Why API strategy matters

About the author: Siddharth Jhawar is a Management Consultant at Zinnov with the Engineering Excellence team.

This meme depicts the state of APIs in the current tech industry. It seems that every other company has its API or planning to launch one. But what exactly is an API?

API stands for application programming interface. It is a set of functions that allows access to core functionality of a central solution. Think of it as a command that can retrieve relevant information or capability from the product core.

API adoption has grown exponentially, from about 9000 APIs in 2013 to over 16000 in 2016. (as listed in ProgrammableWeb, which is one of the most popular repositories of APIs listed on the web)

This tremendous growth can be attributed to the fact that firms are realizing immense business potential in APIs. APIs decrease effort to scale businesses, improve agility, increase accessibility of solutions, and provide customizations.

Expedia is an online travel company that provides a suite of public APIs to optimize transportation and accommodation related search of users. Out of its $6.7 Bn revenues in 2015, ~90% comes from APIs. Companies like eBay and Salesforce generate more than 50% of their transactions through APIs.

Implementation of APIs necessitates a business strategy that includes setting goals, framing policies, and understanding market opportunities. Often, organizations conceive and design API initiatives without aligning them to business goals. At times, they even have stretch expectations from APIs. Organizations need to be cautious in defining the intent behind APIs. Some possible intents include:

Sharing of data and services (Internal APIs, most commonly used): APIs can be used to exchange information and services within product groups and functions, to increase productivity by streamlining collaboration. For example, Amazon CEO Jeff Bezos through his infamous memo (around 2002) had established a mandate to expose data and functionality internally through APIs.

SaaS adoption: APIs can act as a hinge to shift businesses from on-premise to SaaS. For example, Salesforce Pardot API integrates with external 3rd party applications like ERP, CMS etc. to give access to customer data stored within an account.

Extending revenue channels: The APIs of Twitter, Facebook, Google, etc. have found new revenue channels in a number of ways:

• Monetizing datasets: APIs ease the process of hosting and transferring data. Existing datasets could be provided to prospective consumers by using APIs. For example, Foursquare monetizes location datasets through APIs.
• Extending customer reach: APIs strengthen an app ecosystem by extending customer reach that enables developers to create customized solutions. YouTube offers iFrame API to developers that give them programmatic access to customize video playback experience. Sears API exposes eCommerce catalog and provides access to its products list. Facebook API allows applications to use profile information and social connection, which in-turn helps Facebook expand its customer base.
• Exploring untapped market: APIs can be used to access untapped market through partnerships. For example, Flipkart affiliate API allows partners to access products information, offers, and consolidated report.

Driving innovation and brand awareness: Public APIs are helpful in driving innovation and brand awareness through third-party developers. The case in point being Twitter, which acquired TweetDeck — a third-party developer platform for $40 million to improve its user-interface.

Successful API initiatives have a comprehensive GTM strategy in alignment with business objectives. Before releasing APIs, organizations should understand the business intent to avoid pitfalls or failure.

More about the future of APIs in the upcoming articles. If you would like to know further about API business strategy, ping me or drop a note at disruptor@zinnov.com.

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