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Even the smallest droplet of data can impact business strategy—but sifting through business data can feel like drinking from a firehose. Business intelligence (BI) tools collect and present business data in digestible views, like reports, charts, and dashboards. These services make it easy for stakeholders to gain insight into business performance.
The most useful business data, however, isn’t always found in a business’s financial statements or SEC filings. It’s often found in alternative data sources.
What is alternative data?
Alternative data comes from non-traditional sources and can provide a more detailed and accurate picture of a brand. Financial investors can use this data to decide which brands to invest in or partner with, while brands themselves can use alt data to inform internal strategy and business decisions. It can also help business leaders generate holistic risk assessments, identify market shifts and emerging trends, and capitalize on potential revenue streams.
In short, alternative data providers enhance business insights by providing valuable data insights that can’t be found anywhere else. Let’s look at a few examples.
Understanding alternative data
Data providers collect alternative data from a wide range of third-party sources—from satellites and online forums to individual consumer devices. Most commonly, alt data comes from:
- Social listening tools monitoring a brand’s online reputation
- Purchase data from consumer devices connected to the Internet of Things
- Online reviews that show public reception of a brand’s products and services
- App usage and website traffic showing upticks or downticks in new users
- GPS data and satellite imagery monitoring retail foot traffic and consumer movement trends
- Job posting data showing employee growth
- Private jet movements revealing high-profile meetings between executives and potential business partners
How alt data complements traditional data sources
Traditionally, business leaders relied on data produced by the companies themselves. Official sources like press releases, business profiles and company information, and SEC filings present one picture of a brand’s performance.
But user behavior, public sentiment, and externally available business movements all generate alternative data. Because alternative datasets come from third parties, they can complement traditional data sources by presenting a more holistic and objective image of a brand.
Benefits of incorporating alt data into business intelligence processes
Alt data is useful for more than making investment decisions. It helps businesses make better internal decisions and understand their customer base more clearly.
Using alt data in your business intelligence processes can help your organization:
- Strengthen relationships with existing customers
- Predict customer and market behavior
- Identify new leads
- Assess the risks of potential investments and partnerships
- Optimize retail locations based on foot traffic and demographic data
- Improve supply chain movement based on traffic patterns, warehouse data, and weather
When combined with effective data analytics strategies, alternative data presents a clearer, more in-depth picture of your business environment—which helps you improve everything from operations to customer experience and beyond.
Role of alternative data in business intelligence
Alternative data providers are websites and services that supply non-traditional information about businesses and markets. These providers are growing in number thanks to the increased demand for unconventional data in BI processes. The number of alt data sources increases with every new integration of smart devices into everyday life.
In fact, one report by the Alternative Investment Management Association counted 400 active alt-data providers compared to only 20 in 1990. According to a Grand View Research report, the market size of alternative data was $4.4 billion in 2022 and is expected to increase by 52.1% by 2030.
What sets alternative data sources apart from traditional BI sources is that they provide an outside, complementary set of information. Huge amounts of structured, semi-structured, and unstructured data are available online for teams to mine and use to make better business decisions.
Instead of relying on in-house data, alt data services collect and analyze data using web-scraping tools. Alt data services might use social media content, web traffic and usage data, and consumer information from internet-connected devices.
Or they may collect “exhaust” data—the by-products of standard business processes. This information can include debit and credit card transactions, industry data, supply chain records, and insurance records.
Alt data providers aggregate all of this data, ensure that it’s privacy-compliant, and present it for analysts to inspect and implement.
Enhancing decision-making with alternative data
Alternative data looks beyond traditional data sources to fill information gaps in the decision-making process. As a business decision-maker, you can feed unique datasets from B2B data providers into your BI analytics, pinpointing significant patterns that impact the business.
One of the most common sources of alt data is consumer behavior patterns. Alternative data provides up-to-date information on market trends and business performance, filling in the gaps where traditional data falls short.
There are many ways organizations can use alternative data to enhance decision-making, including:
Improved customer experience
Companies can use alternative data to monitor and improve customer experience. Social listening, for example, can reveal customers’ opinions about a product or service.
Analyzing patterns in the conversation surrounding a brand can help decision-makers make adjustments to your customer service and product development to enhance customer satisfaction. For example, if users are regularly complaining about your software tool’s lack of a particular feature, you can prioritize that feature in your product updates.
Collecting information about customer movements can help you accurately forecast trends and take advantage of behavior patterns.
Over time, CCTV and drone imagery can reveal trends in retail foot traffic and vehicle density in parking lots. Heatmap analytics—using a combination of CCTV cameras and Wi-Fi hotspots—can also help brands optimize in-store product placement and layout.
Retailers can also leverage real-time weather data analytics to forecast how shifting demands will affect logistics, inventory, and staffing.
Data analysts can use raw data gathered by satellite imagery to make eerily accurate predictions about nearly every industry ahead of official reports.
