Benefits and value of meteorological information services the case of the Finnish Meteorological Institute

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1 METEOROLOGICAL APPLICATIONS Meteorol. Appl. 16: (2009) Published online 12 March 2009 in Wiley InterScience ( Benefits and value of meteorological information services the case of the Finnish Meteorological Institute Pekka Leviäkangas* and Raine Hautala VTT Technical Research Centre of Finland, Kaitoväylä 1, Oulu, P.O. Box 1000, FI VTT, Finland ABSTRACT: The benefits of meteorological information services have been widely studied, but a coherent view of the impacts of these services remains elusive. Meteorological information services must be seen primarily to have potential positive impacts on the functions of society: only in that light will their true worth emerge. This paper looks at the value of the services for society as a whole. In addition to their methodological contribution to the value assessment of meteorological services in general, the services of the Finnish Meteorological Institute represent an empirical case. Evidently the value of information is set to play an increasing role as societies grow increasingly information intensive. The results of the empirical case were explicit. The total value of benefits generated each year by the Institute s services exceeded the annual budget of the Institute many times over. Copyright 2009 Royal Meteorological Society KEY WORDS meteorological services; cost-benefit; value analysis; impact assessment Received 22 August 2008; Revised 8 December 2008; Accepted 13 January Introduction and scope The EVASERVE project ( which closed in the spring of 2008, developed methods and tools for the evaluation of information services. The project produced several evaluation modules for practitioners and several case evaluations, of which the Finnish Meteorological Institute (FMI) was the most extensive one. EVASERVE was launched initially in 2006, with some pre-studies having taken place earlier, because it was apparent that information services had not protruded into the market to the extent enabled by modern information and communications technologies (ICT). The prospective services seemed to lack sustainable business models and clear information supply chains. This has been demonstrated e.g. in the case of information services for logistics, where multiple actors in the supply chain make coherent information flow and services an extremely complex issue (Leviäkangas et al., 2007). This paper introduces the results and conclusions of the FMI study (Hautala and Leviäkangas, 2007). The methods applied to the FMI case are also presented and the variety of methods that were needed for wide-scope analysis demonstrated. The benefits of meteorological information services have been widely studied, but a coherent view of the impacts of the services i.e. the value for money invested in the services of each national meteorological institute remains elusive. Some attempts have been * Correspondence to: Pekka Leviäkangas, VTT Technical Research Centre of Finland, Kaitoväylä 1, Oulu, P.O. Box 1000, FI VTT, Finland. pekka.leviakangas@vtt.fi made, for example regarding the benefits accrued to aviation and terminal operations (Allan et al., 2001) and to oil and gas production (Considine et al., 2002). There are few more extensive studies (Anaman et al., 1997). Weather is acknowledged to have a drastic impact on the economy and the functions of society. In March 2007, the World Meteorological Organization (WMO) held a conference on the theme Secure and Sustainable Living: Social and Economic benefits of Weather, Climate and Water Services. This material is available at and it lists some staggering figures for (Table I). Mostly the analyses were highly sector-specific and focused on the damage consequences of weather-related phenomena. Meteorological information provision must first and foremost be seen seen as a service, not a function in its own right. This service should have potential positive impacts on the functioning of society and only in that light will the services be regarded for what they are truly worth. This paper looks at the value of the services for different sectors of society. In addition, the paper offers a methodological contribution by demonstrating the application of information service valuation methods. The impacts of meteorological information services are analysed in this paper for: all modes of transportation: road, rail, marine and inland waterways, aviation and light traffic (pedestrians, cycling); construction and facilities management, i.e. the building phase of physical infrastructures and the operation Copyright 2009 Royal Meteorological Society

