A well-structured plan for taking full advantage of external data can provide businesses a competitive edge. However, even though most enterprises have made great strides in utilizing data from their own activities, not many take full advantage of data generated outside their walls.
The COVID-19 crisis has proven how relevant and crucial external data can be. In just a few short months, consumer activities, purchasing habits, and digital behavior changed drastically, making pre-existing consumer forecasts and predictive models outdated.
Gathering and analyzing external data may not be new, but the value of data created externally is increasingly becoming more important than the data that businesses collect from internal sources. External data provides new insights into customer behavior and preferences, which were not previously accessible. This allows enterprises to further tailor their sales and marketing strategies to the customers that are more likely to buy their products and services.
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Businesses across industries can successfully utilize external data from multiple sources – for instance, company reviews posted by employees, patent filings, and employee turnover data from career websites and professional networking websites.
Although external data sources are of great value, they also present multiple practical challenges. For instance, simply gaining a basic idea of what is available requires substantial effort since the external-data environment is fragmented and also expanding at a rapid pace.
Furthermore, efficient operationalization of external data requires updates to the existing data environment of an enterprise and also includes changes to the systems and infrastructure. Enterprises also need to be aware of consumer scrutiny and privacy concerns while utilizing some types of external data.
As per Explorium’s 2021 State of External Data Acquisition report, 79% of enterprises consider external data as “very valuable,” however; only 28% have a data acquisition strategy in place. This is despite 81% of enterprises spending more than US$1 Million per year on external data.
Creating Value with External Data
The use of external data can be game-changing across a variety of sectors and business functions. The journey toward successfully leveraging external data involves three crucial steps.
- Establishing a team for external-data sourcing – Businesses must have a dedicated data sourcing team, and this team must have a data scout or a strategist. The role of this strategist is to partner with the data-analytics team and other business functions to identify operational, cost, and growth that could be propelled by external data.
- Leveraging data marketplace and aggregation platforms – Even though online searches may seem like an easy way for data sourcing to find data sets, that approach is not always the most effective. A more effective strategy would be leveraging data marketplace and aggregation platforms that specialize in developing relationships with multiple data sources. This can give companies ready access to the wider data ecosystem and also allow them to rapidly test hundreds of data sets under a single contract.
- Preparing the data architecture for external data streams – In order to achieve positive ROI from external data, there needs to be up-front planning, continuous quality-assurance testing, and flexible data architecture. This will provide enterprises with insights on whether any modifications need to be made to the data architecture and also involves examining data regularly against the quality framework in place to identify if the source data has changed and also understand the drivers of these changes.
The Importance of External Data
Whether business leaders integrate external data in their existing processes, or they start a new business by utilizing external data, or they sell the data their own to third parties, there is huge potential in the application of external data.
Creating value and reducing risk with external data requires a unique mix of organizational capability building, creative problem solving, and laser-focused execution. And, business leaders who showcase the achievements possible from using external data will be able to sway the broader leadership team and create excitement for scaling beyond early tests and pilots and tests.
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