Using APIs to gain unfair competitive advantage in the Network Economy
At FABERNOVEL, we’re convinced APIs are a powerful lever for traditional companies willing to enter and thrive in a world dominated by the GAFA (Google, Amazon, Facebook, Apple), Unicorns (Uber, Airbnb…), Chinese giants (Alibaba, Tencent…) and all similar actors that have deeply changed the way goods and services are produced, shared and distributed.
As outlined in our latest study, these new players share one common feature: they’re all structured as networks, connecting individuals, businesses, information and goods to one another.
Take Google for example: Google connects pieces of information through its indexation engine, it connects users to information through its search engine, then connects users to one another through Gmail and connects businesses to users with Adwords. Do the same exercise with any tech actor you can think of, and you’ll see they’re all in the business of connecting things. Airbnb? Netflix maybe? Even Apple -with its apparent focus on physical products- is actually connecting us to information, businesses, and digital products through its AppStore.
These actors made us enter the Network Economy, where connections have become the most valuable assets a company could want to own. Layered on top of the classic economy, the Network economy has its own rules and its own market mechanisms: we call them GAFAnomics, or “rules of GAFA”.
This network structure gives companies 4 superpowers, corner stones of their competitiveness. They’re magnetic, real-time, infinite and intimate. Below a quick reminder of what they mean if you didn’t find the time to read the latest GAFAnomics deck:
- Magnetic: Networked companies are able to detect, organize, and animate very small units of value. They leverage excess capacities and user value creation to capture and deliver micro deals. Their competitive advantage is to deal efficiently with billions of small transactions and to capture value created outside their walls.
- Infinite: Networked companies use highly scalable software and services to achieve zero cost delivery once critical user mass is achieved. Thanks to network effects and zero marginal costs, they can grow indefinitely in revenue with minimal impact on costs. Their competitive advantage is speed of scale and profitability.
- Real time: Networked companies use real-time data feedback to instantly optimize market fit and improve products’ value. They use optimum management and work in perpetual beta to answer user needs in real-time. Their competitive advantage is instant fit-to-market.
- Intimate: Networked companies use customer knowledge to fine-tune and personalize the experiences they deliver to each customer. Large-scale customization is at the heart of their products. Targeting and customizing their products to every single user, they create intimate long-lasting relationships. Their competitive advantage is customer hospitality and comfort.
Legacy companies willing to compete in this new economy, should then aim at becoming networks themselves (at least partly). By multiplying connections they can acquire these four superpowers and benefit from externally-produced value, exponential growth, instant fit to market and tailored customer relationships.
Application Programming Interfaces (APIs) offer an easy way for companies to establish these nearly essential connections. Indeed, APIs enable any business to connect to other businesses in order to give each other access to information, customers or products.
If Unicorns have grown so fast, it’s mainly because they all use APIs. First, they use others’ APIs to easily connect to network infrastructures and benefit from them. Indeed, connecting to existing networks allows any company to effortlessly contact customers (Facebook, Adwords…), conceive products and services (Google Maps for cab hailing apps…), distribute them (Amazon or App Store…), accept payments (AndroidPay, Stripe…) and so much more. Second, they offer their own APIs to structure themselves as infrastructures, making easy for others to connect to them, thus increasing their visibility, their usage and generally expanding their network.
In his presentation at APIdays, the largest event dedicated to APIs in Europe, organized by FABERNOVEL, Cyril Vart explained the audience how some major actors leveraged APIs to acquire these four superpowers and become giants of the network economy.
Check out the slide deck below to understand how APIs = Superpowers !