2 370 P. LEVIÄKANGAS AND R. HAUTALA and maintenance phases; transportation infrastructures were studied in conjunction with the specific modes; energy production and distribution, and, agricultural production. Value analysis is usually associated with value engineering, quality engineering and cost engineering. It studies (1) the characteristics of a product or service which form its value to the user, (2) the methods of decreasing costs, (3) improving quality (e.g. Mudge, 1971 or the website of SAVE, Society of American Value Engineers). This paper concentrates on the first point. Users of the product could be private citizens, institutions, or public administrations. Each user has a different perspective concerning what is of value. This paper adopts the viewpoint of society and hence comes close to socio-economic cost-benefit analysis. By reducing the scope and looking at the benefits and costs of meteorological information services to one particular entity, such as a single company, the approach would be a standard financial cost-benefit analysis. Hence, this paper is positioned at the intersection of cost-benefit analysis, value engineering and impact assessments drawing from both engineering and microeconomics. The assessment excluded many beneficiary sectors that were considered hard to handle because of difficulties in either obtaining the data or expressing the benefits in monetary terms. Furthermore, VTT Technical Research Centre of Finland, the responsible organization for the assessment and the EVASERVE project, did not have the necessary expertise for such exhaustive coverage. The selected sectors were assumed to represent the greatest beneficiary sectors and the choice was purely pragmatic. The transportation orientation is clearly visible. road authorities and the development of one of the most advanced road weather systems in the world. However, FMI resembles, in most aspects, any other modern meteorological service organization with functions starting from different areas of research and development and extending to consulting and commercial services. The current (2008) organization chart is shown in Figure 1. The board of FMI consists of representatives from different ministries, FMI s own personnel representative, academia, industry and the press. Personnel totalled around 550 people (571 person-years in 2007), of which less than 10% were in administrative and corporate management functions (Finnish Meteorological Institute, 2008). The annual report for 2007 (Finnish Meteorological Institute, 2008) showed a total expenditure budget of 48.6 million Euros of which 16.2 million was covered by revenues from commercial services and external research funds (EU, national funds). The press is by and large one of the biggest commercial customer segments of FMI. FMI participates in the international meteorological community through, e.g. the WMO, NORDMET, EUMETSAT and EUMETNET. It maintains a profile of being a small but efficient and advanced meteorological service organization and prides itself especially on the automated production and distribution process of meteorological information. The assessment of benefits resulting from FMI s services covered both public and commercial services. The assessment did not consider the division between public and private services or the nature of beneficiary organizations. Rather, it viewed the services of FMI as a whole, taking into account the scope of restrictions described earlier. 2. Finnish Meteorological Institute (FMI) in brief 2.1. Governance and organization Since 1968, FMI has been providing weather and climatological services under the Ministry of Transport and Communications (MOTC). The reason for the Institute s position under MOTC was that FMI s informative role in society was recognised early. Later, the position proved successful because of extensive co-operation between Table I. WMO estimates of economic losses and fatalities resulting from weather (WMO, 2006). Year Economic losses estimated among WMO members (million USD) Total No. of weatherrelated fatalities estimated among WMO members Figure 1. Finnish Meteorological Institute organization chart (source: Finnish Meteorological Institute).

3 BENEFITS OF METEOROLOGICAL INFORMATION SERVICES THE FINNISH METEOROLOGICAL INSTITUTE Customer interfaces and market position FMI shares the Finnish meteorological information market with one other major player, Foreca Ltd. Foreca is the first and largest private meteorological service company in the country, established in 1996 having already expanded into other Nordic countries. It claims to be the biggest fully privately-owned meteorological service company in Northern Eurosope. It has won several large domestic and international customers and is particularly aggressive in providing advanced mobile services for various purposes to a wide range of consumer and corporate customers in the boating arena, road weather services, energy companies, press and media. The latest (2007) annual turnover figure is about 3 million Euros, with 20 personnel (Foreca, 2008). The market share division between Foreca and FMI is somewhat difficult to assess, but obviously this is a crucial parameter when thinking of the impact of the companies services. In the EVASERVE assessment it was roughly estimated that FMI s total market share is about 70%. Since FMI holds and manages all the meteorological observation infrastructure in Finland, the comparison must be done on the basis of customers. FMI provides all the services required by public institutional customers, such as defence and civil protection. In the commercial corporate and consumer market, the competition between FMI and Foreca is tough (as can be surmised from the above figures). All the benefit estimates given in this paper represent only the share provided by FMI. This should be kept in mind, in particular when considering the total benefits of meteorological information within the scope of Finland. The total figures are even higher, as Foreca has a noteworthy market share in the corporate and consumer market and the positive impacts are also generated through Foreca s services, which are not included in this assessment. 