How to Succeed in the API Economy; a Prescription from ProgrammableWeb
In aggregate, the organizations around the world that directly or indirectly monetize their APIs form the basis of what the media often calls the “API Economy.” As a subset of the total global economy, the API economy is responsible for the exchange of trillions of dollars of value annually. According to a recent report, 35% of today’s technology leaders generated over a quarter of their organization’s revenue as a direct result of APIs.
In my recent years as editor-in-chief of ProgrammableWeb, one of the more common requests I get from large organizations is for consultative help on formulating a strategy to join the API economy. They see the Stripes, Twilios, Googles, and Amazons out there monetizing their APIs in some fashion (either directly or indirectly), but lack any sort of prescription for how to emulate that success in their own lines of business and industries.
After spending the last eight weeks bouncing between Boston, San Francisco, Munich, Brussels, Milan, London, and Las Vegas responding to a surge in interest from businesses and organizations of all sizes (and discovering my own personal limits in terms of International air travel!), it was time for a more scalable approach in the form of a downloadable blueprint.
But the more people I presented to, the more I realized that even though APIs come across as being a technology topic (ProgrammableWeb is fundamentally a part of the tech media), one thing that makes APIs unique and special is how the conversation about joining the API economy is hardly a technology conversation. Or, if it is in certain circles, it shouldn’t be. Yes, you need best-of-breed and secure-by-design API technologies and best practices to join the API economy and I can talk about that subject until the cows come home. But, relatively speaking, technology is a pretty small part of the overall conversation.
As it turns out, joining the API economy is mainly a business conversation. And once that conversation starts, it’s one of the few topics that really forces stakeholders from across the entire organization — IT and non-IT people alike — to align around a business idea; not a technology idea. APIs are merely enablers. Small potatoes in the scheme of what we’re talking about.
So, what do I mean when I say joining the API economy? Well, let’s first start off with what an API fundamentally does; it makes an existing or new business capability (take your pick, could be any capability) available from across a network as an on-demand service for usage by other applications and software. This way, the developers of those other applications needn’t build those business capabilities themselves. They just “import" it from the service.
In many cases, an organization’s primary interest in turning business capabilities into a networkable service has to do with legacy modernization. It’s about breaking up existing expensive slow-moving monolithic systems of record into smaller, nimbler, more easily maintained, reusable building blocks of business capability whose exposure is limited to the organizational intranet (as in, “behind the firewall”). Although this is typically done with APIs and the benefits are significant (I won’t enumerate them here), this, in my view, is not an act of joining the API economy. And even though many, if not most, of those benefits accrue to the bottom line in business-friendly ways that the CFO will love, legacy modernization is very much a technology subject.
But the minute a new or existing business capability gets exposed outside of the organizational walls with the express intent of enabling an external entity (partners, customers, developers, etc.) with that capability, you are joining the API economy. And pretty much the only reason to do this is for business purposes (one exception is when government organizations do it as a matter of policy or transparency). It could be the way Netflix exposes its APIs solely to partners like Sony and Nintendo that cover the "last mile" of the Netflix customer experience. Or, the way Google exposes APIs for Google Maps so Uber customers can see how close drivers are to picking them up.
Ultimately, these interactions have a business motivation. Either a better ultimate customer experience that drives usage and loyalty which in turn indirectly drives more revenue (as is the case with Netflix). Or, maybe, as has always been the case, the export of such business capability is a way to capture outsourcing revenue from other organizations that need that capability but have no desire to build it themselves the way Uber uses Google Maps (or at least it did at the time this article was published). In this respect, APIs can be used to build new revenue generating experiences, products, business models, and business channels.
Which is why joining the API economy is very much a business conversation. It’s about serving some other business need, with APIs simply being the best means to that end.
Not surprisingly, any blueprint for joining the API economy should be more about business stuff like sizing up the opportunities, setting objectives, making the appropriate organizational adjustments, going to market and measuring progress than it is about technology.
And so, this is precisely the train of thought that our blueprint follows. Published in partnership with ProgrammableWeb’s parent organization (MuleSoft, now a Salesforce company), this is the first in a running series of papers written to help organizations succeed in joining the API economy.
To be clear, joining the API economy is not a must-do for all organizations the way having a website is. In fact, the first of the journey's four main stages (Establishing Digital strategy) is very much about diligence, the outcome of which may be an invalidation of any API economy opportunities. At least for now.
The second of the four stages (Aligning Organization and Culture) is really about all the adjustments that an organization must culturally make for the networkable service orientation (NSO) of business capabilities to succeed. To the extent that digitally reinventing some or all of the company around the provision of business capabilities as digital services requires services-oriented and secure-by-design thinking, it will be a major cultural shift that requires alignment across the entire organization.
In fact, part of democratizing innovation — an important outcome of API-led connectivity — involves including IT and non-IT personnel alike in the ideation process. It’s no longer enough for the tech teams to be the only ones thinking about how to leverage a technology like APIs. The entire organization must be thinking about the business capabilities within their domains, and what if any opportunities might be connected to those capabilities were they to be made available outside the organization as API-led services. Culturally, this sort of democratization of innovation will require a fair amount of education in order to get the collective creative juices flowing.
The third of the four main stages involves getting all of the right technology in place and this will likely vary from one organization to the next depending on the digital strategy and ecosystems that were set forth in the first stage. But suffice to say that it will involve the implementation of some sort of API management system because API management systems, like content management systems or database management systems, are not something you need or want to build yourself.
The fourth stage is all about ecosystem engagement. Joining the API economy isn’t as simple as launching an API and making it available outside your firewall. If that’s all you do, your API is nearly guaranteed to fail. You must nurture the ecosystem for which the API is intended. The ecosystem goes hand-in-hand with the desired business models and outcomes that should have been identified in the first stage. The ecosystem involves the target audience of your API and the value that you’re hoping they’ll co-create with you and the business model that serves as the context; again, very much a business conversation.
All of this and more are outlined in the downloadable whitepaper. The paper, aptly titled “API Strategy Essentials: A practical guide to winning in the API Economy,” is encyclopedic in nature but also leaves many topics for further exploration; fodder for more papers that will be coming in the weeks and months ahead. Here’s the link to download the paper.