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Understanding Digital Transformation: Two Key Principles

MichaelE
Feb 21, 2018

In a previous post, we discussed the challenges of executing on the best laid digital plans. Here, we’ll delve into two key tenets of digital transformation.

In unpacking digital transformation and modern business, let’s focus on two principles.

Modern business isn’t (just) about adopting a mobile strategy or using the cloud to generate efficiency savings. Most crucially, it’s about embracing a shift in the nature of supply and demand.

Consider Apigee customer Ticketmaster. Decades ago, it was an analog business: customer interactions occurred via physical locations or a phone number—a limited supply delivered through limited, often purpose-built channels. This changed when Ticketmaster moved online, but only to a degree. Transactions were still channeled through a limited set of pipes, such as core websites, and offerings were still constrained, relying on customers to seek them out.

Contrast that with today’s Ticketmaster, which makes its core business services, such as ticket purchasing and event discovery, available via APIs. This provides a programming interface that empowers partners—Facebook, Broadway.com, Costco, and Fox Sports, among others—to combine these services with their own. Rather than shouldering the full burden of building channels and attracting customers to them, Ticketmaster can now benefit from demand generated by third parties and transactions fulfilled in channels it didn’t have to create.

Infinitely scaling digital assets

This sort of example represents a fundamental rethink of traditional supplier-distributor and value creation paradigms. Strategies no longer focus on piping a finite set of goods and services through limited channels toward a rigid set of possible customer interactions. Instead, businesses can infinitely scale digital assets. Unlike physical resources, these assets can be reproduced at virtually no marginal cost; whether they’re purchasing and discovery services such as Ticketmaster’s, navigational services such as those offered by Google Maps, or almost any other digitized enterprise capability, the assets can be endlessly extended to new developers, partners, and users.

This scalability enables organizations to leverage software—both their own and software from others—to not only provide products and services when and how the customer wants but also to distribute value creation across ecosystems of digital participants, allowing businesses to benefit from resources they didn’t have to build themselves.

Pitney Bowes and Walgreens, also Apigee customers, further exemplify this idea. After nearly a century in mailing and shipping solutions, Pitney Bowes has transformed into a provider of digital logistics and e-commerce solutions. It’s done so by making its core services, such as location intelligence and shipping capabilities, available to partners and developers who can build them into third-party applications.

Similarly, Walgreens has made its services, such as photo printing and prescription fulfillment, available to software developers. This has helped the company transition from a brick-and-mortar business into an omnichannel organization that interacts with customers across both physical and virtual space. It now fills a prescription every second via mobile devices.

APIs for repeated leverage

As these companies’ respective successes demonstrate, digital transformation and the modern business dynamics it enables rely on a company’s ability to package its services, competencies, and assets into software that can be repeatedly leveraged. This requires APIs.

Building APIs doesn’t automatically transform an organization, of course. Indeed, because APIs are the means through which developers connect data, systems, and applications—that is, the mechanism through which software talks to software—most companies are already using APIs. What’s important is how the APIs are operationalized to support platform and ecosystem strategies. This brings us to the second principle:

Digital transformation is bigger than IT investments or even platform strategies. Successful digital journeys require overhauling the organization’s operating model.

Successful organizations recognize IT as an enabler of business opportunities, not a curator of infrastructure, and that APIs are the strategic levers that make those opportunities possible. Technology leaders and business leaders should break down traditional silos and work together to solve business challenges. If legacy mindsets persist, they can open operational chasms throughout the organization, as the following graphic illustrates.

For example, many companies want to drive new sources of revenue via an API program—but because these companies classify APIs as “technical infrastructure,” they don’t make other necessary adjustments to their go-to-market, sales, marketing, and product management approaches.  

APIs as products

This sort of schism isn’t uncommon, as the Apigee Compass statistics in the previous post alluded. Closing the gaps requires that businesses not only use APIs but design and manage them as products for developers.

The point isn’t merely to expose systems—it’s to create an interface that lets developers reliably leverage assets to create new apps and digital experiences. Managing APIs as products involves offering self-service features that enable developers to quickly access the resources they need, adopting operational models that support agile development, supporting evangelism and other marketing strategies to promote the APIs, and much more.

Companies that fail to make operational changes might succeed in building APIs, but they’ll struggle to achieve the desired level of adoption and impact. Many organizations want to gain speed and agility by using APIs, for example, but API programs in organizations that continue to employ legacy funding and governance processes often succumb to long delays and stifling bureaucracies.

Coming up next, we’ll discuss ten key ingredients and interdependencies of digital transformation.

And for more on these topics, check out the eBook, “The Digital Transformation Journey: Chart Your Path with Apigee Compass.” Take 3 minutes to get tailored recommendations for your company through Apigee Compass.

 

The API Product Mindset