3. Methods and data 3.1. Impact mechanisms of meteorological information services The beneficial and/or negative impacts of an information service derive from mechanisms that are often very hard to assess because of the inter-linkages of the variables involved. Usually, impact mechanisms are a combination of empirical experience more or less thoroughly documented and logical deduction. In the best cases, empirical observations have been modelled so that different scenarios can be analysed, such as the marginal impacts of increased, improved or better-utilised information. Such empirical models are found extensively in engineering (e.g. safety impacts of road improvements), health care (e.g. impacts of smoking) and economics (e.g. impacts of tax cuts). Usually, the use of models requires expert interpretation, taking into account the reliability and accuracy and model characteristics, including the available source data. Evolution of the model can be summarized as follows: the conceptual idea of the impact mechanism is first formulated, described, empirically constructed and validated. The derived analytical model can then be applied to impact studies. In social and constructive sciences, such as economics and engineering and particularly in the former, the empirical patterns might be changing over time, sometimes quite swiftly. Table II lists the characteristics of impact assessment models. All these different types of models were applied in the FMI case. The majority of impacts relied on logical-descriptive models. It is virtually impossible and definitely not reasonable to incorporate a single approach to a complex impactassessment problem. Some impacts have more reliable sources of data and impact models behind them and some have to be analysed by being content with, for example, information gained from interviewing persons with presumedly adequate knowledge of the impacts. Table II. Impact assessment model types (modified from Leviäkangas, 2008). Model type Characteristics Data need examples Analytical Empirical, validated Empirical, unvalidated Logical-descriptive Heuristic Empirically validated, widely accepted model; produces results in what-if scenarios Empirically validated, but the model validity is discussed or criticized; not widely accepted; can be used for ex ante scenario work Continuation of empirical experience, e.g. trend models; not valid if the underlying dependencies or mechanisms change The dependencies can be illustrated or described but not analytically quantified The model appeals to perception of the reality and included associations between associated phenomena Known input variables Suggested input variables Historical data, time series No explicit or immediate data needs, some historical data or prior studies may back the argumentation; data serving deduction and induction; interviews and gathering of insights and experiences and other qualitative data usually utilised extensively

4 372 P. LEVIÄKANGAS AND R. HAUTALA Meteorological information service Proactive maintenance and train control Traffic and train safety Optimisation of resources through better planning and more efficient operation ( ) Track availability Safety benefits ( ) Time savings ( ) Trains on time Passengers Freight Railway workers and train staff Figure 2. Impact mechanism of meteorological information on railway operations an example of descriptive modelling (modified from Hautala and Leviäkangas, 2007). Pre-study Literature Interviews, workshops Impact mechanisms Statistical analysis; review of empirical data; analytical model construction Impacts Pricing, cost data Analyst Benefits Validation by experts Figure 3. The overall assessment process, repeated for each sector (Hautala and Leviäkangas, 2007). Whilst this is, in most cases, the appropriate line of action, it poses the problem of producing results that are not uniform and not easily comparable with each other. Hence the role of experts at the back-end of the impact analysis process increases when conclusions are drawn. In the FMI case, the impacts on, for example, railways were based on logical-descriptive models (Figure 2) and verified with some interviews and literature. Empirical models were non-existent. In other cases, the impacts could be analysed through quantitative, analytical model specifications, as was done for safety impacts on road traffic (Leviäkangas et al., 2008). The model assumed that drivers receiving relevant weather information would lower their speed, and hence the accident numbers and severity would be lower. Two models were behind this assumption: first the analytical (but empirically unvalidated) model (Nilsson, 2004) on safety reduction numbers and severity, and second the empirical model on information impacts on driver behaviour (Peltola, 2000) The benefit assessment process The logic behind the assessment process was as follows: the impact mechanisms are first envisaged or formulated, then the actual impacts are assessed or estimated, and finally, when appropriate unit prices or their estimates can be attached to the impacts, the benefits can be estimated. Figure 3 illustrates the methodological approach applied in the assessment and value analysis of FMI s information services. This process was repeated for each analysed sector. Transportation was divided into sub-sectors per mode, which were analysed as separate entities.

