Bringing external data sources into your data analytics operation could be one of the most under-utilized approaches at companies today. However, the trepidation surrounding this method’s use is not because CDOs and data analytics leaders don’t understand its value. Rather, it’s the range of factors and options to consider for this new and increasingly popular practice. This includes the use of data marketplaces, data-as-a-service, and the intricacies of buying and selling data, such as the role of data brokers and the importance of trust.

If your business is not yet benefiting from external data, now is the time to start.

McKinsey & Company offers a fresh perspective on why in a recent article titled “Harnessing the Power of External Data.” According to the article, “Few organizations take full advantage of data generated outside their walls.” The reasons for this include the many challenges that go along with using data from outside sources, such as choosing the right provider, ensuring data quality and privacy, and making any needed updates to systems and architecture.

The Benefits

While it’s true that making the leap to using external data sources is not without its obstacles, the benefits can be felt across the company. This includes using analytics for identifying new prospects, predicting market changes and growth opportunities to improve forecasting, and reducing risks by better identifying and managing suppliers, to name a few.

Whether you’re just getting started with external data or already using it, the McKinsey & Company article offers the following three key steps to you help you along the way:

  1. Establish a dedicated team for external data sourcing: Establishing a team from the start helps ensure cross-functional coordination and communication. The article recommends appointing a data scout or strategist that partners with the data analytics teams and business functions to identify performance improvements across the company.
  2. Develop relationships with data marketplaces and aggregators: Searching out individual external data sources can be time-consuming and expensive. According to the article, “A more effective strategy involves using data-marketplace and aggregation platforms that specialize in building relationships with hundreds of data sources, often in specific data domains—for example, consumer, real estate, government, or company data.” Companies benefit from faster, easier access to a broader set of data sources via simplified online platforms, with some even offering brokerage and procurement services.
  3. Prepare the data architecture for new external-data streams: Making changes to your data architecture is inevitable when bringing external data sources into your environment. This process starts with assessing your current data architecture to determine how it can handle the ingestion, storage, integration, governance, and use of external data, including security, and how it will be integrated with existing data. From there, companies should make the needed modifications to their architectures and ensure quality and consistency by constantly monitoring the use of external data.

If you’d like to learn more, including ten criteria for choosing external data sources, be sure to read the complete McKinsey & Company article.