Data & Corporate Strategy

Let’s face it. The world is becoming increasingly complex. Economic policy, global conflict, pandemics, and other events prove that constant change is the only certainty going forward. At the same time, investor and board expectations seem to only be increasing. Differentiation, growth, and alpha remain as important as ever.

With all of this volatility, executives must maintain a strong grip on what is happening in a given market, industry, or field of play. A great way to support these efforts is through the use of alternative data. Investor circles have used alternative data to drive alpha for years, but it can be complicated to acquire and use for less sophisticated buyers.

At WM3, we believe alternative data should be widely accessible. That is why we built a platform to leverage Large Language Models (LLMs) to help companies, consultants, and analysts build datasets that improve strategy and decision making. In this post, we aim to remove the mystique around alternative data, and define a few simple use cases to show how it can be valuable for companies trying to navigate an uncertain future.

What is Alternative Data?

Alternative data refers to information that comes from sources outside of traditional financial and economic reports. There are many different types of alternative data, and new sources are being developed all the time, but we generally break alternative data down into three key categories.

Web Data

Web data is simply data created on the public internet. This is the unstructured stuff that all of us interact with every day. Companies can use web data in a bunch of different ways to understand customers, competitors, and markets. For example, social media and news sentiment is a great way to understand how a brand is perceived through time. Another use case is analyzing a competitor’s public job listings or pricing; monitoring these provides clarity into where competitors are investing resources and how they position products and services. The possibilities for leveraging web data are vast. Everything from travel, to real estate listings, and search terms can be collected, tagged, and provided to support almost any kind of analysis.

Public Data

Public data are sources that come directly from companies, governments, or other institutions. Financial information is typically well structured in these disclosures, but there are a ton of insights that are more challenging to unpack, organize, and link. For example, qualitative insights and perspectives often found in management discussions of annual and quarterly reports are difficult to synthesize and compare at scale. Other popular data like carbon emissions, diversity ratios, shipping activity, and trade records are available, but complex to work with.

Proprietary Data

The last pillar of alternative data is proprietary data. This is the stuff that is usually owned and created by other businesses. Oftentimes it is the residue of a core business model. For example credit card companies sell anonymous credit card payment data, or satellite companies will sell images of different parts of the globe. With the rise of the internet of things, this data is becoming more common and more useful.

Alternative Data and Competitive Strategy

Easy access to quality alternative data can improve decisions at any organization. Whether you are sitting in the C-suite responsible for the performance of an entire company, director with P&L responsibilities, or entrepreneur assessing a wedge into a market, different sources of data can be a real weapon for understanding customers, competitors, and other stakeholders. While the use cases for alternative data are almost infinite, we think a good point to start is with competitive strategy.

Competitive Advantage

Michael Porter, the GOAT of corporate strategy, defines competitive advantage as “the position one firm has over its rivals as a result of offering comparable benefits at a lower cost or a differentiated value proposition.” Put simply, competitive advantage refers to a firm’s ability to create value for its customers in a way that is superior to its competitors. Porter generally believes this happens in two ways: through lower costs or providing unique benefits. Coming off the back of Porter’s analysis in the 1980s, a dearth of research has emerged proving that attaining competitive advantage should be the main goal for most businesses. If this is true, deep analysis about competition, markets, and industries is required. There are dozens of good frameworks to help guide this kind of work, but at the foundation of them all is quality data. Great strategy work is rooted in reality, or what another famed strategist Richard Rumelt calls ‘diagnosing’ the situation. Unfortunately, traditional financial markets data does not tell the whole story, and most other data providers offer products that are months and sometimes years behind. A pipeline of high quality data is essential for making the decisions around building a sustainable competitive advantage.

Strategy

If competitive advantage is the target destination, that means strategy is the vehicle to get there. According to Porter, the key to creating and maintaining a competitive advantage is through the implementation of a successful strategy. The essence of strategy is deciding what to do and more importantly what not to do. Some executives have an intuitive sense of the direction of markets, but many require data to remove bias from decision making. This is especially true for high impact and irreversible decisions, or as Jeff Bezos has famously called them ‘one way doors.’ Similar to competitive advantage, typical public financial data and industry reports just do not provide a clear enough picture to inform strategy. Waiting for lagging data can lead to poor decisions. When layered with internal performance data, alternative data provides clarity and increases the odds of setting the right strategy.

Performance Management

After decisions are made and a strategy is set, one of the core jobs of a leader is to drive the strategy forward. Internal systems, processes, and reports are extremely helpful with this performance management, but they do not provide context on the ever evolving external landscape. Without an external view, course correcting becomes more challenging. Data from the public domain like product reviews, customer sentiment, pricing, and feature releases allow companies to manage performance and adjust strategy before it is too late.

Conclusion

As the world becomes more complex, companies must evolve their strategy and decision making capabilities to attain and maintain competitive advantage. Some leaders will rely on instinct, but we believe this alone is a losing bet. High velocity and quality alternative data to support your decision making is required to win. In the past, executives have had to rely on expensive strategy consultants or extra staff to compile this critical data and analysis, but with the WM3 platform this has changed.

At WM3, we leverage the latest advances in artificial intelligence to build bespoke datasets to support all of your research and analysis needs. We work with businesses of all kinds to problem solve with alternative data. And we do it at a fraction of the cost of leading strategy consultants. This includes helping corporate strategy departments analyze markets and competition. Working with sales leaders to understand pricing and customer demand. Helping ESG leaders know what is required to be compliant. And providing transparency into critical vendors to help procurement teams make better decisions. If you are working on a problem or developing a strategy where you could use more data, please let us know. We would love to help!