Data has been playing an important role in guiding business management and strategic planning way before the digital revolution got its start. These days, however, leveraging this critical resource is more challenging than ever. Capturing and analyzing the overabundance of available business data– which itself is constantly evolving– is often not enough to maintain a competitive advantage.
Over the past few years, AI-powered technology has been a game-changer in data capture and analytics. AI together with machine learning, are giving companies of all sizes the tools they need to derive actionable insights and make critical decisions– often in real-time. Now that these technologies are maturing, smaller enterprises, in particular, have the space and the opportunity to reclaim their competitive edge.
The key to better brand development, market share, and operational efficiency, however, actually comes from an unlikely place: better business metrics. Most businesses these days are already using a range of automated performance metrics and KPIs to help them make effective decisions. But these metrics are based almost exclusively on internal data sets, for instance, sales conversions and volume, profit reports, order turnaround times, and customer satisfaction surveys.
The problem is that competing businesses operating within the same market also have access to the same or similar types of intelligence and may thus reach similar conclusions. For this reason, the companies that can complement their traditional performance metrics with external market data in creative ways will be the ones most likely to succeed in the coming years. And, the more innovative and out-of-the-box these external data sets are, the better.
For this reason, the companies that can complement their traditional performance metrics with external market data in creative ways will be the ones most likely to succeed in the coming years.
This is where so-called alternative data comes in.
What is Alternative Data?
As the name implies, alternative data refers to any information that doesn’t come from traditional, internal sources. The majority of alternative data is based on external information and databases that are publicly available across the web. This data is extremely broad in scope and can include social media posts, online reviews, website traffic, and media mentions, all of which can be used to gauge customer sentiment. On the more creative side, it could also include analysis of live traffic cameras to determine foot traffic at various times of the day, government statistics, weather forecasts, and even satellite imagery.
Alternative data provides both new types of business intelligence and new ways of understanding traditional data. When this data is paired with AI-enhanced analytics tools, businesses are able to gain deeper, more accurate insights and fill in any intelligence gaps.
They can also increase their ROI. According to a recent report from Deloitte, businesses that leverage alternative data in their performance analytics tend to outperform benchmarks about 13% better than traditional approaches to analytics.
This isn’t surprising. Sectors such as e-commerce and travel, and more recently, the financial services industry, have been relying on alternative data points for several years. According to one recent study, two-thirds of UK financial services companies are now leveraging alternative data to improve their decision making. Meanwhile, major retailers are using data taken from satellite images to decide where to open new locations and how many customers are shopping at their competition based on parking lot traffic.
AI and Alternative Data’s Impact on Business Performance
By leveraging technologies such as AI and machine learning and combining them with the insights available from both traditional and alternative data sets, businesses create a dynamic, multi-faceted performance feedback loop. This in turn can lead to better market intelligence and customer profiling.
For instance, say a company is deciding whether or not to pursue an emerging market, it could:
· Monitor consumer sentiment specific to the market through social media shares, as well as forum entries and media mentions
· Monitor sales statistics for complimentary products or services
· Identify their competitors in the market and record the market’s response to their promotional campaigns as well as any new product or service offerings.
· With a retail or High Street business, customer traffic can be monitored.
· Hire mystery shoppers to record various aspects of the customer experience within the company as compared to their competitors and then further compare this to internal sales data.
Armed with such intelligence, the company can better understand how to best develop and promote their products in the given market. This data can also be used to improve their offerings in the future, engage and energize their customer base and build a sense of trust.
In conclusion, alternative data can have a significant impact on a company’s performance and future market share. By looking at their business intelligence from a fresh angle, it gives them proprietary insights that can improve decision making and allow them to focus their resources in the most effective ways, such as developing their brand, improving customer experience, and dynamically pursuing new opportunities.