Working with many companies on AI projects, I experienced how data are crucial, fueling any organization. It's the secret ingredient that can give you an edge over the competition. It's the key to staying ahead in today's fast-paced business world. But not all data is created equal. In fact, there are two types of data that organizations use to inform their decision-making: internal data and external data. And the truth is, understanding the difference between the two is crucial if you want to make data-driven decisions that drive your business forward.
The main goal of the following article is to give you a basic understanding of internal and external data. Learn the pros and cons of the former, and most importantly, how to effectively use external data to make data-driven decisions that drive your business forward.
So, if you're ready to unlock the full potential of your data, let's get started!
External data refers to information generated outside a company or organization to inform business decisions and strategies. It can include data from government portals, social media, market research firms, and even competitors. This type of data can provide valuable insights into customer behavior, market trends, and even the competition you can't get from internal data alone.
On the other hand, internal data is the data that an organization collects from its own operations, such as sales transactions, operational performance, and employee data. It's the data you have direct control over. It can provide valuable insights into the company's past performance and help make educated guesses about future performance.
Of course, there are pros and cons to both types of data. External data can be more unbiased and objective, while internal data can be influenced by the company's perspective and goals. And while internal data is often proprietary and not available to the public, external data is often publicly available.
Companies are putting more effort into looking beyond their internal data to find valuable insights from external sources. Several factors drive this trend. In our opinion, the most important ones are increased competition in the market and technological advancements.
One of the main reasons companies are turning to external data is to gain a better understanding of their competition. As the business landscape becomes increasingly crowded, companies realize they need to know what their competitors are up to. External data sources can provide valuable information about competitors’ strategies, pricing, and target markets, giving companies a better understanding of the market and helping them make strategic decisions.
Another factor that has companies turning to external data is the recent advancements in technology. With the rise of big data, AI, and cloud computing, it's become more cost-effective and more accessible for companies to collect, store, and analyze large amounts of data. This has made it more accessible and quicker to access external data sources.
Additionally, with the increasing digitization of the economy and society, companies are turning to new data to stay up-to-date and make sense of the vast amount of data being generated. More and more business leaders feel comfortable with AI and cloud treating it as an important part of their business rather than a temporary trend.
One popular way is through APIs (Application Programming Interfaces). APIs allow companies to access data from external sources in a structured and controlled manner. For example, many social media platforms, such as Twitter and Facebook, offer APIs that allow companies to access data such as tweets and posts. This can provide valuable insights into consumer sentiment and preferences. A great example of such an API might be swapi.dev where you can get all the data from the Star Wars canon universe!
Another popular way to access new data is through web scraping. It is the process of extracting data from websites. This technique has been around for quite some time. It has become increasingly popular in recent years as more companies look for ways to gain insights from the vast amount of information available on the internet. You can go to our recent tutorial and create a web scraper in less than 5 minutes.
A third popular way to access external data is through partnerships and collaborations. Companies can work with other businesses or organizations to gain access to data that would otherwise be difficult to obtain. For example, a retail company may partner with a weather company to gain insights into how weather patterns affect sales. You can check our case studies to learn more about similar use cases.
Lastly, companies can also access new data through data brokers. Data brokers are businesses that buy and sell data, such as consumer demographics, marketing data, and purchase history. Companies can purchase data from these data brokers to gain insights into their customers and the market. An example of such a company might be Nielsen or data.com
Overall, the importance of external data in 2023 cannot be overstated. By leveraging this valuable resource, companies can stay competitive and make better decisions in a rapidly changing business environment.
In Forloop, we know that starting with external data is not easy. Therefore, we run weekly webinars, deep diving into industry-specific use cases and sharing our experience working with different companies. Please feel invited and join our slack channel to discuss your use case.
