The humble API has been around for a long time, but increasingly we are witnessing how this simple technical concept is enabling new business strategies. APIs are helping to continue evolving ideas on how organisations can share their assets to increase leverage and develop ecosystems of their own. Like some of the thinking behind open source, sharing can be profitable as it builds healthy communities around good ideas on which new revenue streams can be generated. It has been a long journey for the commercial world to unite on this complex idea, and I’m hoping that open APIs are going to be another example of how sharing digital resources can be mutually beneficial. Giving your hard earned stuff away for free can feel counter intuitive so let’s use a story to visualise how this works.
Imagine a one horse town on a baron frontier, a long dusty track is the only connection to the outside world. The only reason this place exists is because of your local copper mine that employs half the population of two dozen people. Things usually tick over OK but every time there is a storm the track to the neighboring town turns into a muddy river and supplies get held up. After a good year however, you decide to use the huge pile of waste rubble you’ve dug out of your mine to improve the track which becomes a half decent road. The track wasn’t your responsibility and is used by everybody, but you can get your copper out to market and keep the supplies coming in with ease. Something else happens too. Ever increasing numbers of outsiders start passing through, using the new road regularly to get to towns in the north and it’s not long before you build a thriving saloon and stables. Your initial efforts to maintain this link to the outside world have now resulted in shops a hotel, even a bank and most importantly a growing ecosystem that needs services and has the money to pay for them.
I’m sure this analogy has been used many times before, but in this case I think it’s useful to visualise how some of your data could connect you to innovative individuals who can build new services linked to your company via an open API. A lot of the immediate value of an open API comes from the information that is received back from those who interact with your data.
If you dont believe me take a look at the clip, Kevin Costner hammers home the point with stirring background music;)
Ubers API means independent developers are producing more Uber apps. More apps means more inbound data from a wider range of platforms and offerings which provide information on who, when and where customers are travelling. An airline, hotel and Uber could be on one app combining their services whilst producing more detailed data sets to send back to Uber. As the marketing and distribution of company and services self perpetuates the incoming data increases simultaneously.
The Netflix API enables extremely cost effective distribution of its data over various platforms. Why budget to build an app for every smart device that comes on the market when someone else will arguably do a better job for free. Such has been the success of the Netflix API ecosystem that it has contributed to the value of the devices it is used on.
With many start ups focusing on API delivery from the beginning, companies can offer their core business as Platform as a Service. Fintech apps take financial data from organisations like banks or exchanges. With fintech start ups unbundling bank services, especially in retail we are seeing an ecosystem develop around banks acting as platforms while collecting more diverse data than ever before.