Most companies are focused on internal data – financial figures, sales data, churn rates, et cetera. But these are all lagging indicators, usually only reporting what happened last month. Companies solely focusing on these types of data are missing out on highly relevant, live data from outside the company (hence the outside insight). Lyseggen calls these ‘digital breadcrumbs’ and they consists of data such as social media posts, online news, as well as job posting (to see in which areas the competition is growing).
Outside Insight describes this new area of business intelligence and how it can help companies with marketing campaigns, decision making, and competitive insights and planning.
At times Outside Insight feels like a sales pitch for Meltwater, of which Lyseggen is the CEO, but the overall message of the book is clear: there is a treasure trove of data available to companies that can offer new insights and ways of thinking, but hardly anyone is it.
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Book Summary & Notes
“Most companies today do not utilize external data in a systematic manner but instead focus their analyses and rigour on internal data such as company financials. The problem with such an approach is that it is very reactive. Internal data is the end-result of historical events. Running a company based on internal data such as last quarter’s financials is like driving a car looking in the rear-view mirror.“
“While BI is primarily focused on company-specific operational metrics, most of which are lagging performance indicators, OI is concerned with a real-time understanding of the ebb and flow of the competitive landscape in order to anticipate future threats and opportunities. The technical requirements are very different for the two software categories. While BI software is mostly focused on data that is structured in nature, OI software needs to be much more sophisticated and will have to understand text and be able to find patterns in large quantities of unstructured data. For this reason OI relies heavily on techniques from big data, machine learning and predictive analytics.”
“At the Meltwater board we talk about this incident from time to time. We use it to remind ourselves that there is only so much that can be accomplished by poring over historical data – partly because history doesn’t necessarily predict the future, and partly because there is only so much that can be captured in a spreadsheet. Running a company is a complex endeavour. The biggest factor is always your people. Their confidence, enthusiasm and conviction are always the most important factors in your future business performance.”
“This insular bias is fortified as analysis travels up through the organization. When a report reaches the company board, the underlying facts have been analysed, structured and packaged through many layers of management. At each level, data is curated to support the narrative each level of management wants to communicate. Some data will be amplified; other data will be muted. As a report travels upwards through a company, there is a tendency for the facts to become weaker and the narrative stronger.“
Running a company with outside insight
“Running a company in the Outside Insight paradigm will increasingly start to look like running a series of A/B tests. You iterate through different initiatives and carefully measure how well each of them performs. You invest more money behind those that work and abandon those that prove to be ineffective. Decisions are fact-based, and the yardstick you use to measure success or failure is simple: are you gaining or losing ground on your competitors?”
“In the Outside Insight paradigm decision-making is different in three key ways. First, it adds forward-looking insights from external data as a critical component in the decision process. Second, decisions happen in real time, responding to critical changes in external factors. Third, companies measure their progress and plan for the future by benchmarking against their competitors.”
Marketing with outside insight
“This trend has transformed marketing over the last twenty years more than any other. Consumers’ purchase decisions used to be highly susceptible to marketing. Today traditional marketing techniques have become much less effective because consumers turn to online research before making up their mind. They don’t trust marketing. They are looking for what other people are saying about you – they are looking for social proof.”
“The first big change is that in our new digital reality everything has become measurable. Every single campaign or user engagement can be rigorously analysed. In the process, marketing has moved from being a predominantly creative discipline where return on investment (ROI) was often vague and hard to calculate, to a number-crunching exercise optimizing ROI by analysing page impressions , click-through rates and user engagement in real time.”
“The second change is the introduction of social media. Social media represent a completely new era for market research, providing an unprecedented opportunity to learn about the needs and preferences of your target clients. For the first time in history companies can have direct access to people’s hearts and minds. Unsolicited and in real time, they can listen in to people’s conversations about their product and how it compares to that of competitors.”
“The third change is that the process through which people make a purchase decision has been turned upside down. The time when companies could rely on marketing campaigns pushed at target clients is over. Today the information flow has moved from push to pull. Before making any decisions, people research your reputation online. They are looking for evidence that they can trust you and your brand.”
“Daniel Wellington, OnePlus and OnePiece are three examples of a new generation of consumer brands. These are businesses whose main arena of focus is online and which instinctually pay most of their attention to metrics of the Outside Insight type. Their most important metrics are related to social media engagement because they are businesses that rise and fall with the size and vibrancy of their community of loyal clients. These businesses don’t spend much on traditional marketing channels because they rely on their clients to spread the word for them. Satisfied clients create the social validation to convince others to jump on the bandwagon. That is the fundamental principle on which they build Outside Insight marketing campaigns. That is the fundamental principle on which they are building a new generation of successful companies.”
Problems with new tech
“It is the nature of all new technologies to solve problems that could not be solved before and at the same time inadvertently create new problems for which we have to find good solutions. Outside Insight is no exception in this respect. The three problems that are outlined above – how we protect people’s privacy, how we make sure our algorithms are ethical, or are used ethically, and how we address the natural development of fake breadcrumbs – are all important areas of concern.”
Interested in Outside Insight? Get the book on Amazon.