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Era of APIs: Why do we need an API strategy?
 

Era of APIs: Why do we need an API strategy?

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  • Over the past decade, about 1 billion web browsers enterered the marketplace. <br /> <br /> Today, we’re projecting a world of trillions of apps (Mary Meeker, Cisco, Gartner) <br /> <br /> Customers that are not in touch with this are losing touch with customers full context <br /> <br /> Customers that are doing well with this, are driving new reach and revenue <br /> <br /> This is an explosion of consumption driven by mobile and social <br /> <br /> So what are companies doing about it? <br /> <br /> Takes us to our 2nd transition <br /> <br /> <br /> “Currently worth $7.3 billion this year, the apps market is set to double by <br /> the end of next year and then to reach a colossal $36.7 billion by 2015. – rideresearch” <br />
  • http://en.wikipedia.org/wiki/Punctuated_equilibrium <br /> We are in an epoch of change – no longer copying Amazon’s 1-click model – rapid speciation

Era of APIs: Why do we need an API strategy? Era of APIs: Why do we need an API strategy? Presentation Transcript

  • Era of APIs: Why do we need an API strategy? Prof. Bala Iyer Twitter: @BalaIyer 07/24/14
  • 2 Agenda  Intro to digital halos  Basics of API  Learning from Apps  Platforms, developers and ecosystems  Case study  Ecosystem moves  Conclusions
  • 3 Digital Halos  Software is eating the world  Sensory layer has emerged  Every business is an information business  Extend the value proposition using information  Information assets trapped within companies  DIY economy  Innovative business ideas come from within and outside
  • 4 Connected world -- Networks  Deliver value to customer segments using a portfolio of capabilities some of which are achieved through links or dependencies.  People  Objects  Systems  Organizations
  • 5 Networks + Digital Halos  Novel applications Products Customers Partners Employees Information value networks
  • 6 Vintage Ad // Dr. J For Converse 1977 Ad For Nike See the Emphasis Change from Products to Connected Information Platforms
  • 7 Change in focus from hardware to software
  • 8 Creating Awesome Users  Don't make a better [X], make a better [user of X].  Kathy Sierra  Think about how customers experience the product or service
  • 9 Uncertainty about what the user wants
  • 10 Open the Innovation Process  Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology [Henry Chesbrough]
  • 11 With a little help from our friends  Given market uncertainties, it is impossible for companies to build every product that a customer needs.  Diversity of needs forces companies to focus on a few features (long tail) or to source capabilities  The have to depend on complementors
  • 12 Enter Application Programming Interfaces (APIs)
  • 13 Tech definition: An Application Programming Interface is a structured way for two computer applications to talk to each other over a network (predominantly the Internet) using a common language that they both understand. Business definition: Business Capabilities exposed over the internet for partners to use. A way to get your data to partners and apps. Essentially a contract. What is an API? Amundsen’s Dogs, Information Halos, and APIs: The epic story of your API strategy. Sam Ramjee Apigee.
  • 14 Liberating Value Internal Services Decision A P I Partner Services Decision Data StructuredData THIRD PARTY DATA ENTERPRISE EVENT DATA • D&B • Thomson Reuters • Nielsen • SAP & ERP • Salesforce & Eloqua • Engineering • Mfg./ * Production • Distribution • Legacy / Others CONSUMER GENERATED DATA • Weblogs • Omniture • Capital IQ • Social Media OPEN DATA EXPERIMENTS
  • 15 Purpose of API  Tactics  Means to an end. Netflix used APIs to get their application on more devices  Product strategy  API is the product. Twillio uses its API to add communication features to any product.
  • 16 What is accessed?  Data  These APIs provide access to data. Twitter allows third-parties to access tweets and provide value added services  Process  These APIs provide access to services. IBM Watson allows developers to use its process engines to build their own apps. For example, an airline could create a virtual travel agent app that recommends the perfect destination based on customer preferences [Watson]
  • 17 Types of APIs Twitter Nielsen IBM Watson Twillio Data Process What is accessed? Purpose Product Strategy Tactical
  • 18 Business motivations for API Create options to link with new partners Controlled way to access information assets Facilitates ecosystems Create new revenue streams New way to “fit” product or service to user need New way to experiment Reduce time to market Increase brand value
  • 19 API history  1970s- Function calls and scoping  1990s -APIs was the sole province of operating system vendors -- IBM, Microsoft, Apple, Red Hat, etc.  2000s - Internet-centric companies such as eBay, Amazon, and Netflix began exposing their information assets through APIs.  2010s- traditional brands -- such as Mastercard, Comcast, USA Today, The New York Times, Best Buy, and others
  • 20 Consider this: 60%+ traffic through APIs More bandwidth through APIs than all the websites Entirely API based product and ecosystem 30% of primetime internet traffic through streaming service managed by APIs API drives all forms of distribution - website, apps, partners Source: Under the Iceberg: Using APIs to Transform your Business. Greg Brail, Dan Jacobson, Dan Woods, and Scott Regan . 60% of eBay listings are added using APIs
  • 21
  • 22Source: Journey to a Brave New World Distributor
  • 23
  • 24 Learn from the natives
  • 25 EPIC Journey to Antarctica, 1911 Two explorers and their teams are attempting to be the first people to reach the South Pole. The teams are led by the Norwegian Roald Amundsen and the Englishman Robert Scott. On 17 January 1912, Scott finally arrives at the Pole after an epic two-and-a-half-month long march in temperatures often well below - 30 degrees. They see the Norwegian flag fluttering in the freezing wind. Amundsen has beaten them to the Pole by five weeks. Scott and his men did not survive the journey back to base camp. Amundsen’s Dogs, Information Halos, and APIs: The epic story of your API strategy. Sam Ramjee Apigee.
