APIs as Products: The How and the Why
The number of connected, sensing devices continues on a trajectory toward a point where most work, play, and commerce will have a digital dimension. Within three to five years, software will touch nearly all social interactions or commercial transactions, generating data of unprecedented scope.
This is the context for our conviction that the leading companies in every industry will be those that master projecting their business models through software. Managing APIs as products—as core business assets rather than IT projects—is a key part of this mastery.
This is a proven concept. Google Play APIs drive growth in the number of apps in Google’s proprietary marketplace, and, by extension, the market share of Android devices that comply with Google's compatibility standards. AT&T’s payment API generates revenue and reinforces the telco’s pole position in the customer relationship.
For many buisnesses, however, following in the footsteps of these companies means crossing a chasm between the mindset and practices they’ve used for managing “products” versus “IT projects.”
Projecting business models through APIs
In traditional physical businesses, products are presumed to be the assets that will make or break the company’s position in the market, including revenue, margin, and brand strength. Examples include cars at an auto maker or shoes at an apparel company.
Conversely, in the past it may have been reasonable to presume that the business impact of “anything IT” would be comparable, for example, to an accounts payable function: absolutely necessary. Serious failure would harm the business. But it was hard to imagine that any amount of improvement would “change the game” in the market.
For APIs, this is no longer the case. Consider this claim:
Every successful company knows how to project its business model through business assets that are not software. Managing APIs as products simply means applying the same approach and skills you already have to them.
Two examples from the same industry paint this picture.
First, an example of projecting a business model and changing the game through “not software.” When Hyundai entered the U.S. automobile market, it very specifically and narrowly addressed a market demand for low-cost automobiles. Over time, however, the company deployed some business assets—specifically, the offer of “America’s best warranty” and, in 2009, a re-styled Sonata model that is credited with “chang[ing] the game” in its segment and making “consumers re-evaluate Hyundai” as a company that made “stylish and appealing” cars. Following these moves, Hyundai markedly increased its market share, and now some Hyundai models are considered to be credible competitors with Lexus.
Engineers, designers, and business analysts at Hyundai all most likely used IT systems as tools in the process of bringing these advances to market. But the digital side of things did not have a life of its own, as a core asset driving market outcomes.
GM's SmartGrid APIs
So let’s look at the second example, which includes “not software” and software together. GM has launched an API and app store as part of a strategy to address to a downward trend in driving rates; this offers a great example of physical and digital existing together as core assets to potentially “change the game” in the market.
GM’s Cadillac ELR is a luxury hybrid vehicle. “Going electric” is one way to expand GM’s position in the market. So is a set of four “SmartGrid” APIs, which enable owners to use a mobile app to remotely check and manage vehicle charging. But they also open up a range of scenarios, because they can communicate with the grid: an owner could set a rule to charge when electricity rates are lowest, but also opt in to charge at times when renewable energy is available. Utilities can offer plans that maximize the use of clean energy.
The APIs are assets equal to products for winning GM its intended market results:
- By going hybrid, GM becomes an option for consumers interested in electric vehicles for economic or environmental reasons
- By going “smart and connected,” GM becomes a potential partner for owners to more fully achieve their goals for cost savings or living their convictions
- By doing both, GM becomes a platform of potentially millions or tens of millions of big, programmable batteries connected to the grid with enormous value to utilities and any number of potential partners.
APIs and products: inseparable
In a digitally transformed world, decisions like this about APIs are comparable to deciding to “deliver America’s best warranty,” or a breakthrough automobile design. At GM (or Nike, for that matter), business decisions about the experiences that will define a company’s brand, win it share, and make it more money encompass products and APIs together, inseparably.
Walgreen’s as a business has been great at locating and stocking physical stores to drive loyalty, share, and revenue, but now it is also great at “put[ting] an API around our stores.” Disney as a business has ben great at delivering an experience of a lifetime in its parks, but now it‘s also great at making the most of adding a digital dimension to that experience.
It’s worth noting that this change in the role of APIs extends beyond consumer-facing, or “B2C,” APIs and apps. Bechtel, for example, has been great at creating joint ventures with the capability to build big, complex construction projects. Now it is also great at using APIs to accelerate onboarding partners and speed the pace of work.
The question becomes: what specific changes in mindset and practices must your company make to accelerate progress on your journey toward successfully managing APIs as products?
We’ll explore this in an upcoming post.