The Business ABCs of APIs
APIs are empowering businesses to grow exponentially by letting apps and companies communicate directly.
Web application programming interfaces—or web APIs—have come a long way since 2000 when they were leveraged only by a limited set of companies including eBay and Amazon. Today’s APIs are the rails of the digital age. They let us do everything from scouring a dozen websites for the best flight price, to connecting the name of a local auto shop to Google Map coordinates.
They also tie the business world together, empowering companies to manage, streamline and translate data internally and externally—for some companies, APIs are their entire business model. Enter Mehdi Medjaoui: He’s on a mission to share just how APIs can be leveraged for business benefit.
The Business Value of APIs
Medjaoui says that APIs’ real worth can be distilled into three value propositions for businesses:
1. Expanded Enterprise. An “expanded enterprise” Medjaoui says, uses APIs to extend its capabilities by opening new lines of business, new markets for acquiring customers, or entirely new product and service offerings. This is often the first step any existing business that’s beginning to explore the possibilities of APIs can, and should, take.
2. Elastic Enterprise. APIs create an “elastic enterprise,” letting the business function and grow as much as needed without adding a large number of new staff members. The API does the heavy lifting and remains a constant in the organization as developers come and go. As long as the API is properly maintained, the company will be poised for growth.
3. Exponential Enterprise. While similar in concept to an elastic enterprise, Medjaoui says an “exponential enterprise” is more customer-facing. The goal of using a successful API is that it manages everything algorithmically without the need for human oversight. In API-driven companies, this results in zero marginal cost in acquiring a new customer. Uber is a particularly good example of this: The API routes ride requests between passengers and drivers without an actual person ever having to get involved with the process.
Product or Support?
There are two primary ways a business can leverage APIs, notes Medjaoui, and both are sustainable approaches in the long term.
The first approach a company can take is to make and market an API as its actual product. Twilio and Stripe are both good examples of this strategy. Stripe is a company that lets businesses accept payments over the internet. It doesn’t hold customers’ money—it simply processes transactions through its API. Thanks to its API, Stripe has managed to achieve a valuation of roughly $10 billion while having fewer than 1,000 employees.
On the flip side are companies that use APIs to support existing products. If a business is trying to break into the world of APIs for the first time, this is probably the best strategy.
A huge range of companies, from Amazon to Capital One, make great use of APIs to support their products, but Salesforce stands out from the crowd with its API strategy, says Medjaoui. Salesforce, the purported founder of the web API, now uses its API to dramatically expand its market reach by allowing third parties to customize its product for use in different environments.
APIs from the Inside Out
So, how should a company unfamiliar with APIs get started?
Medjaoui says, “The main drivers of change are often internal APIs.” In other words, APIs that are used by employees to improve some process within the company. “As they mature, you can open these APIs to third parties and partners, eventually evolving your API strategy from the inside out.”
But this isn’t the only way to go, Medjaoui explains. Many companies start by developing external APIs and then evolving them from the outside in. A good example of this is the approach taken by BNP Paribas, a bank that sponsors API-building hackathons—APIs that BNP might ultimately adopt internally.
“Understand that APIs are more than a tech interface,” says Medjaoui. “They're a business interface. More accurately, they’re a tech interface that provides a business capability. With that capability, you can have different internal teams, but as long as the API is intact, the customer sees the same thing. Put simply, APIs ultimately provide a long-term reliability that people can’t.”