Taking advantage of innovations in digital technologies to create new business models, services, and experiences remains a priority for many organizations.
The rise of the Application Programming Interfaces in the last years mainly depends on the fact that this technology, or specific use of it, seems able to open new business opportunities. Is it true?
Let’s try to answer this question starting from the technical explanation of the Application Programming Interfaces.
In information technology, Application Programming Interfaces, usually called APIs, are the technical solution to the need for exchanging information between applications. Within distributed IT architectures, like Service Oriented Architecture, several applications transfer information between each other, with the scope to process the received data flow to complete a task or accomplish a specific result. The exchange of these data flow happens through APIs.
How is it possible then, that a not so new technical concept as APIs became so popular in the last decade and, even more, is considered the solution to all the (digital) challenges the modern companies will face in the future?
API Innovation Chart: the map for your digital journey
The APIs started to become popular outside the IT departments when, between winter 2004 and summer 2007, Amazon began to make its internal services (Simple Queue, S3, and EC2) available to the public through APIs. In about the same timeframe, other very successful B2B ventures offered their services via APIs like Twilio for telecom services, eBay for e-commerce, or the first Google for maps. Today, also, every conscious internet user knows APIs. IFTTT, one of the most successful services for the b2c market, is packaged and delivered via APIs, and social networks offer APIs to manage or extract data from personal profiles.
Inspired by these digital pioneers’ success, the enterprises in almost all industries made and are still making their investments in API technology, adopting API Management Platforms to running their API Programs.
The API Management Platform is a system for efficiently and effectively managing APIs at scale, enabling secure sharing of data between applications. Offered capabilities usually span design, development, publication, monetization, operations, monitoring, analysis, and optimization. Systems from many vendors also include developer portals for APIs self-service adoption, helping to grow corporate internal or decentralized ecosystems of providers and consumers.
Despite the magnitude of these investments and the organizations’ commitment, innovation remains challenging.
One of the leading research and advisory firms Gartner, in one of its reports from 2018, wrote: “Creating new business and operating models, building the right skills and competencies, and the culture of innovation is a big step for most. Real innovation is much more than technology”.
The reason why most organizations struggle with digital transformation is that equally consistent investment in the API economy doesn’t follow the investment done in API technology.
As we will discover, being successful in the API economy requires much more than the technological capabilities available on the market.
Over time, it requires consistent investments in strategic assets like research and development, agile cross-functional organizations, lean processes, highly skilled professionals, and sustainable ways to forge partnerships.
The awareness of where the company stands in its digital transformation process using API technology is, together with proper planning of the needed efforts and resources, the baseline to make these investments reasonable and profitable.
That’s why, supported by large-scale research in the API industry since 2015, we developed the “API Innovation Chart” to support organizations on their self-assessment and digital journey.
The API Innovation Chart consists of three reachable areas of innovation driven by APIs: Integration, Platform, and Digital Ecosystems.
Each area, requiring focus on clear objectives and investments in specific strategic assets, represents one step in the company’s digital transformation journey through APIs, from being very internally orientated, to being part of dynamic digital ecosystems. The capabilities required to succeed in each step build on the ones acquired in the previous.
To take full advantage of the opportunities the API technology can generate, like creating new business models, services, and experiences, to finally becoming a future-proof digital business player, the company must follow its path from the inside out. Focusing on objectives and investing in assets that can bring toward the next area.
The role of API technology in the value chain is merely fundamental, and APIs used to implement or optimize internal processes, is still the starting point for many organizations.
The Enterprise application integration (EAI) architectures are, by nature, API based. Allowing data exchange in a reliable and scalable manner, the APIs used in the integration context represent the glue connecting applications and data in the value chain processes.
The technology investment consists of the API Management Platform adoption and the procurement of technical expertise to leverage its potentials.
The API Management Platforms are middleware systems that provide all the technical capabilities to implement efficient integration processes for the value chain. On-premise or used as-a-service, these systems can contribute to the transition from old monolithic integration architectures to more flexible and distributed ones.
The technical expertise in API architecture and design makes, almost always, the difference. The focus on efficiency through API’s usability and re-usability generally bring to consistent costs saving in the short and mid-term.
Walking the Platform area is the first step in becoming a digital company. To properly start competing in the digital economy, enterprises need to leverage their digital assets and API technology to deliver their value proposition.
