External Data – Why Is It Essential for Business Efficiency
When it comes to analytics and insights, internal data seems to be the first place companies go for. However, they should not miss the wealth of value generated from excavating external and third-party datasets. External data sources will help you know what your competitors are doing and how consumer behavior patterns can affect your performance. Information regarding your operation, like sales and operational performance, can tell you what happened in the past. It can also help you predict the future and the possible business outcomes. It is essential to be aware of both kinds of data if you want to take as much advantage as you can of the transformative opportunities provided by data and analytics.
AI and Machine Learning in a World of Data
Artificial intelligence and machine learning, combined with data, are increasingly becoming a transformative force in various industries and markets. Sadly not all companies can achieve this. Not every company has sufficient resources like Amazon and Walmart. These companies can create a large amount of proprietary, internal data from a customer base of millions.
The changing consumer behavior during the pandemic meant that many of the current models that businesses use to predict demand were now irrelevant. Large amounts of internal data became of no use. Companies found external data important in creating new models to forecast the number of people reacting to changing situations. Data on internet search traffic held value for everything. Companies use it for everything from tracking the speed of the virus to forecasting where the changing behavior will hit the most.
Sources of External Data
External datasets can be available to the public, For instance, various governments have a wide range of information accessible on portals such as data.gov and data.gov.uk. They can also be held privately. This data is available both on a pay-to-use and free model, based on your data source, credibility, and information available. Companies like Nielsen and Experian offer marketing and demographic data collected from various sources.
Finance and credit card companies have been using external data from credit reference agencies. They use this primarily to gauge the risks of giving out loans to each customer. Real estate uses public data of property sales to calculate the value of houses they buy, sell or lease.
We should not ignore the role played by the external data in the transformative power of the “digital twin.” It is a duplicate form of a business, product, or process that helps forecast how different variables will impact real-world performance. The external data can be used to imitate the “world” that the twin exists in.
There are always some challenges to things that provide benefits. And this does not always mean a cost factor. When it comes to external data, you do not have direct control of the ways of collecting data. You might find yourself being more reliant than needed on the data provider, which might disappear or significantly change its ways of operating at any time. There can also be some technical issues.
Working with various datasets from multiple providers requires you to ensure that the data is in a set format that is easily in-tune and merged. Most crucial insights can come from merging two or more different and entirely distinct datasets. Finally, as you find yourself needing multiple data sources, you will also have to build and maintain relationships with other data suppliers. You will always find yourself ensuring that the data you buy comes from lawful and ethical data capture. And if your vendor fails you in this aspect, you might face a huge penalty, besides losing your brand reputation.
If your company is capable enough to put plans and strategies in one place to manage all of that, then working with external data will be highly beneficial for you. Data and analytics will not be about “you.” Rather about creating awareness of the environment and ecosystem the company is surrounded by. You will also become efficient all-around your current business model. This will even change the way you create, manage, and operate your organization. So, are you ready to explore the benefits of external data? Let us know in the comments section. Don’t forget to share this article with your peers!
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