5 BENEFITS OF METEOROLOGICAL INFORMATION SERVICES THE FINNISH METEOROLOGICAL INSTITUTE Pricing of impacts The task of assigning a price tag to impact factors is challenging and has been described thoroughly by Leviäkangas (2008). A short description of the pricing regimes used in this assessment is given here Accident costs Whenever, during the course of assessment, meteorological information was assumed or known to reduce the number of accidents particularly in road transportation, the official accident unit costs adopted by the Finnish Road Administration were incorporated. The accident unit costs comprised a part that covered the average material damages of a road accident. These costs are relatively easy to obtain from the statistics of insurance companies when they report the total of paid compensations to insured car-owners. Person injuries are calculated on the basis of data gathered from hospital and health care costs when tending to injuries, and from loss of work input (loss of production) covered by the Social Insurance Institution of Finland, which receives funds for compensation from obligatory payments from employers and employees. The loss of production in the case of fatal accidents follows the same idea, i.e. the lost share of an individual s contribution to the gross domestic product, excluding the share of the individual s own consumption. The loss of well-being and cost of human suffering are based on Nordic studies on willingness-to-pay and form the largest component of accident costs. The unit costs adopted by the Road Administration are Euros for a fatality, Euros for permanent injury, Euros for difficult but curable injury and Euros for minor injury. These unit costs are published annually by the Road Administration (Finnish Road Administration, 2006) and the Ministry of Transport and Communications (Ministry of Transport and Communications Finland, 2006). When the approximate impact of road weather information delivered to drivers is known, it is possible to assess the reduced number of accidents and then calculate the safety benefits using the aforementioned unit costs. Whether the accidents occur on roads, rail, water or in the air, the same unit costs are applied across the different modes of transportation Time costs Whenever meteorological information has the impact of reducing travel or transport time, there is a benefit for the traveller and transporter. The values of time used in Finnish transport investment calculations are based on average salaries of transport operator personnel (i.e. bus drivers, truck drivers and train engineers) and on those of business travellers. One component consists of the time values of commuters and a small amount of those of leisure time travellers. These last two components are based on willingness-to-pay studies carried out in the Nordic countries, while the other components are based on statistics of labour costs (Ministry of Transport and Communications Finland, 2006). The Finnish Road Administration and Ministry of Transport and Communications update and publish these unit costs frequently, and they are applied across the modes of transportation. Cost savings in operations and other impacts. Whether the operations were related to freight or passenger haulage, infrastructure maintenance, construction, or any other type of activity, the method of assessing the cost savings due to meteorological information were based primarily on interviews and confidential statistics provided by those interviewed. Sixty managers and experts were interviewed from various fields: road transportation (6); rail transportation (3); aviation (operations, 3); marine and inland waterway transportation, including ice-breaker operations (11); logistics operations, logistics services and supply chain management (6); road infrastructure management (4); rail infrastructure (1); aviation (terminal and field operations, 1); construction (2); facilities management (1); search and rescue covering both aviation and marine (3); energy production and distribution (5); civil protection and environment (4); insurance (2); research (various fields, 4); and meteorology (4). All the interviews were in-depth and unstructured, except for logistics and supply chain management where some issues were considered on Likert s scale (a simple scale of 1 7; 1 = no impact, 7 = very high impact) to prioritise the impacts of meteorological information. The full description of interview results can be found in the study by Hautala and Leviäkangas (2007). This also includes detailed descriptions of benefit assessments that are too extensive to be repeated here. The interview sample cost information was then very conservatively up-scaled to cover the whole of Finland. When uncertainties of up-scaling where considered too high, the monetary values were rejected entirely. The applied pricing methods and techniques are listed in Table III. The table demonstrates the wide variety of techniques used in the FMI case, and the fact that not all techniques are suitable for all situations. For agriculture, the cost savings were based on updating the previous benefit-cost studies by Ansalehto et al. (1985). This study included data from 230 farmers from central and southern parts of Finland. It was deemed to be the best available material and could not be significantly improved by using more current but much smaller samples Benefits with current information and perfect information Two important concepts were applied in this part of the research: value with current information, and, value with perfect information.

