Three API Models to Achieve SMART KPI-based Success
This article explains API Models being adopted by organizations undergoing digital transformation — unbundling, outside-in, and ecosystem models.
Double-digit Boom in API Model Economy to Continue Until 2026
By 2026, estimates (IDC Spending Guide Sees Worldwide Digital Transformation Investments Reaching $3.4 Trillion in 2026) suggest that organizations will spend $3.4 trillion on digital transformation (DX) with a five-year CAGR of 16.3% — supply chain bottlenecks, skyrocketing inflation, political turmoil, and a looming recession notwithstanding. The advantages of DX are manifold — intuitive artificial intelligence, robust operational efficiency, and superior customer experience — all of which play a critical role in enabling businesses to weather black swans like COVID-19.
Application Programming Interfaces are a key component of DX, with every noteworthy company investing unimaginable sums in devising API models. Although the “API economy” is just over a decade old, several enterprises have correctly surmised that their future success hinges on their rapid adoption of APIs.
Companies Adopting API Models Remain at the Forefront of Digital Transformation
It’s not just the IT industry that can benefit from the API economy — opportunities exist in each industry. Any business with an app or website already has most of what is needed to provide its customers with API models. Nevertheless, some caution is in order as companies must not arbitrarily open their APIs to the Internet. The most successful companies adopt something termed “ways of the API”. Let’s understand the three primary API models through some case studies.
Twilio Focuses on Web APIs to Achieve Unicorn Status
While few dispute the 21st century being a digital one, legacy companies have struggled to keep pace with digital transformations underway. Companies designed for the pre-Internet era must even overcome their leaders’ way of working — a so-called ‘mental block’. Thus, a digital transformation is for both organizations and mindsets. Leaders build not only digital solutions but also those perfectly suited to their line of business.
For example, Twilio was ripe for striking gold in the Apple App Store era. Twilio honed in on smartphone offerings — billing, data, and text and built web APIs for cloud-based calls and text messaging. Twilio is now listed and recently acquired Segment for $3.2 billion (Twilio — Twilio to Acquire Segment, the Market-leading Customer Data Platform) — boding well for others looking to follow in its wake.
Legislation and Market Factors Play Equal Roles in API Model Adoption
It is anticipated that some industries such as banking and healthcare could shift to API technology due to legislation. Others including telecommunications and media and entertainment could be prompted by interoperability and the need for disruption respectively. An API transformation could exponentially expand the target audience of small and midsize firms that operate in a cutthroat environment. The API ecosystem permits companies to easily customize their offerings, unbundle and re-bundle their core competencies, and offload non-core ones to third parties. For example — Twilio uses AWS (How Amazon powers Twilio) to host its API infrastructure (Steps to using Twilio APIs). Twilio deploys 30 features a day and guarantees 99.99% availability.
Companies that have demonstrated the greatest success in the API ecosystem have typically followed one or a combination of the following:
- Unbundling Method — Dismantling and Rebuilding Business with APIs
- Outside-in Method — Keeping Needs of API Customers Front and Centre
- Ecosystem Method — Building an API Ecosystem for Sustainable Growth
Unbundling Method
Two decades ago, Amazon mandated (API Mandate: How Jeff Bezos’ memo changed software forever | Kong Inc. (konghq.com)) that all product teams would need to expose their data and functionality and communicate solely through API models. This edict was certainly ahead of its time and took some years to make its impact felt across the organization, but it played an invaluable role in Amazon’s hypergrowth. The overnight shift allowed Amazon to dissolve internal infrastructure services with web-friendly interfaces and laid the groundwork for the company’s golden goose — AWS.
Unbundling software into API-enabled businesses is a trademark of digitized companies. Such companies then re-bundle their capabilities to capitalize on untapped markets. For example, APIs permitted Netflix to become the de facto global streaming platform it is today. Unbundling even aided Uber in moving into food delivery from its previous ridesharing start.
Outside In Method
Companies can carefully analyze underserved markets and develop API models to satisfy their needs. This is product design from a consumer’s perspective. Companies put themselves in their consumers’ shoes to deliver user-friendly interfaces for developers who use the API to build apps, along with providing the necessary tools and technologies to streamline development. Several fast-growth companies fall into the trap of feature overload, overwhelming customers. Continually evolving APIs and keeping customer needs front and center goes a long way in avoiding this.
For example, Pilot Flying J, a U.S. truck stop chain, digitized their parking slots, prepaid fuelling, and shower reservations through API technology, allowing developers to provide an all-in-one solution to truck drivers. In order to cement customer loyalty via digital touchpoints, companies are advised to follow the “outside-in” development process. (Case Study — Omnichannel Strategy | Pilot Flying J (mulesoft.com))
Ecosystem Method
Companies should identify “value networks” by defining important stakeholders and their “value interactions” with one another. This helps deliver the right product at the right time, speed up delivery time, and spike consumption rates exponentially. Digital-first organizations think from an ecosystem perspective to devise strategies for sustainable growth and deploy APIs as the infrastructure to facilitate value exchange within the network. Companies that seek to thrive in the API era are recommended to embrace the API ecosystem approach.
For example, the aviation industry is a capital-intensive duopoly with the big two — Boeing (APIs — Boeing Developer Tools) and Airbus (Airbus — OneAtlas Developer Portal) — constantly trying to outperform each other. Airbus realized that vital flight and operations information was siloed. As a supplier with longstanding relationships across the ecosystem, Airbus launched the API-enabled platform Skywise to minimize maintenance costs and reduce technical delays. (All About Skywise APIs)
Tips to Extract the Maximum Value from the API Model of Choice
Ideally, organizations should begin their API development by starting small and constantly iterating. They could form cross-functional business and technical experts teams to understand customer requirements. Each of the three methods serves a different purpose:
- Use the Unbundling method to define API capabilities and API infrastructure.
- Use the Outside-in method to examine UX and hone in on digital opportunities.
- Use the Ecosystem method to map your business model and external dependencies.
Deploy the software development lifecycle and continuously measure, learn, and apply your findings to deliver innovative solutions. This methodology can reduce the cost and risk of innovation and can even be found in existing DX budgets. While significant effort is needed to change established working methods, digitally native companies have defined success templates. Rival companies must discern how to adapt APIs into their value chains to truly make a difference and achieve high levels of customer satisfaction and stickiness.
Conclusion
Remember that DX must accompany a change in leadership thinking. APIs are indeed the building blocks for DX, but realizing which API products and API services to develop necessitates a digital-first approach. Digital entrepreneurs have forged a path that organizations can follow to unlock the true potential of APIs and thereby achieve true SMART KPI-based success.
