Skip to content
Executive decision making

Using Alternative Data & External Signals for Decision Making

Perri Robinson

Jan 6, 2020

Each day brands and consumers alike leave a trail of digital breadcrumbs. When traced and analysed, this litter of online activity can be used to provide organisations with business-critical information on their audience, competition, industry trends, risks and more.

Did you know that 90% of the world’s internet data was generated in the last two years alone? This equates to 2.5 quintillion bytes of data created on a daily basis. That’s billions of individual data-points containing infinite amounts of business-critical information that can be used to inform corporate decision making.

Although we’ve seen an increase in executives leveraging alternative data (data found from outside of their company’s walls), we’re still seeing many making business decisions solely based on internal data. Even more worryingly, a study by Gartner found that 95% of leaders continue to make business decisions using intuition and significantly underestimate risks as a result.

Internal data, such as sales volumes, financial numbers, CRM data etc. is, and will remain, important. There are a bunch of companies out there, such as Salesforce and Oracle, doing a fantastic job in the business intelligence space, however, internal data looks at the past. The caveat is that it’s a lagging indicator. You wouldn’t drive a car only looking in your rearview mirror. The same should go for steering your business. You need to look ahead to spot hazards and stay abreast of the competition. Alternative data, give businesses the information advantage they need to do just that.

Outside Insight

Mining and blending both internal and external insights helps you to stay fully informed and gain a 360 view of your company. Only then can you sleep well at night knowing you’re making decisions utilising the most complete set of data available.

During this article, I’ll walk you through the types of alternative data sources that can be tracked, as well as a handful of signals that can indicate the route to take when it comes to strategic decision making.

A treasure trove of valuable alternative data sources

Publicly available internet sources are a treasure trove for executives. When analysed, they offer insights into your ecosystem and surface threats/ opportunities in tandem. Being able to assess your company against the backdrop of the wider industry and understand the context of the landscape you’re operating in is critical for success. Here are a few examples of external data sources often monitored by the c-suite for that purpose:

Alternative data sources

Predictive insights lead to proactive business decision making

The remarkable evolution of big data technologies has led to an increase in companies creating data-driven business workflow processes, however, many execs are struggling to make sense of big data. Let’s admit, we’re drowning in it – and some companies are finding it difficult to stay afloat altogether. The truth is, executives need insights as well as data.

Advanced technology such as machine learning, natural language processing and AI are increasingly used in enterprise solutions for the purpose of making sense of big data. By converting unstructured sources into structured ones that enable Search, Alerting and Analytical capabilities, businesses are better able to harness the alternative data around them.

Perhaps one of the most promising areas in which AI helps us to make better business decisions is predictive insights. Using historical and real-time data, specially trained algorithms can look for patterns and signals which indicate what could happen in the future and alert you to real-time opportunities and threats as they grow.

Using external data, you can predict potential IPOs, growth patterns, investments and more. Extracting these trends can give you the edge you need to prepare for disruptions in the market, seize opportunities as they arise, and mitigate risks by solving business problems before they hit.

Unlocking Key Signals and Indicators

Systematically connecting the dots across different data sources instead of looking at them in isolation is vital. In doing so, companies can get to grips with casualties and surface insights used to benefit all functions of the company, from marketing, sales, R&D, HR and beyond.

Here are a few examples of signals that executives from various industries are using to inform critical business decision making.

Competitive intelligence

As the saying goes, “no man is an island” – the same applies to businesses.

Each day your competitors leave behind plenty of online breadcrumbs that can be used to anticipate their next move and where your industry is heading. Competitive intelligence looks beyond financial data to provide you with an unbiased and comprehensive overview of your competitors’ strategies, company’s position in the market, customer perceptions, and rising trends to enable more proactive decision making.

