COVID-19 has forced businesses to adjust to a very different world almost overnight. Plans and forecasts for 2020 have been put to one side as businesses focus on adapting to these unprecedented times.
One of the key pain points around forecasting is that nobody could have foreseen the situation we find ourselves in. The data upon which business-built strategies and business plans were created is no longer relevant, so what can affected businesses do to stay competitive in an ever-changing situation? Using alternative data sources can give better insights and different business strategies.
If companies want to be able to assess the right course of action in the current crisis, they need to move fast to capture real-time insights regardless of focus, be it supply chain data, consumer sentiment on social media, or online reviews. Put simply – you need practically ‘live’ data insights to keep up in a crisis like the one we’re currently dealing with otherwise you just can’t make the necessary business adjustments quickly enough.
Today, non-traditional data sets are being looked at as a mechanism for mitigating the impact of COVID-19. In these choppy waters, where no one can predict the future, alternative data can come to the rescue by providing businesses with the clarity and guidance they sorely need.
Alternative data insights leading the way
The term alternative data may be a new phrase to the business community, but it is growing in popularity and is predicted the industry will be worth $350m by the end of this year – but what is alternative data and why is it so important to businesses?
Alternative data is data that is created and collected in a way that breaks tradition. Taking the current COVID-19 crisis as an example, we are in the middle of the pandemic, but we are probably weeks, if not months, away from reports being available that highlight the trends we are currently experiencing. Businesses acting on these reports will be significantly worse off than those that have acted on current, real-time, data. An example of how this can be achieved can be seen through retailers looking to understand customer footfall at shopping outlets when the global lockdowns begin to lift. Alternative data focuses on collecting and analysing data such as cameras in car parks and those inside shopping centres – as opposed to waiting for sales data to feedback from stores. Focusing on what is happening in the here and now is vital for businesses, and this is an evermore popular way of tracking this.
How alternative data delivers fresh opportunities, today
Though alternative data has typically been used by hedge funds, the latest reports indicate that the broader investment community is now quickly seeing its value. In 2020, investors, governments, and central bankers are using alternative sources of data to understand the impact of the COVID-19 pandemic that has sent stock markets around the world reeling. This is a trend which the wider business community can learn a lot from, as they too have much to gain from utilising “outside-the-box” data.
You might have seen 3M, the largest maker of medical face masks, has been widely criticised for over-pricing one of the world’s most desirable products today– the N95 mask. This is a prime example of a global incident, and public relations disaster, that could potentially have been prevented with the correct application of alternative data.
But how? If you examine the background of the incident closely, the cause of this new “pricing strategy” was not what you might have expected – 3M, the company – but the sales and distribution channels themselves were behind it, now under legal attack.
Alternative data could have assisted in both crafting the right pricing strategy, preventing price gouging and providing real-time market research to correctly assess future demand, and ramp up production accordingly (or make other necessary changes to the supply chain).
3M could have leveraged freely available alternative data sources to keep up to date with the countrywide and worldwide demand and distribute the masks to the most needed communities on time.
Navigating standardization, compliance, and regulation
With the increased interest from the financial industry and businesses at large, alternative data standards and best practices have taken center-stage. The governance and processes for the licensing and distribution of traditional data have been well-established globally, whereas in the alternative data sector regulation is still at an early stage, and standards and best practices are not yet fully outlined.
We believe that alternative data ought to be treated with the utmost respect. It should be managed and collected with ethical by-design processes and practices right from the beginning, in order to improve data quality and reliability – ensuring customers receive the highest standards of ethical service.
To make the right kind of decisions with confidence, you need to be equipped with the right kind of data, and this can be achieved with alternative data. It is crucial to bear in mind that when undertaking this process businesses should go the extra mile when reviewing and assessing the quality of any services they use. It is essential that businesses always ensure an ethical by-design process is implemented from the very first step – this is key to success.
By Omri Orgad, North America managing director, Luminati Networks