Harnessing the power of external data

Many businesses have made significant progress in collecting and analysing data from their operations. However, only a small percentage of companies have fully realised the potential of linking internal data with data from third parties, vendors, or public data sources. It's a waste of time to ignore such external data.

Organizations that stay current with the expanding external-data ecosystem and successfully integrate a diverse range of external data into their operations can outperform competitors by unlocking growth, productivity, and risk management improvements.

The COVID-19 crisis demonstrates how significant external data can be. Consumer purchasing habits, activities, and digital behaviour have shifted dramatically in a matter of months, rendering pre-existing consumer research, forecasts, and predictive models obsolete. Additionally, as organisations sought to comprehend these shifting patterns, they discovered little useful information in their internal data. Meanwhile, a wealth of external data has the potential—and continues to have the potential—to assist organisations in planning and responding at a granular level.

While external data sources have enormous potential, they also present several practical difficulties. To begin, gaining a basic understanding of what is available requires considerable effort, given the fragmented and rapidly expanding external-data environment. Thousands of data products are available via a variety of channels, including data brokers, data aggregators, and analytics platforms, and the list is growing daily. Additionally, determining the quality and economic value of data products can be challenging.

Additionally, efficient use and operationalization of external data may necessitate updates to the organization's existing data environment, such as system and infrastructure changes. Additionally, businesses must be mindful of privacy concerns and consumer scrutiny when utilising certain types of external data.

These are significant but surmountable obstacles. This article discusses the benefits of utilising external data sources, illustrates them with a variety of examples, and details how to get started. These include establishing a team dedicated to external data strategy and cultivating relationships with data brokers and marketplace partners.

Additionally, company leaders, such as the executive sponsor of a data initiative and the chief data and analytics officer, as well as their data-focused teams, should learn how to rigorously evaluate and test external data before using and operationalizing it at scale.

Conclusion

Across industries, businesses have begun to successfully leverage external data from a variety of sources. In this space, the investment community is a pioneer. To forecast outcomes and generate investment returns, investment firms' analysts and data scientists have compiled "alternative data" from a variety of licenced and public data sources, the majority of which are derived from the "digital exhaust" of an increasing number of technology companies and the public web. Investment firms have established teams to assess the effectiveness of hundreds of these data sources and providers in making investment decisions.

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