James Parton, a marketing director at Twilio, a cloud communications company with more than $70 million in funding, has a warning for business executives who are yet to devote sufficient attention to APIs – an emerging and major revenue stream. “APIs are going to be the driver for the digital economy and unless companies are talking about APIs already, they will be left behind.”
According to Parton, these technical protocols that allow third-party software programs to interact with other applications have totally revolutionised how businesses interact with each other, how customers interact with businesses, how organisations share information and reach new customers.
But before you assume that these conversations should be relegated to the realms of the CIO and the IT department, think again. Given the revenue potential and strategic significance of APIs, these resources have successfully made their mark across a wide range of industries – from telecoms and retail to healthcare and travel.
So, how do you develop a wining API strategy?
Well, for starters businesses should see their API strategy, and any attempts to leverage the value of APIs, as being a part of their broader digital transformation plan. As is the case with any business strategy, decision makers and business leaders need to ask themselves a few key questions before getting started. Wired list the following as being essential:
- How does your API strategy contribute to your overall business strategy?
- What value does the API deliver and to whom?
- How is it different from what your competitors offer?
- What API business model best supports your overarching business model?
- What technological decisions need to be made?
- Will you make or buy an API gateway solution?
- What is your hosting preference – cloud or on premise?
- What security measures need to be put in place?
- Who are your customers?
- What gains does your API offer?
- How is the value of the API communicated?
- How are the APIs deployed, maintained and supported?
- How do developers get on-board?
Similarly, McKinsey highlights why any business looking to unlock true value from APIs must start off by deciding the level of access they want to offer, what fee model to adopt and what API standards best suit their needs. These three considerations are unpacked below.
Why value is linked to access
This all depends on your goals – if you’re keen to drive sales and increase traffic, then providing third-party developers with open access to your API is the way to go. This was the strategy adopted by the likes of Twitter and Netflix, who were able to scale at a rapid pace without having to spend money on highly skilled development teams. If, on the other hand, your business has already achieved scale, it may be a good idea to consider internal development and more focused partnerships in order to achieve greater control over the user experience and the monetisation of your offering.
Finding the right fee fit
You can offer your API for free, adopt a revenue-sharing payment model and or take a direct-usage approach. Finding the right fee structure depends on the intrinsic value of the data or services that an API offers. One way to test the waters is to offer limited API pilots to test different payment thresholds for your customers and then scale up once you’ve identified how to deliver the greatest value.
Partner up or stay solo?
This decision comes down to the level of competition in your industry. In a monopoly or duopoly market, business leaders will favour a closed ecosystem as this offers the greatest value. In more competitive markets with several big players, API standardisation makes it simpler to reach national or global scale. And finally, in markets with “perfect competition”, allowing the leading player, or an advisory body, to come up with a common standard is the most logical choice.
Whatever your needs or expectations, making the most of APIs means developing a clear strategy around where you are, what you want to achieve and how you plan to get there. If you need any advice, complete the form below and we’ll be in tough. We’re always here to help.