Omri Orgad, regional managing director, Luminati Networks explains how the emergence of alternative data is driving business opportunities and shaping economies.
Data-driven information is shaping the world around us. The more online data we generate as a society, the better we can understand trends and forecast for the future. This is especially true in business, and those who are leading markets are typically ahead of competitors, thanks to cutting-edge decisions made by analysing online data. Businesses are used to crunching numbers when it comes to traditional data such as sales figures, etc., but what about other non-traditional data? The appetite for alternative (alt) or external data is growing as businesses try to get ahead in an ever-changing landscape.
Take the ‘sharing economy’ as an example. For the purposes of this article, it includes community-driven internet services that help coordinate the shared benefit of property, goods, and services. This sector is generating data at unprecedented rates, a lot of which has yet to be analysed and capitalised on. As such, travel and rental companies may want to collect and analyse data such as ‘in what areas people are looking for short term rentals?’. By analysing this they can better understand demand and adapt services accordingly.
Another example can be seen in transportation. Many cities in Europe, the Middle East, and North America are seeing new shared transportation options across their areas. From Ofo bicycles and Wind electric scooters to companies like Car2Go, which allows people to rent a vehicle for as little as 10 minutes without the hassle of ownership. Many of these new modes of transport are a product of analysing alt data sets such as city transportation routes, transport infrastructure, time and cost paid per bus/train ride, and the like. Identifying something as simple as a lack of parking spaces can spur a business advantage. This can be seen by how PinkPark opened a new market of renting out private parking spots while people were at work. This is a good example of alt data being at the heart of decision-making and strategy.
Alt Data – Powering Innovation & Decision-Making
It is clear to see the amount of data and the impact it is having, but this is not exclusive to the travel and transportation sectors. The start-up sector is another interesting area in which alt data can help cement decision-making and drive product development. Start-ups by their very nature are structured in a way that disrupts a market in one way or another. But to really bring something unique and disruptive to saturated markets, entrepreneurs must perform in-depth market research. If classic data sets are cross-referenced with alternative data sets, start-ups can find solid ground for establishing product-market fit. Here are some alt data sets which can generate actionable insights for start-ups from their first investment round to product launch:
- Examining your unique sales proposition (USP) – Validating your ideas is important at any stage of developing your business. Alt data may provide you with crucial information such as aggregating similar solutions in your industry that are currently being invested in by Venture Capitalists (VCs). Finding other companies trying to solve similar consumer pains can allow you to see who you will be competing against in the future. This will enable you to tweak your offering for an increased competitive advantage.
- Monitoring search engines – Alt data sets derived from search engines can be extremely useful as far as identifying where consumer interest currently lies as well as analysing current industry leaders’ offerings. Once you know what customers are looking for and what they are being offered, you can adapt your marketing strategy, messaging, and pricing packages/special offers to keep pace.
- Learning about your target audience – Getting to know your target audience intimately is extremely important. For instance, you may want to look for what their exact pain point is to help you figure out what solution they need you to provide, and what their current routines and habits look like.
History has shown us time and again that when it comes to technological innovations, those who wait to learn from others’ advancements stay behind and become outdated. Meanwhile, those who are first to adapt and adopt new technologies are ready for every market shift. This has certainly been proven recently and is set to be the case when it comes to the collection and use of alt data.
Over the coming years, alt data is set to permeate almost every sector of our economy, growing from a market size of $1.64 billion in 2020 to a staggering $17.35 billion by 2027. It will touch every sector and slowly engulf every business’s decision-making process. Now is the time for organisations to fully embrace the data revolution that has already started to define this decade and to put alt data at the heart of their strategic and business planning.