6 374 P. LEVIÄKANGAS AND R. HAUTALA Table III. Input data, impact models and valuation regimes. Sector Input data Valuation, pricing Transportation Road Pedestrians and cyclists Waterways and marine Aviation Rail Logistics Construction, facilities management Literature, statistics, interviews with road hauliers and infrastructure managers Literature, statistics, interviews with insurance companies Literature, statistics, interviews with search and rescue companies, shipping lines, oil combating organizations and environmental protection Literature, statistics, interviews with airline operators and terminal managers, company information Literature, statistics, interviews with rail traffic managers and infrastructure maintenance managers, company reports Interviews with logistics operators and service providers and supply chain managers, company information Literature, statistics, interviews with contractors and facility managers Internalised 1 unit cost values for accidents, shadow pricing 2 ; unit time costs of road users, market data, willingness-to-pay; expert estimates on infrastructure cost, based on market data. Internalised unit cost values for accidents, shadow pricing Internalised unit cost values for accidents, shadow pricing; estimates based on the actual cost of oil damage prevention, historical costs; estimates based on market data and experience of shipping lines, market prices Internalised unit cost values for accidents, shadow pricing; estimates based on airline operators views and experience, market data; expert estimates on infrastructure management costs, historical costs and market prices Internalised unit cost values of accidents, shadow pricing; estimates from interviewed experts on maintenance costs, historical cost. Interviewees perception of cost impacts, based on market knowledge and experience Interviewees perception of cost impacts on the construction sites, historical costs and market data; analyst s estimates of reduced cost of long-term damage Energy production and distribution Literature, statistics, interviews with energy companies and network operators Interviewees and analyst s estimates of cost-saving impacts, historical costs Agricultural production Literature Values updated from previous studies using consumer price indices; cost of damage 1 Internalisation means that the costs of third parties are included in the calculus at hand to capture a wider, more holistic view; see e.g. Mishan (1972) or Pearce and Nash (1989). 2 Shadow pricing is a pricing technique that reflects true costs or prices better than market prices, for example in cases where market prices fail to capture all costs to third parties; shadow pricing always includes internalisation; see e.g. Mishan (1972) or Pearce and Nash (1989). These concepts, introduced by Williamson (1982), are particularly useful in normative analysis and supplement value analysis and cost-benefit analysis. For example, information on difficult ice conditions in the Baltic Sea will benefit many users. In fact, pre-notifying the ice-breakers when crew lists are drawn will enable operational work time savings for the ice-breaker operator, while delivering more reliable information to cargo vessels will aid them in assisting the breakers well in time and improve the fuel economy and time reliability of the vessels. The chain of events from forecasted meteorological phenomena to the decisions of meteorological service users is complex, yet easy to foresee. In the FMI case study, the concept of perfect information was introduced in order to have a reference system that the organization should aim at so as to produce the highest benefits for the society. The concept was deployed by asking the interviewees how they would see their operations affected if they had all the necessary meteorological information on hand, at the time requested and with complete reliability. The assessment of benefits with current and perfect information was not always possible in both cases. For example, in logistics and supply chain management the current situation (i.e. how well the information was used and what the current impact was) was not well known by the interviewees, although they all recognised the need to use meteorological information better. In marine and waterway transportation, however, the potential for better utilisation of meteorological information was regarded as extremely high by the interviewees. In fact, the figures became so high that finally no estimates were willingly given either by the interviewees or by the analysts doing the assessment. In other words, weather information is an absolute necessity and of extremely high value in maritime and waterway operations. It should be noted that not only information value attributes such as reliability, timeliness and content are relevant when regarding perfect information, but also attributes such as availability, accessibility and

