In today’s rapidly evolving business ecosystem, traditional financial metrics no longer tell the whole story. For FP&A professionals, tapping into non-traditional sources of information — sometimes known as alternative data — can be the key to unlocking deeper insights and more agile decision-making.

This article takes you on a journey through the innovative world of alternative data, highlighting a real-world case study, the key technological enablers, and some best practices for integrating these insights into your financial planning processes.

What is alternative data?

Alternative data refers to non-traditional sources of information that, when analysed, can provide valuable insights beyond standard financial reports. Examples include:

• Social media sentiment: Real-time consumer opinions and trends gleaned from platforms such as Twitter and Instagram.

• Satellite imagery: Foot traffic data or changes in industrial activity captured via satellites.

• Web scraping: Data from online reviews, e-commerce trends, or competitor pricing.

• Geolocation data: Insights from mobile devices about consumer movement and behaviour.

This is not an exhaustive list by any means but hopefully, it gives you a sense of some of the potential available out there. By transforming these disparate sources into actionable insights, FP&A teams can better predict market shifts and identify emerging risks or opportunities.

A case study in retail

The best way to explain how powerful alternative data can be is to run through a hypothetical case study. Let’s look at a large retailer that faces volatile consumer demand during seasonal peaks. Traditionally, this sort of company may rely solely on historical sales data and standard market reports to forecast demand. However, these conventional methods can only go so far, and they assume that prior performance correlates directly with present circumstances.

What if the retailer looked to incorporate alternative data sources as well? 

Imagine a scenario where the retailer could monitor social media trends for early signals of changing consumer tastes or utilise satellite imagery to gauge foot traffic in key urban areas. With this information and advanced analytics tools, the FP&A team could integrate these new data streams with internal sales data. This could help to develop a predictive model that flags potential dips in demand well before traditional metrics can. 

Assuming these insights are meaningful, the company could adjust its promotional strategy, reduce excess inventory, and reallocate marketing budgets accordingly. And while this might seem far off, the truth is that this is where the world is moving as more and more alternative data sources become accessible and affordable. These new insights will not only enhance predictive capabilities but they can also provide a competitive edge in fast-moving markets.

Technological enablers: how will this come to pass?

In order to achieve these benefits, we will need to rely on a number of key technological enablers that make it possible. After all, the power of alternative data lies in its volume and variety – but transforming this raw data into meaningful insights requires highly sophisticated and powerful innovations.  Some of these include:

• Artificial Intelligence. AI algorithms can sift through massive datasets to identify patterns that would be impossible for a human to spot. The capabilities here are advancing rapidly and this will be the bedrock for all alternative data analysis.

• Seamless data integration. Sophisticated software solutions like we offer here at Apliqo can integrate numerous disparate data sources into a single, cohesive framework and system. Strong integration is crucial for ensuring that insights from alternative data are contextualised alongside traditional financial metrics.

• Real-time analytics. The speed at which data is processed is also a key enabler. As we move closer and closer to true real-time analytics, FP&A teams will be empowered to respond to market fluctuations almost instantly, rather than waiting for monthly or quarterly reports.

When you combine these three innovations together, you can start to see how this alternative data can play a major role in the future of FP&A.

Overcoming challenges in data integration

While the benefits of alternative data are substantial, there are some notable challenges that will need to be overcome:

• Data quality and consistency. Alternative data sources can be noisy and unstructured. Ensuring accuracy requires robust data cleansing and validation processes.

• Integration complexity. Merging traditional and non-traditional data into one unified system can be technically challenging. It demands scalable platforms that can handle diverse data formats and sources.

• Skill gaps. The effective use of alternative data often requires expertise in data science and advanced analytics. FP&A teams may need to upskill or collaborate with data specialists to fully exploit these new sources.

• Status quo bias. Often these alternative data sources brush up against tried-and-tested methods that many people are unwilling to shift away from. Unlocking the potential here will require an innovative attitude and a willingness to try new things, even if it takes significant time and effort to show results.

To address these challenges, many organisations are investing in training programs and partnering with technology providers that specialise in data integration and analytics. By doing so, they can create an ecosystem where alternative data is not an isolated silo but a core component of financial planning moving forward. 

Best practices for FP&A leaders

For FP&A professionals looking to harness the power of alternative data, here are some of the strategies that we might recommend:

1. Start small and scale gradually. Pilot projects can help you understand the value of specific alternative data sources without overwhelming your existing systems. Once successful, you can gradually expand the scope of your initiatives.

2. Invest in robust data infrastructure. Ensure that your data systems can handle the volume and variety of alternative data. This might involve upgrading existing platforms or adopting new tools that facilitate real-time integration and analysis.

3. Foster cross-functional collaboration. Work closely with IT, data science, and operational teams. Collaborative efforts not only enhance data quality but also ensure that insights are relevant across the organisation.

4. Develop clear KPIs. Define what success looks like when incorporating alternative data. Whether it’s improved forecast accuracy, reduced inventory costs, or enhanced revenue growth, clear KPIs will help you measure the impact.

5. Leverage vendor expertise. Partnering with a technology provider like Apliqo can give you the necessary tools and expertise to jumpstart your transformation journey.

These principles are a good way to get started as you embark on the path less-travelled.

Looking ahead: the future of FP&A with alternative data

We believe that as we move further into the AI-first era, the importance of alternative data in FP&A will only grow. Organisations that successfully integrate these insights will be better equipped to navigate uncertainty, anticipate market shifts, and drive strategic initiatives. Practically this will likely manifest in increased automation, an expansion of data sources, and greater collaboration between operational and financial teams at large.

The integration of alternative data into FP&A processes represents a significant evolution in financial planning and analysis. Those who embrace it can gain a more nuanced understanding of market dynamics and operational risks and this can position organisations to thrive in a competitive and unpredictable landscape.

Embracing this new paradigm isn’t just about keeping up with trends—it’s about building a resilient, forward-looking financial strategy that turns uncertainty into opportunity.

To explore this further, get in touch with Apliqo and let us help you inject the future of FP&A right into the core of your organisation.