In this context, organizations are committed to the conception, development, and launch of “products offered as-a-service and consumable through APIs.” These (digital) products can be of two main types:
The Product’s APIs
The product’s APIs can be considered as a feature of the core product, allowing users to access and use the core product itself via APIs.
The API Products
The API product, instead, is a standalone product generating value for customers through data exchange. Like any software product, it solves specific problems or satisfies its users’ needs. In this case, the APIs are the product’s ‘user interfaces.’
In both cases, independently by the offered value proposition, the APIs are integrated into customers’ value-chain processes. With the scope to satisfy their primary needs of automation, digitalization, and efficiency. The user experience is entirely driven and controlled within the products through its offered value, usability, integration cost, and performances.
These well-packaged digital products, almost always of a b2b kind, can generate direct or indirect revenues, depending on defined business goals and applied product strategy. And are provided to customers through proprietary developer portals or API marketplaces.
Like in any brand-centric business context, the success of the players within the Platform area is directly proportional to their capacity to transform customers into fans, offering them value through outstanding products.
The transition from the Integration area towards the Platform area is not challenging from a technical perspective but requires the most significant investment in competences and organization. The monetization of data through the integration APIs or “APIfication” of the existing value-chain assets is little more than a myth and, in practice, is hardly ever fruitful.
Even if its user interface is an API, the conception, launch, and operation of a software product is not an integration business. It requires the involvement of adequate professional figures hired in product-oriented organizations, supported and incentivized by clear and ambitious business mandates.
3. Digital Ecosystems
The step towards the most outside area is, undoubtedly, the one that requires considerable maturity in offering digital products consumable through APIs and mastery in the API economy dynamics.
In this b2b2x context, API products and product’s APIs are adopted by partners, across industries, to satisfy the exponentially growing customer’s demand for digital experiences.
These experiences must be pleasant, gratifying, and frictionless; otherwise, customers will likely move to a competitor, or a combination of these, who can offer a better one.
The list of competitors and partners within this digital economy includes startups disrupting old industries with new ideas, devices, and business models. And also, enterprises around the globe rethinking their products, how they get to market, and even their core value proposition.
The transition from the Platform area to the Digital Ecosystems area requires a significant investment in strategic partnerships and mindset shifting. The digital companies are open and connected through their API products and product’s APIs because these digital products are the building blocks of customers’ digital experiences.
The capacity of the business players to survive in the Digital Ecosystems area is directly proportional to their ability to offer outstanding digital experiences in collaboration with other players.
Mastering the Digital Ecosystems
From the beginning of the industrial revolution, companies adopt traditional partnership strategies primarily based on joint production and marketing efforts. The same conventional approach is not any more effective in the digital economy driven by customer’s ecosystems.
In this challenging playground shaped by rapidly emerging technologies and trends, today’s minor partnerships can easily be strategic tomorrow and the other way around.
In this unpredictable context, forging partnerships through digital products is the only feasible option because aspects like readiness, speed, and scalability are crucial, like never before.
In a connected world where prospect strategic partnerships bloom, grow, and consolidate through the mutual adoption of digital products consumable via APIs, timeliness, availability, and interoperability are the key factors determining your presence in the continually evolving customer’s digital ecosystem.
The API Products generate value for the customers making your company’s value proposition accessible and consumable directly within their digital ecosystems. Very often, sometimes exclusively, through products and services offered by third parties.
Every player contributes to the customer’s digital ecosystem with the ambition to strongly influence the (digital) customer experience; given the prominent customer-centricity, complete control is impossible.
This lack of power, as we’ll discover, is one of the most critical aspects that product teams have to always consider within their strategy, by taking adequate measures to mitigate possible risks.
The road to digital success is steep and could be insidious. Reaching digital relevance can be frustrating and extremely expensive.
API technology can alleviate the pain, but digital transformation is much more than technology. To survive in the digital economy, it is better you start offering (and consuming) API products.
If your ambition is to build and offer great API products, the API Innovation Chart can help you to make the first step in the right direction.
A great API product is a piece that perfectly fits the customer’s digital ecosystem puzzle, strongly influencing the digital customer experience. It opens new business opportunities efficiently and is adopted by partners who are leaders in their industries and markets.
For a modern digital company, the presence in as many digital ecosystems as possible makes, doubtless, the difference. The difference between being a leading brand or a shooting star. Between being an appetible strategic partner or a marginal one.