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“Survival of the fit,” in Darwinian evolutionary theory, describes the mechanism of natural selection. The biological concept of fitness is defined as reproductive success. But could this also apply to modern business? Sustained growth might be the criterion for fitness in a business context. So why is sustained growth so difficult to achieve? Surprisingly, it is not for the lack of ideas but lack of ability to adapt to change and competition.
The fittest business can quickly innovate and adapt to competition and it can use its core competencies to extend itself in new ways. These organizations are often lean, mean, and learning machines using application programming interfaces (APIs). They are built on a foundation of cloud, mobile, big data analytics and social computing and they are generally connected to the internet of things, to extend and monetize the organization’s core assets for growth and new value and revenue streams.
Even organizations born in different eras of digital transformation (mobile, internet-based, and client/server) that are successfully using APIs to achieve disruptive growth in their respective industries.
- eBay was born during the height of the internet era. Several years ago, eBay shared that more than half of their item listings were made through an API. eBay invested heavily in its internal SOA platform, as well as in its external facing API program.
- The PayPal API is very heavily used and well supported.
- Expedia Affiliate Network (EAN) runs its looking/booking methods in conjunction with its affiliate program. In 2011, EAN booked over $1.5 billion in annual travel bookings through its API. Notably, those were transactions through their affiliate-network APIs only -- an incredible feat.
- USA TODAY is an originally print media company seeking to re-invent itself to stay relevant. USA TODAY APIs powers its popular iPad, iPhone and Android news apps. Beyond news articles and headline resources, USA TODAY has released APIs for U.S. Census data; book best seller lists; book, movie and music reviews; and sports salaries.
- For the mobile era, online transportation network company Uber achieved a valuation of $62.5 billion in 2015. That's within its first six years. Theoretically, this would position them in the top 20 percent of the Fortune 500 list, above well-established, long-standing household names such as GM, Texas Instruments or HP. Uber is disrupting a $100 billion global taxi market.
What are these “Darwinian-fit” businesses doing differently?
A key ingredient for the massive success of these companies is that they build and provide platforms around their products and services. The platforms are open to partners, suppliers, vendors or consumers and as a consequence powerful ecosystems arise enabled by the platforms. Collaboration is the new maxim.
And that is basically what changed. In their book Platform Revolution, Geoffrey G. Parker, Marshall Van Alstyne, and Sangeet Paul Choudary discuss the shift from traditional “pipeline” businesses that follow the sequential value chain as proposed by Michael Porter to “platform” businesses. This also allows for co-opetition. A great example is the Red Hat and Microsoft collaboration announced at the end of 2015. However, with advances in IT towards what Gartner describes as the “Nexus of Forces -- the convergence of mobile, social, cloud and information,” co-opetition to foster collaboration can be achieved a lot more effectively. The convergence of mobile, social, cloud and information (big data) is a key driver for the new way of business. But underlying to all these four forces is one key enabler: standard interfaces that actually enable integration and collaboration -- or in other words: APIs. APIs are the new language of collaboration that enable the new way of business.
To stay competitive CIOs and their businesses need to rethink their strategies. In the old pipeline-way of business, the main strategy was to build barriers to shield competition. In the new way of doing business -- platform business -- barriers are counter-productive. Barriers can discourage collaboration and potential partners are likely to turn away to other platforms entering other ecosystems. A smart way to enable controlled access to a company’s data and services is required.
APIs are a key mechanism to reduce barriers and to enable access to a platform and become Darwinian-fit. The benefit of APIs is that the type of platform access is defined via the API design and API management solutions provide the necessary control, security, and visibility features. Done right, API-based access to a platform typically enables companies to achieve several business benefits:
- Businesses can build active and self-reinforcing ecosystems around their platforms including different types of stakeholders.
- By leveraging network effects, business can increase the reach of information and content distribution.
- By enabling external access to a company’s data in a controlled way, the rate of innovation can be improved -- leveraging the concept of Open Innovation.
- Omni-channel strategies serving a multitude of diverse channels (web sites, web apps, mobile apps, IoT apps etc) can be implemented more effectively avoiding channel-specific silos. Instead channels build up on a common platform using common interfaces (APIs).
- Companies can generate revenue directly by charging for access to their platform, which is referred to as API monetization. A popular model is Freemium where access to basic data or services is for free and access to higher value data or services requires a fee (see Zapier as an example).
- Using and re-using the platform and its APIs internally within the company but also externally with partners can increase the organizational agility. The response time to changing requirements can be reduced significantly by relying on the interfaces of a solid and proven platform.
APIs are a method to enable controlled access to a company’s platform, to remove barriers and to enable collaboration between partners or even competitors. The Darwinian-fit business examples mentioned earlier -- eBay, PayPal, Expedia, USA TODAY, and Uber -- use API-driven platforms. It is certainly a hard challenge to transform a traditional pipeline business into a platform business but enabling collaboration via platforms can make a business’ competitiveness future-proof. APIs are the new language of collaboration.
The Winning in the API Economy ebook, from 3scale by Red Hat.
The API Owner's Manual, from 3scale by Red Hat.