7 BENEFITS OF METEOROLOGICAL INFORMATION SERVICES THE FINNISH METEOROLOGICAL INSTITUTE 375 effectiveness play a role. Perfect information is in fact the product of value attributes that are all fully met in the particular utilisation context Literature material for the FMI case analysis The literature review resulted in a list of more than 90 studies, articles and reports on the benefits of meteorological information. Some of these were selected for closer examination. Most (18) of the papers analysed were on weather and road transportation with particular emphasis on the effect of weather-controlled speed limits, driver information and pro-active road maintenance operations. Two articles discussed rail transportation and weather and only one addressed marine transportation in combination with weather. Two sources considered aviation and 10 referenced the benefits of meteorological information in general. Benefits of meteorological information to other sectors were poorly represented in the actual review sample and were later covered by individual researchers/analysts. The material was evaluated in terms of reliability and validity (reported and described methods, sample sizes, concreteness and clarity of results). The full reference lists are available in the study by Hautala and Leviäkangas (2007). 4. Summing up the methodology and results The summary of used input data and valuation regimes for assessing the benefits of meteorological information and services delivered by FMI is given in Table III. The reliability and validity of assessments is naturally dependent on input data and the suitability of the applied pricing regimes. These can be judged fairly well from the table. Accident and time costs are traditionally relevant to transportation, and the unit costs adopted by the Ministry of Transport and Communications were incorporated in the benefit assessment of FMI s services. The benefits come through impacts, assessed by analysts relying on empirical impact models, descriptive models and information from literature. Direct information from company and organization representatives as well as wide use of statistics were also the cornerstones of impact and benefit assessment. All costs and benefits are given in 2006 prices. The results of the FMI case concerning the benefits of its information services were explicit. The total value of benefits, generated each year, exceeded the annual budget of the Institute many times over. The benefits were calculated for the current situation with existing services, and then assuming perfect information the theoretical maximum potential of benefits was assessed. This projection was done simply by assuming that all potential users of meteorological information have access to it, are using it and are adjusting their behaviour and decisions accordingly. The validity of this process is directly dependent on the validity of impact model and available pricing data. The validity of the results is discussedbrieflyalsoinsection5. The results of the FMI case are summarized in Table IV. Current services generate roughly million Euros annual benefits for the analysed sectors; it was estimated that by enhancing the distribution systems and availability of service and by improving service quality, the benefits could accrue up to million Euros per year. The annual budget of FMI being around million Euros, the estimate for annual benefit-cost ratio for existing services is at least 5/1 and the potential is up to 10/1. These benefit-cost ratios are calculated yearly [i.e. annual budget of FMI/annual benefits], and thus no discounted cash flow approach is applied. Taking into account that many sectors (such as defence, civil protection and health-care) were excluded from the calculation, the estimates are quite conservative. It should also be noted that the not calculated statement explicitly includes the assumption of the analysts that there exists a tangible benefit but which was not calculated in monetary terms because of lack of data, practical difficulties or confidentiality aspects. On the other hand, part of the FMI budget is covered by payments from beneficiaries, i.e. the paying customers of FMI, and these payments should be subtracted from the benefits. However, these revenues from customers, being less than 20 million Euros per year, do not change the clear pattern: FMI s services are extremely beneficial. In fact, as these revenues (including also other external cash inflows) occur within the system i.e. should be subtracted from the benefits but also from FMI s total budget the conclusion from the society viewpoint remains unchanged. Private beneficiaries (meaning the paying customers) of course have a different perspective and their system includes payments for the services and benefits they either realize or perceive. 5. Discussion The FMI case analysis applied the theories and methods of information economics, value engineering and costbenefit analysis. The analysis covered transportation (including both infrastructure management and traffic), logistics and supply chain management, construction and facilities management, energy production and distribution and agriculture sectors. Each sector had to be analysed using different approaches and valuation methods. The results show that the estimated benefits of FMI s current services to the sectors analysed total roughly million Euros per year. These benefits are generated year after year on a rolling basis, which makes FMI an extremely profitable investment for society given that the annual investment is only some 50 million Euros. With improved delivery systems (such as mobile services, tailored push-services) and easily accessible services, even more benefits can be generated. The theoretical additional potential for the analysed sectors is roughly between 166 and 283 million Euros. Implicitly, and probably to the satisfaction of FMI management and its

