APIs at the Power of One

Darwin’s Finches,20th Century Business,and APIsEvolve Your Business ModelSam Ramji @sramjiVP Strategy, Apigee

DARWIN’S FINCHES

These birds

live in this paradise right here

so what’s the problem?

The problem is

they’re on a small island chain

a long way from anywhere else

that’s a lot of environmental pressure

so these finches

are actually terrific competitors

and their differences

were defined by this man

as successful adaptations.

The ones you don’t see today

had unsuccessful adaptations

and died out.

A century after

a team of scientists identified the mechanismof adaptation and evolution

Twenty years later

called out the geneas the atomic unit of competition.

From the perspective of the gene

the gene is successfulif the organism that carries it is successful.

Switching gears

20 th CENTURYBUSINESS

In 1910 business was mostly direct

By the 1930s there was a lot of competition

But after World War II, there were newenvironmental pressures

Many businesses died out.

Business went from direct to indirect.

Those businesses who thrived in this transition

Shared a set of successful adaptations

Broad consumer marketing and brandingDistribution exclusives in territory and product allocationSpecial makes for select retailersRetailer incentives – slotting fees, joint marketing, tieredvolume discountsConsumer incentives – coupons, in-store events, limitedtime discounts

Unified by one idea

It was not just about selling in

It was not just about selling inIt was about selling through.

From the perspective of the business

The business is successfulIf the retailer that it sells through is successful.

The real world went from direct to indirect

It went beyond the corner store.

The web world is going from direct to indirect.

It is going beyond the browser.

That takes us to

“ Robert Scoble Author of tech blog Scobleizer

Because in a web beyond the browser

APIs are how people get to your business.

You need to see thingsfrom the perspective of the gene.

The gene is successfulif the organism that carries it is successful.

You need to see your businessfrom the perspective of the API.

The API is successful ifthe application that carries it is successful.

Successful applications will use manydifferent APIs.

and they will carry those APIs everywhere

taking your business with them.

For the successful companies, 80% of traffic willbe coming from beyond the browser.

Everyone else will have to play in the worldthat the winners make.

Hardt’s Theorem: The Internet Power LawThe first wave of the Internetdemonstrated the economic impact ofweb-based business models. 99:1 95:5 The API-driven Internet is demonstrating the next concentration of power and is reflecting a “99:1” distribution (examples: Twitter, The HTML-driven Internet showed Facebook) due to the high switching new business models that focused costs and effective lock-in through revenue in the 3rd standard software. 80:20 deviation (examples: Amazon, EBay). Reality reflected a “95:5” rule where 5% of companies dominated the transactions and profits. Previous eras of business showed a normal distribution for revenue, with most firms getting most of the revenue. In the later half of the The next wave of the Internet is 20th century, business model demonstrating the economic innovations focused revenue in the 2nd standard deviation above the impact of API-based business mean. The “80:20” rule became conventional wisdom. models.

One last thought on evolution

Adaptive Radiation in Twitter Applications Visualization by Apigee Classifications by Oneforty.com

Successful applications will offertheir own APIs.

CURRENTENVIRONMENTALPRESSURES

MobileSocial Cloud

They can be independent or they can supporteach other.It is up to you to decide if there’s harmony.

MobileSocial Cloud

Your company may be very well adapted tothe web, but is it adapted to mobile?Mobile devices have limited storage andprocessing and need to be tied in to real-world and social dimensions.They use APIs to get at location, maps,social graphs, and events.

Social sites are data services with a critical massof users, where each new user makes theservice better.You can’t build a new Facebook or Twitter.But you need to access them, so you use theirAPIs.

Cloud computing is not about Amazon.

Cloud computing is not about Rackspace.

Cloud computing is not about Microsoft.

Cloud computing is not about Google.

Cloud computing is about how you reach your customers

Mobile APIsSocial Cloud

We’ve gone from libraries to APIs.In a cloud computing world people accesslibrary-like functionality via an API.These services are the unit of programming.Make your API useful and it will be carried tocustomers you’ve never met.

CHANGE AGENCY

I know you get all this alreadyBut how do you get your colleagues to joinyou in the journey to APIs?

What’s so damn wrong with the current model?I like it and it’s working for me.Plus, I understand it.

Actually, it’s not working.

Populations, societies, and markets are becomingmore specialized and differentiated.

Consumer interest groups are fragmented.

Consumer interest groups are increasingly fragmented.

Markets are changing so fast that you can’tspend the time to “market size, focus group, plan, develop, launch, measure and sustain”because the market niche may be gone orfundamentally changed

A rapidly expanding range of computingplatforms are needed to reach consumers.

Mary Meeker, Morgan Stanley

This is not a solvable problem nor a winnable game.

The only way to win is to change the game.

Thousands of people,who are not on your payroll,who are intimately part of each of these changinginterest groups and niches,must be convinced to carryyour product there for youin a way that adapts to the dynamic environment

Thousands of people,who are not on your payroll,who are intimately part of each of these changinginterest groups and niches,must be convinced to carryyour brand there for youin a way that adapts to the dynamic environment

Thousands of people,who are not on your payroll,who are intimately part of each of these changinginterest groups and niches,must be convinced to carryyour experience there for youin a way that adapts to the dynamic environment

It’s a competition for ideas

Enable your business to adapt into niches

Visualization by Apigee

THE PLATFORMIMPERATIVE

Every market in history has had intermediaries

Business Intermediaries Customers

These intermediaries connect buyers andsellers by knowing what both want andcreating convenient ways to transact

Apps are the new intermediaries.

Business Apps Customers

They occupy many niches already andcontinue to multiply

App Store Growth 2008-2011 600 12 500 10 Apps AvailableThousands Total App Downloads 400 8 Billions 300 6 200 4 100 2 0 0 Data from Wikipedia

As do devices.

Mary MeekerKleiner Perkins

Companies cannot build for all these niches aseach one requires distinct expertise in designand development, and there are too manyniches.

As Marc Andreessen observed recently

“ In short, software is eating the world. We are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy. Marc Andreessen

Evans, Hagiu, and Schmalenseeexplored this deeply in 2006

And Annabelle Gawerhas formalized the solution

The platform business model.

PLATFORMSAREOPEN

As we’ve learned from digital natives like

open platforms grow the fastest.

Visualization by Apigee

In the API era of competition, speed is crucialbecause critical mass leads rapidly to marketdominance.

[Ecosystem Competition] Kishore S. Swaminathan, Chief Scientist, Accenture

Open platforms mean thatapps can be built by developers quicklywithout formal commitment tojoint research,joint development, andjoint marketing.

Open platforms decouple partners from theplatform provider’s business cycles.

This reduces the cost of innovation,enabling many more experiments to be mademore quickly,increasing the chance of a major improvementto the platform business, its customers, and itsintermediaries.

This is low-friction innovation.

PLATFORMSAREOPEN FOR BUSINESS

“ John Musser Founder, Programmable Web

Programmable Web

It is not just about selling inIt is about selling through.

“ Fred Wilson Union Square Ventures

InCLOSING

John MusserFounder, Programmable Web

Dion Hinchcliffe Dachis Group

THANK YOUQuestions and ideas to:@sramjisramji@apigee.com

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APIs at the Power of One

by Sam Ramji

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