Alternative data provides a competitive edge to businesses in the digital era.

It gives organizations obtain more accurate, faster or more granular information, valuation and metrics on company performance compared to traditional data sources.

Many forms of information have been used to boost decision-making in business and investment for decades.

Collectively this information can be called traditional data. However, since the advancements in informational technology, alternative data types have emerged as useful commercial tools. The insights from these types of data have very many applications. You can find startup companies to invest in, improve your internal procedures and get new leads by looking at alternative data. And this is just the tip of the iceberg.

The Many Sources of Alternative Data

Everybody knows that there are many kinds of information. However, what makes some types of data alternative? The simple answer is their sources.

Traditional sources for business data have been official announcements by companies or governmental organizations. They included press releases, periodical profit reports, and similar publications of company data.

Now, as the technology for producing and capturing data has advanced almost miraculously, there are many more sources for business-relevant data. These sources include but are not limited to the following examples.

• Online activity. It includes all kinds of data produced by website and social media traffic. Everything we do online leaves some sort of trail that can be turned into business insights.

• Sensors data. Sensors are all sorts of devices that capture or create information. These devices are capable of transmitting data produced by various activities from shopping to driving habits.

• Satellite imagery. This is a very specific type of alternative data, created by satellites capturing images of locations on Earth. And it can provide very specific kinds of insights, for example, inform the viewer about the busy hours of particular retail or entertainment centers.

• Sentiment data. There are various groups of people whose sentiment might be of use to financial firms and businesses. For example, investor sentiment itself is interesting to those making investment decisions as a way to understand where the markets are headed.

All these sources of alternative data provide an opportunity for extracting powerful financial insights. Thus, using only traditional data is no longer a viable option for most companies.

Utilizing Data Insights

As the variety of the kinds of information is growing, so are the ways to use alternative data insights for business advantage. The use cases for such insights are virtually limitless and depend only on the ingenuity and creativeness of investors and business managers.

Here are 5 examples of the kinds of insights that can be extracted from alternative data and the ways to utilize them for financial success.

1. Insights about competition. Various types of alternative data, from firmographics to social media sentiment can provide information about the competitors. Knowing the current competitive conditions in your industry is crucial to keeping your head above the water and building a steady profit.

2. Information about startups on the rise. These types of insights can also be part of competitive intelligence. However, they are even more useful for investors looking for new opportunities that have not been discovered by others yet.

3. Marketing insights. Social media marketing as well as other types of digital marketing are crucial for building brand recognition. With the data from various sensors and social media sentiment, your marketing department will be able to develop better marketing campaigns on all fronts.

4. Labor market insights. Such alternative data sources as online job posting data and employer review data can help to understand the talent pool better. By knowing the labor market conditions, you will be able to boost your hiring practices and improve workplace satisfaction.

5. Trend watching. Markets tend to change rapidly and sometimes those changes are very hard to predict. Unless you have the necessary data, of course. With alternative data, you are able to note shifting trends as soon as the first signals of it appear anywhere. Information travels fast these days; you just need to use all the available channels to catch the news on time.

These examples illustrate the power of alternative data and point to its importance for modern business decision-making. Nowadays, one looks suspiciously at any suggestion that is not based on hard facts. Alternative data provides this support and leads to fresh business and investment insights that have unlimited potential. Utilizing them is the way forward.