  • 26 Amundsen’s advantage Simple plan, based on their native skill with skis, windproof shelters and on dog-driving methods that were tried and true. unlike dogs who could eat the abundant seal and penguin meat found in Antarctica, the ponies' food had to be carried forward from the ship, vastly increasing the stores that had to be transported. Amundsen’s Dogs, Information Halos, and APIs: The epic story of your API strategy. Sam Ramjee Apigee.
  • 27 Digital natives in the App Economy
  • 28 Market transition to the Post-PC enterprise.. $350b spent each year on software products It’s an App World. The Web Just Lives in It Flurry Report Total Active Apps (currently available for download): 1,131,961 65% free $1.41 av price Total Active Apps (currently available for download): 1,309, 996 18% low quality 49% free $0.19c iphoine $0.50c ipad
  • 29
  • 30 Surging App Economy  Total revenue in 2017 will reach $70 billion. Free apps will account for 91 percent of total downloads. 102B App Store Downloads
  • 31 Revenue Models
  • 32 How do they manage APIs?
  • 33
  • 34 Community process
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40 API assessment  Easy to find  Well documented  Easy to use  Clear pricing  Can perform social interactions  Forums  Support  Collaboration  Ratings and reviews  Search engine integration  Sample code and testing  Notifications  Life cycle managment
  • 41 Store management fees Source: Bill Gurley blog
  • 42 API Management Summary Qualified Retail e.g., Apple iPhone Open Retail e.g., Microsoft Windows Qualified Co- innovation e.g., Salesforce.com Open Co- innovation e.g., Amazon API usage by third parties Community involvement In API maintenance Low High FreeModerated Iyer, B., and Henderson, J. “Preparing for the Future: Understanding the Seven Capabilities of Cloud Computing,” MIS Quarterly Executive (9:2) 2010, pp 117-131
  • 43 Think Platforms, not Products
  • 44 What is a Platform?  A product or service should perform at least one essential function within what can be described as a “system of use” or solve an essential technological problem within an industry, and  It should be easy to connect to or build upon to expand the system of use as well as to allow new and even unintended end-uses [Platform Leaders by Gawer and Cusumano, MIT Sloan Management Review, Winter 2008]
  • 45 Industry Platform Definition  Technology or set of components (or services) that creates a common foundation,  That brings together multiple parties beyond a single firm (“market sides”) for a common purpose and generates network effects,  Where the value can increase exponentially with (a) more users and (b) more “complementary” products & services built around the platform Michael Cusumano, Platform Strategy Fundamentals 2014.
  • 46 Android Platform Users (900 million, June 2013) Advertisers Bid for ads Support development Search for information Apps (800,000) Ad servers Developers (150.000)
  • 47 Best Platforms  Open access & interfaces (but not too open).  Modular architecture (easy to build on, extend).  Most compelling complements (usually result of most vibrant ecosystem). Michael Cusumano, Platform Strategy Fundamentals 2014.
  • 48 Emergence of a new role -- Developer
  • 49 IT Developers Apps Core Business Customers Amundsen’s Dogs, Information Halos, and APIs: The epic story of your API strategy. Sam Ramjee Apigee.
  • 50 Developers now sit between you and your customers and innovate for end users They are like the retail store in the value chain Developers Amundsen’s Dogs, Information Halos, and APIs: The epic story of your API strategy. Sam Ramjee Apigee.
  • 51 APIs provide a way to innovate on the traditional value chain
  • 52 Traditional Value Chain Core Info Assets Innovation Operations Outbound Customers Marketing Inbound
  • 53 API-based Value Chain Operations Outbound Customers Marketing Inbound APIs Developers Apps CoreInfo Assets Value Customers
  • 54 Classifications by Oneforty.com Many Applications use Twitter APIs to thrive on top of the Twitter Platform Visualization by Sonoa Amundsen’s Dogs, Information Halos, and APIs: The epic story of your API strategy. Sam Ramjee Apigee.
  • 55 Innovation  Incremental  The presence of many mapping software  Radical  Combining GoogleMaps and Craigslist  Business model innovation
  • 56 Make it easy for third-parties to build on top of your products – Create an Ecosystem What about control of the ecosystem? Uncertainty of user needs resolved through experimentation
  • 57 Software Ecosystem  .. “a set of actors functioning as a unit and interacting with a shared market for software and services, together with the relationships among them. These relationships are frequently underpinned by a common technological platform or market and operate through the exchange of information, resources and artifacts.” Ivo M. van den Berk, Slinger Jansen, Lútzen Luinenburg. Software Ecosystems: A Software Ecosystem Strategy Assessment Model
  • 58
  • 59 API Networks Small Worlds These topologies matter in determining winners and losers. Opening up APIs Creates these networks that are different from your current dependencies.
