KPIs for APIs: Avoiding Bad KPIs
This is part two in a new series about the importance of setting appropriate key performance indicators (KPIs) for digital programs and the APIs that underpin them. In the first installment, we defined digital KPIs and discussed why they matter. Here, we’ll look at antipatterns in setting KPIs for API programs.
In isolation, API-centric KPIs can be misleading, and the wrong metrics can lead an enterprise astray. If they are not combined with business-level KPIs, simple IT-level metrics—such as the number of APIs produced, the number of developers using APIs, or the number of apps using APIs—can lead a team to emphasize the wrong incentives. Worse, even when teams achieve these targets, they may still come under-fire for “not providing business value.”
Anticipate broad transformation
Take the case of one major enterprise I worked with. The leadership had set hard and easily observed targets to create as many APIs as possible, across all platforms. At first glance, this appeared to cause the desired API building spree—so how did it lead to enormous waste and throw-away work?
It turned out that to deliver these targets cheaply and quickly, the enterprise’s legacy integration teams simply passed existing web services through the API platform layer, without simplifying or optimizing them for consumption or even consolidating security mechanisms on the platform. As a result, the application developers using these APIs had to continue building expensive and brittle business layers in their applications simply to wrangle the small set of relevant data elements from the large payloads.
The huge payloads bogged down communication channels and the processing burned battery life on mobile devices, degrading the customer experience. In the end, the APIs were used only by internal application developers under a mandate; distribution channels found the APIs too difficult to use.
One lesson from this example: while enterprises should revisit their highest level goals and adapt KPIs to be more compatible with digital opportunities, the stronger programs will often proactively shape their own targets to anticipate broader transformation, following some important guidelines:
- Focus on driving growth, breadth, and speed of API adoption by the application programs that depend on them.
- Accelerate the velocity of iterations in not only API and app development, but also the creation of user-facing digital experiences.
- Align the metrics of the API program with the metrics of developers downstream in the digital value chain, such as channel partners using the APIs.
- The program should NOT be a stand-alone P/L function. Otherwise, APIs may be perceived as exotic and apart from the core value creation activities of the organization, which prevents the APIs from creating value for the business.
- Generally, avoid using “number of APIs” produced as a top-line target. Otherwise this is likely to lead to APIs of low value, low quality, and low adoption.
- The program should NOT be governed in scope-budget-schedule terms. This mindset is largely incompatible with creating value in the fast-moving, agile digital economy.
KPIs in the digital value chain
Just like in other business areas, smartly designed KPIs can enable the API program to define its direction, to regularly assess the alignment of its work, and to constantly work toward intended outcomes. But to optimize API program success, the enterprise should also align the rest of the digital value chain around the API program with well-correlated incentives.
The digital value chain
Let’s briefly revisit the digital value chain:
- The front-end application software calls APIs from within its code in order to invoke services elsewhere in a network, all to return data or perform some processing. These apps are mobile apps, websites, a partner’s servers, etc., and are the products that actually create value among traditional customers.
- The APIs that receive these calls have to have certain properties in order to be valuable to the apps: good design, good security, real business value, good performance, and good access to back-ends that do the heavy lifting. Because they function as products for developers, particularly valuable APIs can even be monetized for external audiences, becoming direct revenue streams in their own right.
- Finally, the back-ends that do much of the enterprise’s core work should be well connected to the APIs, meaning they trust the APIs for access control, traffic management, security, proper identity of the user, coordination, lightweight orchestration of multiple back-ends, and more.
In order to be effective, an API program’s goals should be aligned with the goals across this value chain. For example, the application teams needs to have the incentives to launch valuable applications rapidly and transparently to avoid building brand new back-ends. Similarly, the back-end teams need to have the incentive to get the services of their systems into the hands of customers, not simply to other back-end servers.
Coming up next, we’ll discuss specific digital KPIs in API programs, and the benefits and pitfalls of each.
Michael Leppitsch works on transformation strategies for global enterprises at Google Cloud.