Alternative Data – Beyond Finance

When one thinks of?Alternative Data, one might think immediately of large institutional funds trying to predict market trends. With a stretch, one might even think of a bank or fintech using Alternative Data to aid financial inclusion. In this blog post, however, I’m going to showcase how Alternative Data can be used by any company, big or small, in any industry to help them grow, attract new clients, and service their existing clients better. This difference in approach comes down to the definition of?Alternative Data. While traditionally, it has been thought of as non-financial data to assist a financial institution, I prefer to see Alternative Data as any data outside of your industry.

So, whether you own a small restaurant, an international logistic company or an energy developer, there is?Alternative Data?to help you become data-driven!?

Alternative Data for Property

Location, location, location! If you’ve ever heard someone from the property sector say this, it seems to be one of those things that only a chosen few understand. But how do property developers know where to build their next big mall or low-cost housing units? Why do some developments define a new area while others become white elephants? Well, data has a lot to do with it. And Alternative Data more specifically. From traffic patterns to foot traffic, socio-economic, geographical trends and global technology developments, this data can help property developers decide where to start laying foundations. Once they start, the ability for data to drive the placement of stores, what type of attractions they offer, and whether they should become mixed-use is simply endless.?

In fact, the size of the location analytics market is estimated to grow from $11.37 billion in 2020 to $31.13 billion by 2027, at a CAGR of 15.5% (Allied Analytics, 2022). The Deloitte report ‘Data is the new gold - The future of real estate service providers’ specifically mentions IoT devices for collecting and responding to real-time data – something I am particularly passionate about (Deloitte, 2018). McKinsey speaks about the ability of non-traditional data sources to predict real estate prices in their report ‘Getting ahead of the market: How big data is transforming real estate’ (McKinsey & Company, 2018). The report mentions proximity to points of interest, something that real estate developers are taking into account more often than before (and sometimes influencing).?

Alternative Data for Health

The rise of IoT devices has enabled hospitals and health care providers to collect more real-time data than ever before. Alternative Data for healthcare ranges from monitoring ward temperatures to receiving real-time blood pressure and glucose levels from critical patients. The ability of machine learning algorithms to perform predictive analytics and alert the relevant doctor or provider has not only allowed the healthcare sector to provide a better service, but has also allowed patients to be comfortable knowing that any potential risks and issues will be immediately dealt with by the experts who are aided by state of the art, real-time data analytics. Of course, unscaled service providers have also tapped into this by offering personalised solutions. As Hemant Taneja says, “Today, a small group of entrepreneurs can improve the health of more consumers than an entire hospital system can by designing software-defined solutions for staying healthy” by leveraging cloud-based analytics services (Taneja, 2014).

Going one step further, the 2018 paper ‘Uses of Alternative Data Sources for Public Health Statistics and Policymaking: Challenges and Opportunities’ analyses the ability for the use of electronic health records, environmental sensors and social media data to affect healthcare policymaking (Zachary H Seeskin, Felicia LeClere, Jaehoon Ahn, & Joshua Williams, 2018). While public and private sector health insurance claims have been used for some time, more non-traditional sources are being scrutinised for usefulness.?

Indeed, Alternative Data can even be used to aid in better health outcomes for individuals and communities (Beerman, 2021).

Finally, for investors, the famous story of the Johnson & Johnson jet stayed parked near Actelion for five days before Johnson & Johnson announced its $30 billion acquisition of Actelion (Khorshidi, 2020).

Alternative Data for Hospitality

The hospitality sector has been hard hit over the last two years, with lockdowns in various places globally still ongoing when writing this article. The hospitality sector should be using any form of data it can get its hands on to optimise its offering to consumers while ensuring that clients are continuously engaged and know about offers, events and deals. Understanding flight trends, whether consumers are spending on luxuries, and where consumers prefer to travel, given global events are changing more regularly than ever before. Considering the fact that many consumers can now work remotely, the ability for long term stays has also increased. The hospitality sector should be analysing this data in real-time to offer the most contextual offers to clients based on where they live, how often they travel and their unique consumer preferences. All of this behaviour can be analysed by assessing social media data and various other alternative sources.

