APIs: Tech Nonsense or Business Priority?
The just-released State of API Integration Report 2019 outlines the emergence of the API economy, the importance of APIs for software companies and evolving trends. Yet for all the hype in the tech community, most laymen have no clue what an API is or does. Moreover, should they really care?
After successfully supporting DPDHL with their API strategy, including the deployment of an all-new Developer Portal, I realized that APIs are not some technical jargon at the back of a tech user manual. Rather, a robust API strategy should be at the forefront of any company’s digitalization agenda.
So, as a business executive who must undertake the painstaking task of digital transformation, here is a quick primer on what APIs are, and how they can be used to create value.
APIs are like Wall Sockets
In the simplest form, APIs (Application Programming Interfaces) are interfaces to consume business services and data. Much like electrical wall sockets are interfaces for users (e.g. devices) to consume electricity, APIs are interfaces for users (e.g. developers) to consume business services. APIs take requests (like electricity requirements from devices) and provide responses (like electricity services to devices). This analogy lends itself nicely to two key principles:
1. Abstraction: The electrical socket abstracts all the complicated wiring behind it, and packages it into an easy-to-use interface for consumers. Changes can also be made to the wiring behind the socket, without compromising the function of the socket. Similarly, APIs abstract a company’s complex IT landscape and present easy-to use interfaces for consumers (e.g. other businesses, end customers, developers). They also allow a company to change their underlying IT systems without compromising connections to consumers.
2. Standardization: The electrical wall socket is a standard interface for all consumers and can be used for a wide range of different devices (e.g. dryer, dishwasher). Similarly, APIs are a standard way of integrating with a company, which avoid the time, cost and complexity of creating custom integrations for each new customer.
For another beautiful API waiter analogy, check out this tweet.
But What do APIs have to do with my Business Strategy?
Now that you understand the ABCs of APIs, let’s discuss why APIs are crucial for any company to survive and thrive in this digital world. I outlined these benefits for DPDHL when crafting their API strategy but argue that such benefits are universally applicable for any company.
1. Fostering Innovation: Perhaps the most value-creating benefit of API is access to innovation. By allowing access to a company’s functionalities through APIs via a developer portal, internal and external developers can quickly use these functionalities in their own products to create value. Phillips lighting had its own lightbulb moment with this innovation when it opened its Phillips Hue API to developers. Within days, countless developers started to use these APIs in their own apps (e.g. to control hues, act as sensors) which made the product much more valuable for consumers. This is a win-win situation for both providers and consumers of APIs.
2. Improving User Experience: Many companies, particularly in the logistics space, use archaic integration methods (e.g. EDI integrations) which are custom-built for each new customer, have long setup times and are inflexible. Leveraging the benefits of standardization outlined above, APIs allow countless customers to seamlessly integrate with companies using standard specification and simplified documentation, resulting in an enhanced user experience. This results in greater user adoption of products and services and ultimately leads to increased revenues.
3. Developing Product Ecosystems: APIs allow seamless integration of different functionalities and capabilities for customers, allowing one-stop-shop solutions for users by connecting many different applications. Such API-driven ecosystems are shown to improve product stickiness and reduce customer churn.
In short, APIs are not only important for tech companies but for YOUR company as well. The possibilities are endless, and I can only hope that you will have your own wall socket analogy-induced lightbulb moment with APIs soon.