Common ways businesses are conducting competitive intelligence include tracking conversation development around patent filings, R&D investments, hiring trends, and fluctuations in ad-spend with the aim of:

  • Predicting their competitor’s future focus areas
  • Defending market share from existing and emerging players
  • Accelerating strategic growth
  • Evaluating the impact of current strategies vs how customers are responding to competitors’ strategies

A look at open job listings in competitor companies will show where they’re investing in terms of human resources and the new skills they are after. Significant discussions in the media or on social can indicate critical customer feedback, while financial changes indicate gaps in the market or new opportunities to take market share. Each of these factors demonstrates the wider position of the market and can help boards predict the impact of future decisions.

As an example, this report showcases findings for the above external data points from the perspective of automobile brands. A search on the hiring trends of key automotive brands found AI giant, Tesla, to be at risk from competitor Volvo. The analysis showcases that Volvo is hiring x2.5 more engineers than Tesla and we see an uptick in jobs with Artificial intelligence, Machine learning & Virtual reality skills. Tesla should use such insights to defend their tech positioning.

AI intestment

Forward-looking investment decisions

News and social media information is a form of alternative data that’s growing in popularity among investors across the globe. Online media is filled with what the financial industry calls signals – or events which can indicate the growth trajectory (or lack of growth) for a particular company.

Below are just a few forward-looking signals used by investors to surface opportunities and discover potential threats since they offer a good indication of how a brand might perform when it reaches public markets.

  • New partnerships and sales
  • Mergers + acquisitions
  • Product launches
  •  Patent filings
  • Product recalls
  • Online advertising spend
  • Search trends + website traffic
  • Customer/ employee reviews
  •  Lawsuits

Expanding on the above, employee turnover and mass layoffs are also indicative of the performance of a company. By tracking online news around mentions of mass layoffs (and the common job titles being let go), staff turnover, changes in leadership strategy, a new direction focus, poor company culture etc, as well as financial documents, investors are using insights to confidently plan where to part ways with their cash based on the general ‘health’ of the organisation.

Read real-life examples of trends in employee turnover and how to use this as a forward-looking indicator here.

Product development

From crowdsourced ideas to detailed consumer feedback and sentiment, insights drawn from alternative data are enabling product developers to get a much deeper understanding of their users and changing consumer behaviours.

The healthcare space is one example of a sector making positive strides in product development using external data. According to the Google Knowledge Graph, 1 in 20 Google searches are for health-related information. As long as a Google search remains more accessible than a visit to a doctor, there’s a good chance most consumers will continue to consult their search bar leading up to a conversation with a professional. If analysed in aggregate, this search data can be extremely helpful for healthcare professionals looking to better serve this population.

Search data gives us a micro glimpse into the public’s mindset, fears, concerns, curiosities and more. The use of such data points also helps to eliminate biases, so your teams can research and develop products that solve real problems. Leading pharmaceutical companies are also leveraging insights to inform the areas that stakeholders need further educating on, for example, side effects of particular vaccines.

smart phone and laptop screen with Google search

Risk management

The value of external data and predictive analytics has also increased significantly in the agricultural sector and is changing the culture of farming.

Platforms such as the CGIAR (Consultative Group on International Agricultural Research) and the CIAT (International Center for Tropical Agriculture) are developing models to create strategic foresight scenarios which consider the impact of climate, water resources, and technology on agriculture. Farmers can use insights to make decisions, significantly reducing risk and increasing their chances of successful yield. And the industry has seen great success from doing so. In 2014, during a dry spell in Montería (Córdoba), the CIAT recommended farmers delay planting their rice crop. This advice was followed by 170 farmers. By leveraging external insights, farmers were able to mitigate risks. It’s estimated the farmers who followed advice avoided crop losses valued at over USD 3.6 million and produced a better crop yield in comparison to the neighbouring communities who went ahead with the rice farming as per usual.

By now you hopefully have a better understanding of the dynamic use cases of alternative data and the value it brings. Want to discuss leveraging this for your organisation? Fill out the form below and we’ll be in touch!