You can also find a range of alternative data relating to the hospitality industry, from app ratings for bookings apps to headcount at significant hotel and travel groups. One could even look at web traffic and job listings of the major hotel chains

Alternative Data for Stem Education and Entrepreneurship

STEM education is a passion of mine, so how can we utilise Alternative Data to improve both STEM education offerings and access to STEM education on a global basis? The growth in the use of data opens opportunities for entrepreneurs to participate in the data value chain, from collecting data to data analysis and building decision-useful stories from data. Growing trends such as IoT also allow individuals to become entrepreneurs by collecting data and using democratised cloud services to store this data and sell it to third parties. In my view, STEM education should focus on teaching the fundamentals and encourage students to use their newfound knowledge to create income streams for themselves, build businesses, and offer employment opportunities.?

Entrepreneurs are, after all, how we improve our job offerings and reduce unemployment. So let’s start educating everyone to take advantage of the massive opportunities across the data value chain.

From an improvement perspective, the 2009 paper ‘Alternative data-analysis techniques in research on student learning: illustrations of a person-oriented and developmental perspectives’ (Gert Vanthournout, 2009). The paper looked at using alternative data to aid the design and implementation of adaptive instructional methods and remedial trajectories for different learning profiles.

Alternative Data for Infrastructure

IoT devices have enabled what for so long was a purely theoretical concept – digital twins. I, however, would like to position that Alternative Data can actually be used before infrastructure deals are finalised, and the infrastructure is built.?

I believe that Alternative Data can enable deals to become bankable by collecting and making accessible the data used to prove bankability. A solar farm, for example, needs a history of solar data to prove the business case, while a toll road may require a history of vehicle data to assess viability.?

Infrastructure finance is a heavily data-dependent industry – making the use of Alternative Data highly valuable to this sector. I’m working on a few things in this space – if you’re interested, reach out to me.

Alternative Data for Retail?

I interviewed Michael Clampett from Attacq for an analytics podcast where he spoke about the extensive opportunities for data analysis in the retail environment (Rand Merchant Bank, 2020). It is clear that whether you’re a mall owner, a multinational retailer, a supplier, a logistics company or simply a small store, data is available for you to be optimising your offerings. It just takes some out of the box thinking!

Alternative Data for ESG

ESG is becoming an increasingly important factor for both investors and the public. As we face environmental and societal challenges, the question is continually asked "What can corporations do to better serve the communities in which they operate and the environment?". ESG data, however, is difficult to calculate and requires not only Alternative Data but some advanced analytics as well. Risk Insights, for example, use machine learning and AI to offer their ESG sustainability rating tool. The data that is used as input includes both traditional and alternative sources.

I hope that this article gave you something to think about regarding the may wide use cases for Alternative Data.

Bibliography

Allied Analytics. (2022, March 22).?Location Analytics Market Expected to Reach $31.13 Billion by 2027. Retrieved from Digital Journal: https://www.digitaljournal.com/pr/location-analytics-market-expected-to-reach-31-13-billion-by-2027

Beerman, L. (2021, August 16).?Alternative Data Paired with Social Determinants Help Redraw Patient Health Outcomes. Retrieved from HealthLeaders: https://www.healthleadersmedia.com/payer/alternative-data-paired-social-determinants-help-redraw-patient-health-outcomes

Deloitte. (2018).?Data is the new gold - The future of real estate service providers.?

Gert Vanthournout, V. D. (2009). Alternative data-analysis techniques in research on student learning:.?Reflecting Education, 35-51.

Khorshidi, R. (2020, February 12).?Alternative medical data, AI, and new bundlings/unbundlings in healthcare. Retrieved from Medium: https://rezakhorshidi.medium.com/alternative-medical-data-ai-and-new-bundlings-unbundlings-in-healthcare-b6a5e1a9b281

McKinsey & Company. (2018, October 8).?Getting ahead of the market: How big data is transforming real estate. Retrieved from McKinsey & Company: https://www.mckinsey.com/industries/real-estate/our-insights/getting-ahead-of-the-market-how-big-data-is-transforming-real-estate

Rand Merchant Bank. (2020).?Data analytics, no longer a hard sell for retail. Retrieved from Rand Merchant Bank: https://www.rmb.co.za/page/data-analytics-no-longer-a-hard-sell-for-retail

Taneja, H. (2014, June 29).?Unscaling The Healthcare Economy. Retrieved from TechCrunch: https://techcrunch.com/2014/06/28/software-defined-healthcare/

Zachary H Seeskin, N. a., Felicia LeClere, N. a., Jaehoon Ahn, N. a., & Joshua Williams, O. o. (2018). Uses of Alternative Data Sources for Public Health Statistics and Policymaking: Challenges and Opportunities.?JSM.