Open data can bring numerous advantages to businesses if outsiders have free access to company information. The government information website GOV.UK has made more than 40,000 data sets available, but the private sector has been much slower to embrace open data than the public one. 

Businesses have traditionally been more concerned with protecting the commercial value of their data, but they're missing out on many possible benefits. 

Open data can help identify new customers and ideas, develop business models, or create a new revenue stream. Providing access to sustainability and supply chains can improve brand reputation as well.

How businesses can benefit from open data

How open data should be introduced into an organisation depends on the sector it serves. Organisations that share a common risk, such as insurers trying to tackle fraud or telecoms companies and developers who want new mobile apps for customers, can benefit from using open data to aid collaboration.

The Open Data Institute (ODI), a non-profit organisations that advises on using government data, is attempting to promote the benefits of open data in the private sector. In a guide entitled "How to make a business case for open data", it suggests to first identify the goals of your organisation, and evaluate how open data can help achieve them.

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Show Me the Money was designed to add transparency to build trust among lenders and borrowers. The team behind the project collected data from the three largest peer-to-peer lending platforms in the UK – Zopa, RateSetter and Funding Circle – to create an infographic showing how much money was lent to and from different people, with the details mapped across the country.

Privacy protection must not be sacrificed. Regulations around data ownership and sharing must be adhered to, so legal disasters are avoided, and Show Me the Money avoids revealing personal details of lenders and borrowers.  To protect privacy, ensure that any identifiable information remains concealed, or that the information is aggregated to obscure it. 

There may be less attraction for companies that don’t prioritise transparency, but it can still be of value for crowd-sourcing to find solution by opening up problems to others.

After evaluating the possibilities of open data for the organisation, the ODI next recommends analysing the current use of data. This covers what is being shared, who it’s shared with, the present data problems and what type further data would help.

Partners, regulators, suppliers, customers, competitors, researchers, journalists and government are just some of the potential groups that could be involved in the data flow. All of their roles are worthy of investigation.

By studying the existing data arrangements and requests, the areas of demand and potential for added benefit can be established. Businesses often underestimate the depth of data at their disposal. It can cover administrate data, such as receipts, reference data including product information, and aggregate data used to show trends such as records of total sales.

The raw administrative data can have restricted benefits as it often contains personal data. It can also provide a competitive advantage that open access would annul, and risk compromising intellectual property. The easiest data to share is that which the organisation is the sole owner of.

Generating value from open data

The ODI recommends one or a combination of three different models to create value through open data. A freemium model, which is commonly used with web applications, subsidises a free data source with a paid-for service. An example of its benefit is providing a free product that adds value as a marketing tool.

Cross-subsidising business models, meanwhile, funds open data through the other benefits it can provide, such as providing support services or charging for changes to the dataset. This lowers the barriers for reuse by third-party developers, which can use the data to create tools for customers that add value to the business.

[Read next: What every UK CIO should do about Open Data]

The model with most potential for profit, according to the ODI, is taking advantage of network effects around shared-data. This can manifest in either different organisations collaborating to maintain datasets for mutual benefits, or releasing data to increase the market in products and services.

Risk management is an another area that merits attention. Sourcing and managing the data will have costs that require ongoing investment that planning should prepare for.

Selling data can be surprisingly expensive, through the combination of legal, development, administrative, sales and marketing costs. It can also create strategic risks by requesting payment for products that competitors might offer for free.

A trial of open data is a useful way to balance the benefits and dangers of open data. It can act as a basis for an open data policy for what is shared and how it is managed, and reveal the opportunities and dangers of open data for your individual organisation.