Presentation made at the IBM Summit on Sep 15, 2016

1. Era of APIs:
Why do we need an API strategy?
Prof. Bala Iyer
Twitter: @BalaIyer
09/15/16

2. 2
Agenda
 Intro to Smart Objects
 Networked world
 Basics of API
 Learning from Apps
 Platforms, developers and ecosystems
 Case study
 Ecosystem moves
 Conclusions

3. 3
Smart Objects
 Software is eating the world
 Sensory (IP add) layer has emerged
 Company capabilities part of a ecosystem
 Every business is an information business
 Assets trapped within companies
 DIY or developer economy
 Innovative business ideas come from within
and outside
What comes after Smart Products? Bala Iyer and N. Venkatraman

4. 4
Connected objects-- 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. 5
Networks + Smart Objects 
New value
Products
Customers
Partners
Employees
Information value networks
Context awareness and sense-making

6. 6
Vintage Ad // Dr. J For Converse 1977 Ad For Nike
See the Emphasis Change from Products to Connected
Information Platforms

7. 7
Change in focus from hardware to software

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GE is on track to deliver over $1 billion in incremental revenue this year
from more than 40 Industrial Internet offerings
Digital Ubiquity: How connections, sensors, and data are revolutionizing business. HBR Nov 2014.

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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

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Uncertainty about what the user
wants
Scale Economies Personalization
Experimentation

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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
 They have to depend on partners
(complementors)

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Enter Application
Programming Interfaces
(APIs)

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What is an API?
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: Capabilities of assets exposed over the
internet for partners to use. A way to get your data and services to
partners and apps.
Essentially a contract.
Amundsen’s Dogs, Information Halos, and APIs: The epic story of your API
strategy. Sam Ramjee Apigee.

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Entering a new world

16. 16
Innovation path

17. 17
Liberating Value
Internal
Services
Decision
A
P
I
Known 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 Open
Services
Decision

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Purpose of API
 Tactics
 Means to an end. Netflix used APIs to get
their application on more devices
 Product strategy
 API is the product. Twilio uses its API to
add communication features to any
product.

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What is accessed?
 Data
 These APIs provide access to data. Twitter
allows third-parties to access tweets and
provide value added services
 Process engines
 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]

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Types of APIs
Twitter
Nielsen
IBM Watson
Twillio
Data Process
What is accessed?
Purpose
Product
Strategy
Tactical

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Strategic Value of using APIs
 Attract blockbuster complements
 Windows to new ecosystems
 Build enormous repositories of data
 Apply predictive analytics to data
 Sustain your competitive advantage
 Explore growth opportunities in other
ecosystems

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Better than alliances?
 Scalability of operations
 Flexibility in acquiring partners -- URL
 Fluidity in business goals

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API enabled capabilities
 Expanded access to growth options
Create options to link with new partners
Controlled way to access company assets
Facilitates novel and dynamic ecosystems
 Scope of partnerships
 Pathways to intelligent platforms
 Escalating customization possibilities
 Timing releases

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The future is already here — it's just
not very evenly distributed
[William Gibson]

25. 25
Consider this:
50%+ annual rev
of $3b 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 $7b items
90% of $2b rev comes
through API

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27. 27Learn from the natives

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29. 29
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): 2MM
65% free
$0.19c iphone
$0.50c ipad
Total Active Apps (currently available
for download): 2.2MM
18% low quality
49% free
0.06c
estimated that revenue from Google Play could
grow from $1.3 billion in 2013 to $5.2 billion in
2017. Apple App Store pulled in $20 billion in 2015

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Source: Statistica.com link

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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

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Revenue Models

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How do they manage APIs?

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Community process

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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
management

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Think Platforms, not Products

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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]

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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.

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Android
Platform
Users (1 billion, June 2014)
Advertisers
Bid for ads Support development
Search for information
Apps (2.2 MM)
Ad servers
Developers
(150.000)

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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.

46. 46
Store management fees
Source: Bill Gurley blog

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Emergence of a new role -- Developer

48. 48
Amundsen’s Dogs, Information Halos, and APIs: The epic story of your API
strategy. Sam Ramjee Apigee.
IDC Study: 18.5MM Software Developers
From APIs for commercial software products to
APIs for business assets

49. 49
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.

50. 50
Traditional Value Chain
Core Info Assets
Innovation
Operations
Outbound
Customers
Marketing
Inbound

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API-based Value Chain
Operations
Outbound
Customers
Marketing
Inbound
APIs
Developers
Apps
CoreInfo
Assets
Value
Customers

52. 52
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.

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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

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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

55. 55
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.

56. 56
Distribution platform
 General marketplace
 Vertical marketplace
 Own store

57. 57
How do you market your
APIs?

58. 58
API Revenue Models
From Programmableweb.com link

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Case Study
 Ford Connected Car

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SYNC came to be. Using voice activation and hands free
experience, customers were now able to access their devices,
their phones, and their MP3 players.

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“How do we enable customers to access the applications on their
phone, but do it in a hands free and safe manner?” Taking into
account that not everything is suitable for use in a vehicle, there are a
whole lot of things in the car that customers are going to want to
listen to, news, sports, Internet radio, et cetera. That's
how AppLink came to be.
JULIUS MARCHWICKI , GLOBAL PRODUCT MANAGER
FOR FORD SYNC APPLINK

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We expect an entire group of new developers to create new
and different applications that actually benefit from being in
the car.

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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.

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Source: Cars and Computers Overcoming Design Cycle Mismatch, by Howard Baldwin

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At the Mobile World Congress in Barcelona Ford announced that
they open-sourced and contributed the AppLink software to
the GENIVI Alliance

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Hackathon: App Challenge
Winner
 Fuelytics -- an app that “helps drivers
visualize fuel consumption and other
trip data seamlessly in real-time.”

67. 67
Appstore

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Rebooting the Automobile, MIT Technology Review, Article

70. 70
Competing platforms
 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
 Android Auto

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Connected Car Ecosystem

72. 729/16/2016

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Break-out Questions
If you were in-charge of Ford’s API strategy:
 What data/services (APIs) would you provide?
 Which vertical would you enter first? Why?
 How would you market your APIs?
 How would you manage your APIs?
 What would be the revenue model?
 What additional strategic moves would you
recommend?

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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

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Smart Mobility Experiments

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P2P Video
Ride Sharing
Video

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Ridesharing Ecosystem

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Platform moves
• Open sourcing
• Cutting off air supply
• Entrants with network effects
• Creating and defending IP
• Acquisitions
• Creating exclusive links
• Complementor incentives and subsidies
• Interoperate

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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.

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API Revenue Models

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Conclusions
 Treat data as an asset
 Create APIs to data sources
 Make it easy for third-parties to build on top of your products –
Create an Ecosystem
 Develop API management capability
 Uncertainty of user needs resolved through experimentation
 Determine what ecosystems you are really in
 Learn to thrive in dynamic ecosystems
 Influence your ecosystem
 A firm without API is like the internet without the WWW

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How will APIs transform your Company’s
strategy?