Published Online: November 12, 2013
Published in Print: November 13, 2013, as School Data Add Economic Value, Report Projects

Opening School Data Carries Economic Value, Report Contends

The increasingly ubiquitous flow of data across education has caused anxiety among parents and privacy advocates, who fear that information about students will be released or shared with outside entities without permission. Yet a new report, while acknowledging those concerns, focuses on a potential payoff in expanding the openness of data across K-12: robust economic growth.

That analysis, released by the global consulting business McKinsey & Co., concludes that creating more open and transparent data in education from both public and private sources could "unlock" between $900 billion and $1.2 trillion in annual economic value worldwide, about a third of it in the United States.

The report says that added economic value in education would be derived from the higher future earnings of students, resulting from the use of technology and data to tailor academic approaches to individual students' needs, as well as through financial savings for school districts realized through improved procurement processes and other means.

"An increasing amount of data is being made more 'liquid,' " Michael Chui, a principal at the McKinsey Global Institute, and a co-author of the study, said in an interview. The institute is the business and economics research arm of the consulting company. "Not only can this data be used to create transparency or accountability," Mr. Chui said, "but also to create economic value."

The authors define open data as information provided by government or private-sector sources that is accessible, able to be processed automatically through technology or other means, and available for free or minimal cost, with few limitations on its reuse for different purposes.

It is not limited to "big data"—the term typically used in education and other fields to refer to collections of massive, complex amounts of information so large that they can be difficult to process—but also includes smaller data sets that are open and accessible, the authors say.

Along with education, the report examines six other sectors that can benefit from a more transparent data flow: consumer products, consumer finance, electrical systems, health care, oil and gas, and transportation. Combined, opening data in those areas could produce $3 trillion in yearly, global economic growth, the authors say.

Some of the largest potential gains, roughly $1 trillion, would come in K-12 and postsecondary education, with $400 billion of that payoff being realized in the United States, Mr. Chui explained.

Open Data in Education

A study identifies five "levers" in education that can deliver $900 billion to $1.2 trillion in annual economic value through increasing transparency and the sharing of information.

Whether policymakers and the education community have the appetite for a rapid expansion of open data is unclear. Critics have raised concerns about efforts to collect data on students' academic performance and backgrounds, questioning schools' commitment to protecting that information. And others say that policymakers are not doing enough to demand that educational technology companies doing business with schools protect confidential student information and prevent it from being turned over to commercial businesses.

James P. Steyer, the CEO of Common Sense Media, said that increasing the sharing of data about school purchasing is smart policy and could drive down costs. Mr. Steyer's organization, based in San Francisco, provides parents and the public with reviews and information on media and technology, and advocates for protecting students' and families' privacy,

But as the availability of data across education rises, commercial vendors will press for access to that information, and policymakers need to be vigilant in protecting it, Mr. Steyer said.

"I'm sure there are opportunities to monetize the use of student data," Mr. Steyer said. "But that's not the [role of education]. ...The focus should be on improving students' lives and their educational opportunities."

Comparing Costs

Efforts to increase the flow of public data are playing out on an international scale. More than 40 countries have championed attempts to create more open data, with the goal of sparking economic growth and innovation, the McKinsey authors say.

Those nations include the United States, where President Barack Obama in 2009 signed an administrative order requiring the release of government information that did not pose risks to privacy or national security. The administration also backed the creation of a website, data.gov, which contains more than 75,000 data sets, including more than 1,100 connected to education.

In education, the largest potential gains from increasing the openness of data, up to $370 billion worldwide, come from data's ability to contribute to improved instruction by making it easier to provide learning tailored to meet students' strengths and weaknesses, the authors argue. Open data can also be applied to helping teachers by using information on performance to match them with the right professional development, mentors, and coaching, according to the institute. (In addition to the institute, two other organizations affiliated with the company, the McKinsey Center for Government and the McKinsey Business Technology Office, coauthored the report.)

But efforts to collect large amounts of student data across districts and states have met resistance from parents and policymakers, as McKinsey notes. And teachers have questioned what they see as the crude application of data to their professional evaluations. The angry response from teachers to the Los Angeles Times' 2010 stories that made public information on individual educators' performance underscored that disdain.

Away from the classroom, the authors also see potentially big savings, up to $290 billion, in business operations, by increasing the flow of information among districts that may be paying very different prices for similar goods and services. Many districts report what they're spending to their school boards, but not in a comprehensive way that lends itself to cost comparisons, the report concludes.

When districts are able to glean that information, they can reap significant benefits, the authors argue, reducing the price they pay for services such as broadband technology—a major need in districts today. Many school technology advocates are urging the Federal Communications Commission to increase the public availability of pricing information for the E-rate program, which supports schools' and libraries' broadband initiatives, a push that some telecommunications providers are fighting.

Lost in Translation

Martin Carnoy, a professor of education and an economist at Stanford University, agreed that making price information transparent could drive down costs. But he said the authors' projections of economic gains linked to increased student performance amounted to a "leap," because they put too much weight on student test scores as a proxy for future success.

"What does the test score mean in terms of productivity?" Mr. Carnoy asked.

In many districts, the challenge facing schools is not the lack of data, but administrators' and teachers' inability to make sense of it to improve instruction, given time constraints and other pressures, he maintained.

Too often, "people in education are not in this loop," Mr. Carnoy said, and little time is devoted to "explaining what this data means."

Other barriers to educators' use of data remain. A report released earlier this year by the State Educational Technology Directors Association noted that schools are inundated with data from different sources, but they lack the ability to use it because the systems for collecting and analyzing that information are "disconnected" and don't work with each other.

In some states, individual school districts are able to save money by latching on to state contracts to obtain goods and services, while also issuing their own individual requests for proposals to make other purchases—typically related to special projects in construction, technology and other areas, said Dean Stotler, the president of the National Association of State Procurement Officials, based in Lexington, Ky.

Related Blog

Mr. Stotler, who is also the Delaware state director of government support services, agreed that there are obvious benefits for districts in understanding what their counterparts are paying in contracts. The ability to save money, he said, hinges partly on "how well you know your market."

The procurement association is attempting to develop a searchable national repository of contracts issued by states, districts, and other sources, which the organization believes will provide valuable information for school systems, and reduce the risks for vendors doing business by giving them more information on what public entities are requiring of them, Mr. Stotler said.

As it stands now, Mr. Chui acknowledged that many obstacles stand in the way of increasing the use of transparent data in education. The report says administrators need to take steps to gain the support of parents, teachers, and others, in deciding what data is culled and how it is used.

McKinsey says policymakers should adopt policies to protect student privacy, while also encouraging "sufficient granularity" in data collection to make the information useful. They should also enforce existing laws, such as the federal Family Educational Rights and Privacy Act, or FERPA.

There needs to be "thoughtful dialogue about privacy, confidentiality, and security in how to use data," Mr. Chui said, but also a pledge to "protect it effectively."

Vol. 33, Issue 12, Pages 1,16

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