8 376 P. LEVIÄKANGAS AND R. HAUTALA Table IV. Benefits of Finnish Meteorological Institute s services. Sector Principal impacts and benefits Value of current benefits with current information Value of additional potential benefits with perfect information Road transportation Reduction in number of accidents, more efficient infrastructure maintenance Pedestrians and cyclists Reduction in number of slipping accidents, more efficient maintenance Waterways and marine transportation Reduction in number of accidents and environmental damage, more efficient operations, reduction in fuel consumption Aviation Reduction in number of accidents and emissions, more efficient operations, time savings for travellers Rail transportation Higher accuracy of train timetables, passenger and freight time savings Logistics, supply chain Higher predictability of deliveries, reduction in storage costs and risks (accidents, damage) Construction, facilities management Prevention of mould and mildew damage, more efficient maintenance (worksites and courtyards) Energy production and distribution Energy production capacity and availability predictions, prevention of damage and production and distribution interruptions Agriculture Crop protection from damage, pest control and damage reduction, harvest timing Accidents 9 18 million Euros Accidents 9 18 million Euros Maintenance 2 million Euros Maintenance, not calculated Slipping accidents 113 million Euros Slipping accidents million Euros Maintenance, not calculated Maintenance, not calculated Accidents million Euros Not calculated Oil combating 10 million Euros Rescue operations, fuel savings etc. 1 million Euros Accidents 46 million Euros Around 4 million Euros in total Fuel savings 4 million Euros Airport maintenance 3 million Euros Environmental damage 1 million Euros Time 0.3 million Euros Time 0.2 million Euros Not calculated 5 million Euros in total Construction 10 million Euros Construction 10 million Euros Facilities management 5 million Euros Facilities management 5 million Euros Prevention of interruptions 2 million Prevention of interruptions 3 8 million Euros Production predictions 3 million Euros Euros Peat production 5 million Euros Production predictability 5 15 million Euros Increased crops 12 million Euros 3 15 million Euros in total Crop damage 12 million Euros More efficient cultivation 8 million Euros Other benefits 2 million Euros Total million Euros million Euros

9 BENEFITS OF METEOROLOGICAL INFORMATION SERVICES THE FINNISH METEOROLOGICAL INSTITUTE 377 state governance, this means that FMI has been rather successful in its service obligation and has furthermore succeeded in delivering services on a commercial basis, thus adding the beneficial impact. Finally, there is still room for substantial improvement of performance, if performance is measured by the benefits a meteorological institute is able to deliver. It is worth noting here that only a few selected sectors have been covered. There are other sectors and services that might prove to be at least as beneficial as those addressed. For example, advanced flood forecasting and warning systems could help to mitigate substantial economic losses in many countries, even in Finland where especially in the northern parts of the country rapid snow melting can cause considerable damage to infrastructure (roads, houses, bridges) and agriculture. When validating the results it must be acknowledged that some of the figures are crude approximates. Where there were reasonable impact models available, such as in road transportation, and a good knowhow and understanding among the researchers and interviewees, it can be assumed that the results are as reliable as they can be at present. Also it is believed that the figures relating to maritime transportation and construction are on a fairly solid basis because of the confidence we had in the statistics and interviewees perceptions and experience. With few exceptions rail transportation estimates lacked prior studies, but the value of meteorological information was explicitly recognised by railway managers. Analysis of logistics and supply chain operations was based on interviews and subjective scaling of impacts, and hence the reliability is perhaps weakest in this section. However, it is believed that there is a substantial benefit potential that has not yet been thoroughly assessed. Judging from the FMI case, it seems evident that the value of information will play an increasing role as societies grow ever more information intensive. The role will be a serious one: private sector stakeholders must consider their business development efforts and the public sector their own information services and services they procure from the private sector from this particular angle: will the information be of value in financial and economic terms? The FMI case showed clearly that the value was there, and moreover well above initial expectations. The market position of FMI was taken into account by assuming it had a 70% share of the meteorological information market. Thus, the total benefit assessment for the whole of Finland can be obtained by simply adding the missing 30%, most of which is the market share of Foreca Ltd, the private meteorological service provider. However, many services provided by both FMI and Foreca require a national observation network that is managed and owned by FMI. This being the case, it is easy to see that FMI enables an even larger benefit generation than reported here. The value creation process is actually much longer than it appears to be at first glance. Regarding the case of FMI, for instance, the data observation network, information infrastructure and organization have been built up over decades, and the initial heavy investment has not been instantly profitable in the socio-economic sense. This problem has been identified in less developed countries, where infrastructure and institutions are still in the development phase. The benefits really start to accrue after a significant lag, and once the critical thresholds have been overcome, the next cycle of investments are easier to justify. The service layer building phase is critical: when good quality services