API Economy. Why should Business Talk about API?

Nowadays, it is impossible to run a business without technology. The company has to “talk” and exchange information with the entire business environment through various systems. Most often it is done through API – a technology that allows you to get to system’s resources and make them available outside in controlled manner. API is a technical term, but it has much greater impact on business reality than you might think. It is worth looking at it from business perspective and consider the API as a product that influences the revenue, which can be consciously managed.

API is everywhere

Modern products and services are created with the interface enabling connecting various IT systems, accessing different channels or exchanging data between them. What’s more – various digital services and resources are shared by companies. Together they create additional value or even form entirely new business. API forms standard mechanisms for sharing data and functionalities. Such mechanisms are used for example when we rent a room on a dream trip with the use of a popular booking service without the need to check the availability directly at the hotel. They are also used, when we are paying for purchases in our favourite online store — we can log into our bank account through the payment operator module and then track the shipment with the use of module provided by the courier company.

Conscious management of available API resources — they should bring measurable financial benefits — is becoming an essential aspect of managing modern business.

API becomes the key enabling digital transformation and creation of “agile” companies. The term “API economy” represents the reality in which APIs become the company’s products and thanks to them it is possible to create new business value. In digitally advanced companies every product or service can be initially perceived as a collection of reusable software components, made available by the API. Thanks to which, we can create products or start new projects faster and more efficiently.

Demystifying the API

Traditionally, API remains in the domain of IT departments, which seems to be natural. However, in order to fully make use of its potential, the technological aspect should be supplemented with a pure business analysis. To be precise, such analysis should precede implementing the technology. The discussion about API has to take into account the overall strategy of the company. The API interfaces should be available for wide use and not developed “ad hoc” or “here and now.” If we remain only at the level of technology service, then for plenty business people, the API will remain an area not very exciting and difficult to grasp. That is why it is worth to “demystify” API in the company and bring it to the level of business issue (API as a product). Unlike the purely technological aspect, which will be inextricably behind, the business aspect should be much easier to understand for managers from outside IT departments.

Business APIs are resources, data and services (e.g. accounts, product catalogue, and more precisely price, status of the order or customer record), that can be available for use both within the organization and its departments or outside of it. Therefore, the company may share it’s API, but also may integrate with external APIs available on the market. In both cases, it must be prepared in areas of business, process and technology.

In order to make the best use of possibilities offered by the API, business and technology should closely cooperate, and the process should be raised to the level of an interdepartmental project. Today it is not enough to reduce API to purely technological issue, i.e. architecture, security, data exchange method or technical implementation, All of these important implementation aspects of API need to be deepened and preceded by business analysis.

Such broader analysis should identify the company’s resources, that potentially can be shared through the API. There is a need to determine how the API can be “manufactured”, define business responsibility, management model, and take into account legal aspects, including privacy. Ideally, it will also include plans and methods of API monetization, as well as criteria and indicators of success. Such well-thought and descriptive approach will take form of a complete initiative – a business strategy that will help conscious management to deal with development of this element of business.

How does the API strategy affect the business?

A well-thought and defined API strategy affects many aspects of company’s operation. The most important aspects are company’s speed, agility, business range, channels of activity and creation of new value within the organization.

  • The speed and agility of the company

The speed and agility of action, and as a result – “time-to-market” of new projects, products and services is usually the first tangible effect experienced by companies implementing the API strategy. Traditional, complex IT systems can be modified at a certain pace. Usually, it does not correspond to expectations of the business in organizations. On the other hand, attempting to enforce quick changes in key enterprise systems can contribute to a failure or security risk. Starting a business project requires either adapting the deadline to the long changes implementation time in the company’s core systems or, at best, additional developers (and thus additional costs) to speed up the changes. If we adequately plan the API strategy in advance, we can prepare specific resources and elements of IT systems for use by business in order to create innovative products and enriched services.

  • Business range and activity channels

A company can easily reach new market segments and acquire new customers if it properly prepares resources for business partners with the use of API.

For example – properly prepared API (regarding product specification, current prices, as well as current inventory levels), enables agile opening of new distribution channels in the form of independent distributors and internet intermediaries.

  • Creating new value within the company

Large organizations, consisting of many independently operating business lines or international branches, can benefit from the mutual exchange of data and resources. A properly implemented API strategy will allow controlled, flexible and secure data exchange between them. On this basis, new products and services may be created. Such services and products will take into consideration the use of resources and functionalities from other business lines. Thanks to integrating mechanisms, there will not be a need to create them again.

How to identify and describe the API as a product?

From a business point of view, proper API identification can determine whether it will bring the expected benefits to the company. The business-oriented API focuses on answering following key questions:

  • What is the purpose of the API?

Why do I need it, and what do I want to achieve with it? Is the main goal focused on additional revenue based on existing services? Do I want to enter new distribution channels? Do I want to create new products or services? Should I achieve faster “time-to-market”? Perhaps API is required to comply with legal regulations?

  • Who are target recipients and what are their expectations?

Usually, API recipients can be defined on the basis of specifying such segments as: internal recipients (e.g. departments or business lines), business recipients (e.g. partners, distributors, suppliers), external developers (who will be able to expand the potential of their systems, services or products with the use of our API), and consumers/clients (i.e. end-users of services or products). When preparing such segmentation, it is worth to define expected group of recipients and internal resources of the company, which will deal with this subject matter.

  • What services and resources can be provided in the form of an API?

How can we group and „produce” digital services and resources into friendly API?

  • How does the business model look like?

What is the potential of the API monetisation? How will it be realized? In what model, under what conditions are we able to provide services and resources through the API?

Let’s note that at this stage, we do not touch IT issues such as architecture, security, the way the data exchange is carried out or the technical implementation itself.

Who should be responsible for executing the business API?

Usually the basic mistake is commissioning this initiative to a team consisting only of IT professionals. Depending on the size of the organization and the complexity of the initiative, many people might be involved in the process. That is why, it is worth foreseeing the role of API product manager, who will be responsible for this initiative when it comes to business and will communicate between – IT department and partners. 

The API product manager should be particularly responsible for:

  • Talking with business stakeholders: identifying internal services and products that can be offered as business API, and on the other hand recognizing business expectations for planned API initiatives,
  • “Productization” of the API, i.e. describing the API as an independent product, which will be created taking into account appropriate objectives, recipients, terms and the conditions,
  • Working and consulting with developers responsible for creating the API,
  • Communicating and reporting the progress and the results of the project.

The business API development team should of course have dedicated resources and support in the IT team. API developer (or a team of developers) will create an API based on business needs. Additionally, you have to remember about involving a person responsible for ongoing support of API execution, e.g. environment support, scalability, availability and performance (the role of API operations). That is why, there is a need for the role of API strategy leader — a person which will fuel the entire initiative. Supporting execution and converting API business goals into actual organizational changes and company’s processes are key responsibilities of API strategy leader.

Include the API in your strategy

Currently, most businesses are remodelled due to the huge impact of technology on their daily functioning. Managers, sooner or later, realise that they are not able to do business without understanding technology. Nowadays, integration is a new currency and API is a way for companies to exchange and create value. Therefore, the company as a whole, not only IT department, should be interested in the potential of API. APIs should be consciously managed by all businesses.

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