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


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  • Over the past decade, about 1 billion web browsers entered the marketplace.

    Today, we’re projecting a world of trillions of apps (Mary Meeker, Cisco, Gartner)

    Customers that are not in touch with this are losing touch with customers full context

    Customers that are doing well with this, are driving new reach and revenue

    This is an explosion of consumption driven by mobile and social

    So what are companies doing about it?

    Takes us to our 2nd transition

    “Currently worth $7.3 billion this year, the apps market is set to double by
    the end of next year and then to reach a colossal $36.7 billion by 2015. – rideresearch”
    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?

    1. 1. Era of APIs: Why do we need an API strategy? Prof. Bala Iyer Twitter: @BalaIyer 07/23/15
    2. 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. 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. 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. 5 Networks + Smart Objects  New value Products Customers Partners Employees Information value networks Context awareness and sense-making
    6. 6. 6 Vintage Ad // Dr. J For Converse 1977 Ad For Nike See the Emphasis Change from Products to Connected Information Platforms
    7. 7. 7 Change in focus from hardware to software
    8. 8. 8
    9. 9. 9 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.
    10. 10. 10 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
    11. 11. 11 Uncertainty about what the user wants Scale Economies Personalization Experimentation
    12. 12. 12 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]
    13. 13. 13 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)
    14. 14. 14 Enter Application Programming Interfaces (APIs)
    15. 15. 15 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.
    16. 16. 16Source: Journey to a Brave New World Distributor
    17. 17. 17 Innovation path  Open to any partner  Restricted to chosen partners Internal partners Open API For all Close external partners API Product Management – Driving Success through the Value Chain, Michael Hart, Jen Mazzon, Sam Ramji
    18. 18. 18 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 Sensory Data
    19. 19. 19 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.
    20. 20. 20 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]
    21. 21. 21 Types of APIs Twitter Nielsen IBM Watson Twillio Data Process What is accessed? Purpose Product Strategy Tactical
    22. 22. 22 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
    23. 23. 23 Better than alliances?  Scalability of operations  Flexibility in acquiring partners -- URL  Fluidity in business goals
    24. 24. 24 Business motivations for API Create options to link with new partners Controlled way to access company assets Facilitates novel and dynamic ecosystems Create new revenue streams New way to “fit” product or service to user need New way to experiment Reduce time to market Increase value
    25. 25. 25 The future is already here — it's just not very evenly distributed [William Gibson]
    26. 26. 26 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
    27. 27. 27
    28. 28. 28Learn from the natives
    29. 29. 29 Digital natives in the App Economy
    30. 30. 30 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): 1.4MM 65% free $0.19c iphone $0.50c ipad Total Active Apps (currently available for download): 1.5MM 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 $10 billion in 2013
    31. 31. 31 Source: link Number of apps available in leading app stores as of May 2015
    32. 32. 32 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
    33. 33. 33 Revenue Models
    34. 34. 34 How do they manage APIs?
    35. 35. 35
    36. 36. 36 Community process
    37. 37. 37
    38. 38. 38
    39. 39. 39
    40. 40. 40
    41. 41. 41 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
    42. 42. 42 Think Platforms, not Products
    43. 43. 43 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]
    44. 44. 44 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.
    45. 45. 45 Android Platform Users (1 billion, June 2014) Advertisers Bid for ads Support development Search for information Apps (1.5 MM) Ad servers Developers (150.000)
    46. 46. 46 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.
    47. 47. 47 Store management fees Source: Bill Gurley blog
    48. 48. 48 Emergence of a new role -- Developer
    49. 49. 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. 50. 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. 51. 51 Traditional Value Chain Core Info Assets Innovation Operations Outbound Customers Marketing Inbound
    52. 52. 52 API-based Value Chain Operations Outbound Customers Marketing Inbound APIs Developers Apps CoreInfo Assets Value Customers
    53. 53. 53 Classifications by 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.
    54. 54. 54 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
    55. 55. 55 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
    56. 56. 56 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.
    57. 57. 57 Distribution platform  General marketplace  Vertical marketplace  Own store
    58. 58. 58 Informational Assets For Service Variety Low High Low HighInformationalAssets ForDomainVariety Hybrid Ecosystem Value Chain/Alliance Ecosystem Domain Variety Ecosystem Service Variety Ecosystem Shaping Ecosystem Strategy through APIs © Bala Iyer and Mohan Subramaniam
    59. 59. 59 How do you market your APIs?
    60. 60. 60 API Revenue Models From link
    61. 61. 61 Case Study  Ford Connected Car
    62. 62. 62 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.
    63. 63. 63 “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
    64. 64. 64 We expect an entire group of new developers to create new and different applications that actually benefit from being in the car.
    65. 65. 65 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.
    66. 66. 66 Source: Cars and Computers Overcoming Design Cycle Mismatch, by Howard Baldwin
    67. 67. 67 At the Mobile World Congress in Barcelona Ford announced that they open-sourced and contributed the AppLink software to the GENIVI Alliance
    68. 68. 68 Hackathon: App Challenge Winner  Fuelytics -- an app that “helps drivers visualize fuel consumption and other trip data seamlessly in real-time.”
    69. 69. 69 Appstore
    70. 70. 70
    71. 71. 71 Rebooting the Automobile, MIT Technology Review, Article
    72. 72. 72 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
    73. 73. 73 Connected Car Ecosystem
    74. 74. 747/23/2015
    75. 75. 75 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 moves would you recommend?
    76. 76. 76 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
    77. 77. 77 Smart Mobility Experiments
    78. 78. 78 P2P Video Ride Sharing Video
    79. 79. 79 Platform moves • Open sourcing • Cutting off air supply • Entrants with network effects • Creating and defending IP • Acquisitions • Creating exclusive links • Complementor incentives and subsidies
    80. 80. 80 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.
    81. 81. 81 API Revenue Models
    82. 82. 82 Conclusions  Liberate trapped value and fit  Join the ecosystem – preferential attachment  Think like a business architect  Understand the network  Think about architecture control  Experimentation  Defend core
    83. 83. 83 How will APIs transform your Company’s strategy?