are delivered efficiently and used widely and they impact on system performance and behaviour, the real benefits start to accrue. This supercycle of institutional and infrastructure development is illustrated in Figure 4. The benefits start to accrue after the observation network and organizations have been set up and after the service layer of the whole architecture starts to operate efficiently (Figure 5). The service layer cannot be built without the ground layers, such as observation infrastructure, institutional arrangements and a regulatory framework being there first. It is the services for customers and society that bring the benefits, not the observations nor the refined models. This commercial aspect, sometimes unwelcomed by civil servants, must not be neglected but instead developed at an increasingly aggressive pace. As with any other public service, they are not there for administering but to serve the people and communities. However, we definitely do not wish to undermine or understate the need for functions (e.g. research and development, and model development) that precede the service and distribution functions. Without those, there are obviously no services. As further research is needed, more detailed studies on the beneficial impacts of meteorological services, possibly even adopting different methodologies and views, would be useful. Certainly there is a global need for meteorological organizations to justify their budgets, and showing the value-for-money that society is getting is one argument, if not the strongest one. The approach in the present study also deviates from the popular climate change issues, which are undoubtedly of different magnitude, and focuses on everyday services. Even the preparation for more volatile weather conditions in different parts of the world will require that the service layer is functioning well: it will positively enhance the beneficial impacts. Looking at the services more closely from the value engineering viewpoint is one possible path towards improving the service, penetrating the market more efficiently and ensuring that the information reaches the right audiences at the right time. Another path of research is perhaps not appreciated by all meteorological professionals, but it is raised nonetheless. The liberalisation aspects of the information service market is worth examining. How could this be done? What type of institutional and legal aspects would have to be considered? How could one ensure high quality research and development and forecasting under commercial pressure? How should the different layers be organised and re-engineered, the observation

10 378 P. LEVIÄKANGAS AND R. HAUTALA 100% Commercial, tailored value-added services, targeted distribution Total benefits or costs Production organisation Basic public services, collective distribution Data collection infrastructure & information technology Service systems Total cost of service provision Benefits % Degree of information utilisation, accessibility and impact Figure 4. Value creation super-cycle of a public information service institution (Hautala and Leviäkangas, 2007). Value-added services -automated push services, tailoring, mobile services, corporate services Basic service architecture -forecasts, research, modelling, mass media products Basic physical & organisational architecture -observation network, organisation and facilities, ICT The regulatory foundation and mandate -national and supranational legislation, international commitments Benefit generation, value creation Figure 5. A layered view of meteorological service organization (Leviäkangas et al., 2008). infrastructure in particular? Unless the meteorological community is proactive in this respect, others who do not have the special knowledge of the field will launch processes that may lead in undesirable directions. Business-oriented research into the value of meteorological information for different users is surely a potential stepping-stone for increased cashflows to meteorological organizations. Not all information has to be free of charge: sometimes it makes sense to charge the full value, especially in cases where meteorological information serves other commercial functions such as retail sales or leisure activities. However, this type of business analysis and research must be done with care and without losing sight of the priorities. Based on feedback from those in the interviewed group who were FMI s customers, the business-to-business marketing and delivery of meteorological information services still requires a lot of effort. It is the authors opinion that FMI is at the forefront of commercial activities, but even during the course of the EVASERVE project new clients were acquired by FMI through identification of new customer needs. This was a byproduct of a relatively short interview carried out first by external analysts and it is believed that only a fraction of the full potential has been used so far. Acknowledgements The authors wish to thank all VTT research colleagues who contributed to the evaluation of FMI s services: researchers Risto Öörni, Sanna Sonninen, Jenni Eckhardt and Anna-Maija Hietajärvi, and senior researchers Jukka Räsänen, Jarkko Lehtinen, Martti Hekkanen and Mikael Ohlström. FMI senior researcher Ari Venäläinen and meteorologist Seppo Saku and senior researcher Lasse Makkonen from VTT were also members of this great team, which is credited for the FMI case study. We particularly express our thanks to Pekka Plathan, the former director general of FMI. We gratefully acknowledge the help and support received from many other FMI staff

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