For example, it’s possible to estimate the world’s supply of crude oil by measuring the shadows cast by floating oil tank lids. Using a combination of satellite imagery and infrared sensors, analysts can detect crop health around the world, or count cars in a specific retail brand’s parking lots. Each of these resources can help investors and traders stay ahead of market trends.
Market research and competitive analysis
Advertising executives and corporate advisors use alt data to stay a step ahead of the competition. Identifying patterns in social media trends, consumer behavior, and supply chain disruptions can provide a powerful competitive advantage over other brands in your industry.
For example, social listening can give you the ability to respond to real-time trends and conversations. If a competitor is embroiled in a viral controversy on social media, alternative data provides the necessary notice to take advantage of the situation and craft a marketing campaign in response—in real time.
Risk assessment and predictive analytics
Completing risk assessments is much easier—not to mention more thorough—with alternative datasets. With access to company financial indicators, negative media, and subtle political trends, it’s simpler to avoid risk in your own business and when partnering with others.
Challenges and considerations with alternative data providers
Using alternative data comes with risks and downsides. Possibly the most important challenge when using alt data is ensuring its ethical and responsible use.
Since alternative data is a relatively new concept—and the types of data sources are constantly growing—regulation in the industry is lacking. If you’re using alternative data, create due diligence processes and oversight mechanisms to minimize security risks to consumers.
A high percentage of alternative data comes from private individuals, so it’s essential to treat this information with as much privacy and security as possible. Data privacy is a growing concern in the alt data space, especially regarding how much ownership individuals have over their data. Increasing access to more types of alternative customer data also increases the risk of fraud and identity theft.
Since standards governing alt data are often weaker than those governing traditional data, there is always the risk of relying on low-quality data sources. Before integrating alternative data into your business intelligence processes, be sure to choose a reliable alternative data provider.
Best practices for selecting alternative data providers
First, identify the right alternative data marketplace for your specific business needs.
Not all alternative data vendors are equal—so consider the following factors when choosing where to source your data:
- Data types and cost: Find a provider that offers a large enough sample size of data that’s relevant to your business. Avoid choosing a company that will generate too wide a pool of data that costs more than the insights are worth
- Reliable, accurate data: Most importantly, the information should be accurate and up-to-date. Don’t risk making business or investment decisions based on data that’s outdated or just plain wrong
- Machine learning: Many legacy data management systems don’t have the optimized operations necessary to process new and diverse datasets. The best alternative data platform can provide structured and unstructured data in an intuitive and accessible platform
- Detailed citations: When alt data providers include as many details as possible about the information they provide, analysts can give exact and exhaustive recommendations
Establishing data governance policies for alternative data
Next, set up an effective data governance procedure for using alt data safely. Keep local, federal, and international regulations in mind when collecting and using data.
For example, the European Union’s General Data Protection Regulation (GDPR) states that “Personal data shall be… adequate, relevant and limited to what is necessary in relation to the purposes for which they are processed (‘data minimization’).” It’s often unclear which types of information are considered relevant under this law. Therefore, it is essential to adopt a transparent and ethical data governance framework to avoid mismanagement.
Here are a few tips for building an effective data management policy:
- Use a large data ecosystem
- Ensure data quality and accuracy through validation and verification
- Automate repetitive, error-prone, and mundane tasks
- Regularly delete unused or outdated data
- Use experienced analysts and consultants
- Collaborate with alternative data providers for custom data solutions
Enhancing business intelligence with alt data analytics
Leveraging high-tech tools and third-party data is crucial for getting a birds-eye view of a business in an increasingly data-reliant world.
Alternative data analytics is a process that uses machine learning, natural language processing, and predictive modeling to analyze raw alt data. This process is key for turning raw information into usable insights. By identifying patterns in customer behavior, for instance, or identifying performance trends in the supply chain, business leaders and investors can make more informed decisions.
For instance, Revelate’s data marketplace uses the following advanced analytics techniques to extract insights from alt data:
- Machine learning: Automated data analysis that results in faster and more comprehensive insights)
- Complex event processing: Identifying hidden patterns within specific events)
- Sentiment analysis: Using text analysis and computational linguistics to interpret the tone behind written statements)
- Data mining: Gathering, cleaning, and preparing large data sets, then discovering trends and patterns from the resulting information)
- Cluster analysis: Organizing data into useful groups based on similar characteristics)
And finally, Revelate uses data visualization tools like infographics, charts, and tables to present results to stakeholders in a useful manner.
Are you ready to integrate alternative data with your BI system?
Market-savvy decision-makers have always thought outside the box when making intelligent business decisions. Using unconventional perspectives—such as the ones provided by data from external sources—can help you navigate the market successfully.
While alternative data has endless uses, it should not replace traditional data sources. It should complement standard data to provide a more comprehensive view of business performance, market trends, and consumer behaviors.
Not only is it crucial to have access to data, but to use a marketplace solution like Revelate that makes sense of the information onslaught. Revelate is a data productization and marketplace platform that allows easy access to data through a flexible storefront—all while following data governance, security, and access best practices.
Want to learn more about how Revelate can help you integrate alt data into your existing business intelligence process? Get Started today.
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