Data-Driven Innovation (DDI): More Data Provides Will Enable More Refined Economic Forecasts

McKinsey identified Big Data as one of five areas that have the potential to accelerate growth in the US economy. A McKinsey report found that “advances in computing and analytics is transforming a sea of data into insights that create operational efficiencies. By 2020, the wider adoption of big-data analytics could increase annual GDP in retailing and manufacturing by up to $325 billion and save as much as $285 billion in the cost of health care and government services.” The way that Big Data is expected to act as a positive catalyst to the economy is being called Data-Driven Innovation (DDI).

The Software and Information Industry Association (SIIA) said in a report that : “the core of DDI is increasing efficiency, saving money and precious resources, benefiting all sectors of the economy and improving the quality of life. From safety and security, to environmental and infrastructure, health outcomes and education the opportunities for DDI are endless.”

While Big Data in itself may be charging the economy, Big Data is also becoming a tool for more accurately refining how economists view and understand what is going on in the economy. Traditionally, economists have needed to rely on government statistics gathered from in-person or telephone surveys of households and businesses. Those types of surveys are costly, time-consuming, and often far out of date by the time they are finally tabulated and made available.

Small business activity is one area in the economy traditionally that has not been well understood. While small businesses are estimated to account for about 15 percent of the national economic output, there has been very little details about the economics of small businesses. Businesses like Intuit are providing data that accurately reflects the current state of small businesses. Intuit’s online businesses allows it to collect, anonymize and publish vast amounts of economic data. The Intuit monthly employment data, for example, is nearly eight months ahead of the government’s best information taken from quarterly surveys and state unemployment records and tax returns.

James Poterba, president of the National Bureau of Economic Research and a professor at the Massachusetts Institute of Technology, said that “we’re seeing the emergence of new sets of data and knowledge that we’ve never had before. It’s a real opportunity for policymakers.”