  • 60 Roles  Platform provider  Component supplier or developer  Systems integrator  Orchestrator
  • 61 API decisions requires an understanding of Design, Technology & Strategy
  • 62 Scope of use Internal partners Open API For all Close external partners API Product Management – Driving Success through the Value Chain, Michael Hart, Jen Mazzon, Sam Ramji
  • 63 Distribution platform  General marketplace  Vertical marketplace  Own store
  • 64 API Revenue Models From Programmableweb.com
  • 65
  • 66 Ways to limit API calls  Time based limits: 1 call per second, Last.fm  Call Volume by Address: 5,000 queries per IP per day, Yahoo! Image Search  Call volume per-application: 10,000 queries per application per day MSN Search  Return results volume: 10 results per query, the now deprecated Google Search, or 100 items returned per call, Tailrank, or 100 blogs per map FeedMap  Data Transmission Volume: 120 packets of 1.6KB per minute, MSN Messenger  Formula: Monthly quotas based on various factors, Google AdWords  Kindness of strangers: “Please be gentle with Simpy’s server”, Simpy Source: Programmable web
  • 67 APIs gone bad  Cut off usage (Twitter)  Going out of business  Discontinuing an API (Google Reader)
  • 68 What about architecture? Environment Value Focus Stable Dynamic Firm centric Ecosystem centric Service-orientedEnterprise Architecture API drivenStack based
  • 69 Case Study  Ford Connected Car
  • 70
  • 71 Connected Car API (Open) gives access to any coder who wants to improve the car driving and maintenance experience (public) to improve utilization and reduce churn… but manufacturers restricts access to mechanical operations (Private) to known partners in order to enforce licensing and consumer experience quality standards. Once a partner has signed, any coder who works for that partner (public) can access the Private API to build new cool prototypes and innovate on the experience. To gain business advantage, Ford created a contest on the Open API, and to sustain it they enabled partners’ engineering teams to build and evangelize new applications of the API.
  • 72
  • 73 Source: Cars and Computers Overcoming Design Cycle Mismatch, by Howard Baldwin
  • 74 Hackathon: App Challenge Winner  Fuelytics -- an app that “helps drivers visualize fuel consumption and other trip data seamlessly in real-time.”
  • 75 Appstore
  • 76
  • 77 Competitors  GENIVI – Alliance for Linux-based OS  CarPlay -- Apple  OAA – Alliance for Android based OS  QNX -- Blackberry  Tizen – Open source within Linux foundation  Windows -- MSFT  Sprint Velocity  AT&T Drive  Verizon Telematics
  • 78 Connected Car Ecosystem
  • 797/21/2014
  • 80 Break-out Questions If you were in-charge of Ford’s API strategy:  What services (APIs) would you provide?  Which vertical would you enter first? Why?  What additional moves would you recommend?  How would you manage your APIs?  What would be the revenue model?  Is Microsoft a lock for the future of Sync, or is it QNX?
  • 81 Coring & Tipping Strategic Option Possible Technology Actions Possible Business Actions CORING (How to create a new platform when none existed before) • Solve “system” problem • Facilitate add-ons • Keep key IP closed or “open but not open” •Strong interdependencies --platform & complements • Solve “business” problem • Create complementor incentives to innovate • Protect revenue & profit • Raise switching or multi- homing costs TIPPING (How to win a platform battle when multiple platforms compete) • Develop compelling features • Absorb & bundle from adjacent markets (“envelopment”) • Complementor incentives • Coalitions of also-rans • Pricing or other subsidies to attract users/complementors Source: Gawer and Cusumano SMR 2008
  • 82 Platform moves • Open sourcing • Cutting off air supply • Entrants with network effects • Creating and defending IP • Acquisitions • Creating exclusive links • Complementor incentives and subsidies
  • 83 From To Deal Brokering Self Service Central Planning Edge Innovation Revenue Adoption Control Context Prevention Encouragement Direct Digital Business Indirect Digital Business Major Releases Small Constant Updates Channels Ecosystems Precise Execution Speed and Iteration Formal contracts Experimentation Business Changes driven by APIs The API Tempest: Leading during a sea change. Sam Ramjee. Apigee.
  • 84 API Revenue Models
  • 85 Access  Qualified  The API provided determines who gets access and at what rates  Open  Anyone can access the API
  • 86 Type of process  Core or high valued  These are the crown jewels of the provider  Peripheral or low valued  The provider has adequate competency with these processes but they are not core to its value proposition.
  • 87 Strategies Exploitation Public Service Utility Commodity Exploration Core or High Value Low Value or Peripheral Process Type Access Open Qualified
  • 88 Conclusions  Liberate trapped value and fit  Join the ecosystem  Think like a business architect  Understand the network  Think about architecture control  Experimentation  Defend core
  • 89 How will APIs transform your Company’s strategy?