innovation recently published a report in which we compared 50 states using 25 indicators across three categories. States at the top of the rankings — Massachusetts, Washington, Maryland, California and Delaware — all had taken proactive steps to promote data innovation.

Here’s how others can catch up:

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To Jump-start Data Use, Make It Available

To begin, state governments should ensure that high-value data sets such as legislative, financial, education, healthcare and energy data are available. States need to address data availability in two ways.

First, they should require government agencies to collect and publish data with comprehensive open data policies. Not only does this promote transparency, it also encourages innovative ways to utilize this data. For example, the New York City-based Displacement Alert Project uses open data to increase awareness of the affordable housing crisis through visualizations.

Second, states should promote data collection and sharing in the private sector, especially by digitizing existing processes. For example, by promoting e-prescribing among doctors and pharmacies, states can do more to combat prescription drug abuse.

Most states do not treat all data equally. Colorado, which ranked first in the data category, was good at publishing healthcare price data, but placed in the bottom half of states when it came to ensuring availability of legislative data.

In addition, some states struggled with making government information easily available to citizens or with protecting free speech.

New Technologies Make Data Use Possible

Technology provides the platform on which data innovation occurs.

Technological innovations make it easy to gather and share data that empowers businesses, researchers and governments to get fresh ideas and make better decisions. This includes digital-physical infrastructure, such as smart meters and wearables, as well as purely digital infrastructure, such as government data portals and electronic health records.

Predictably, wealthier states such as Maryland and Utah have higher adoptions rates of broadband and the Internet of Things, but this is still an area where private sector initiatives and federal assistance can prove to be helpful. For example, states that have implemented energy rebate programs have higher rates of adoption of smart thermostats.

Develop Human Capital to Tap Data Efficiently

For states to be able to thrive in the data economy, they need to have a workforce skilled in data science, computer science and statistics, as well as businesses actively working and hiring in these fields.

States that have historically had strong technology sectors, such as Massachusetts and California, have done better in the data economy, and those that are already lagging in this area have an uphill battle, although one that is necessary. But states must be prepared to make long-term investments to attract businesses and improve education.

Missouri, for example, offers incentives to companies that open data centers in the state, making it an attractive location for new businesses to set up camp. And there are many interventions states can take to boost the development of human capital.

While some states have already gotten a head start, the data economy is in its early years. There is still time for states to ride this wave of change. With effective policy and investment in technology and talent, government leaders can ensure that their states are not left behind by the data revolution.

What Policies Can States Adopt to Encourage Data Use?

Regardless of any natural or historic advantages that states may have, there are actions that all states can take to improve their data innovation ranking.

Encourage efforts of local governments — Often, the key decisions on collecting and publishing data are made by municipal governments. States can provide guidance to the municipal governments in their jurisdiction on how to best collect, analyze and share data sets.

Support efforts to improve broadband access — Internet access is the lynchpin to a data economy. It facilitates collection, sharing and access of data sets by governments, citizens and businesses. States can help improve broadband access by streamlining access to conduits, rights of way and utility poles; using state- or city-owned infrastructure for providing access; and supporting digital literacy programs.

Partner with educational institutions to develop workforce — Growing the data-driven economy can seem like a chicken and egg problem: Workers won’t stay in the state without businesses that are hiring for these positions, but companies cannot hire when there are not any available workers. To address this issue, states should establish economic development programs in partnership with state universities to diversify the workforce, attract top researchers and promote entrepreneurship in key industries.

Create a supportive community — In states that don’t already have a large computer or data science community, the state government has a role to play in creating it. It can do this by facilitating networking and educational events and data science competitions.

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