This is the third part of the Building Effective API Programs series. The introduction can be found here.
To take advantage of the API benefits we discussed in the previous post, an effective API program must be rooted in an organization’s overarching business strategy and contribute to its larger objectives. In order to define an API program in this high level context, there are three important questions to answer:
- Why? – Why do we want to expose APIs via an API program?
- What? – What do we want to achieve with the API program?
- How? – How do we have to design the API program to achieve that?
Once it’s clear how the organization aims to leverage APIs to contribute to the business strategy, it’s up to the team who is planning, designing, and implementing the API to come up with a plan for the API. This plan is also often referred to an API strategy.
The purpose of the first question — Why do we want to expose APIs via an API program? — is to understand the organization’s motivations. There are several misconceptions of how to approach this question.
First, rather than focus on the value of the API per-se, it’s helpful to think of the value of the effect of the API. Remember it’s the organization’s core business which is valuable. An API is a channel to provide new types of access to the existing value an organization provides.
Another common misconception is that for an API to be valuable, API users must be prepared to pay for it. This is true only if the API itself is the product. In most models, this is not the case. APIs are usually driving some other metric (pizza sales, affiliate referrals, brand awareness, etc.) and the value of the API to the organization will be measured differently. Consequently, the value of the API to users is the effect of an API call, rather than the call itself.
In our Winning in the API Economy ebook, we sketched out typical uses cases for API providers which can be a helpful guideline:
- To enable mobile as an additional channel
- To grow ecosystems — customer (B2C) or partner ecosystems (B2B)
- To develop massive reach — for transaction or content distribution
- To power new business models
- To drive internal innovation
A recent survey of 152 organizations, conducted by the Cutter Consortium and Wipro, revealed that the most common business drivers for establishing an API program are: to develop new partnerships, to increase revenue, to exploit new business models, to improve time to market, and to develop new distribution channels. The top technology drivers are: to improve application integration, to improve mobile integration, and to support the connection to more devices.
Another great resource to help you think about your API program in a more fundamental way — which we’ll reference throughout this blog series — is John Musser’s five “keys” to a great API from his seminal presentation at OSCON 2012:
- Provide a valuable service
- Have a plan and a business model
- Make it simple, flexible and easily adopted
- It should be managed and measured
- Provide great developer support
The first key, to provide a valuable service, is especially important when thinking about the why? In Building Great APIs: The Gold Standard (I) we discuss this in detail, the main takeaway being that it can be really challenging to find the right value proposition.
However, almost any company with an existing product, digital or physical, can likely generate value through an API if that API links to existing offerings and enhances them. As long as the API is structured in such a way that it can cover meaningful use cases for developers, it will deliver value.
The second question — What do we want to achieve with the API program? — is to examine the API program and its associated strategy as part of the wider business strategy. Here it can be helpful to step back and look at more general theory of strategy, and how both the internal view and the external view inform the tactics which define a strategy.
The internal view, also referred to as the resource-based view, depends on which specific and valuable capabilities an organization has. This line of thought was heavily influenced by the works of Jay Barney. He claimed that an organization’s capability of strategic importance needs to be: valuable, rare, inimitable, and non-substitutable (VRIN).
The external view is comprised of market dynamics, trends, competitors, customer behaviors, etc. – mainly about macro-environmental drivers and industry forces. Macro-environmental drivers are often summarized as PEST (political, economic, social, and technological drivers) and are based on the works of Francis J. Aguilar. Industry forces are described by Michael E. Porter as the Five Forces: rivalry, buyers, suppliers, substitutes or new entrants.
The illustration below shows how the internal view and the external view influence the tactics that make up a strategy.
The final question — How do we have to design the API program to achieve what we want? — is all about implementation and execution. This corresponds to John Musser’s second key: have a plan and a business model.
A plan should consist of: a clear development roadmap, a commitment to features and versions, and defined rules of engagement. A clearly articulated roadmap is invaluable in increasing developer confidence in the API. It should contain business as well as technical elements. Large platforms such as Facebook, PayPal, or Twitter have become much more focused on publishing future plans in order to avoid upsetting developers. A roadmap can also engage users of the API in positive conversation on what might be important to them. To these developers, choosing an API to use is a long term commitment – a good roadmap builds confidence that it will be a great relationship.
We will discuss business models in the next installment of this series.
Example: Lingo24 Translation APIs
Tech-savvy translation agency Lingo24 is an interesting case of APIs and strategy in action. Their translation APIs enable direct access to the Lingo24 translation platform, connecting two streams of translation services and providing a range of flexible solutions for high quality “translation on tap” via two APIs:
- The Business Document API provides access to Lingo24’s professional human translation services. There are a range of service levels from post-edited machine translation to creative copywriting in a foreign language across all major document formats.
- The Premium Machine Translation API provides access to Lingo24’s premium machine translation engines. Free for up to 100,000 words in pairs of English, French and Spanish, with further paid plans that offer more words and access to more languages.
Why did Lingo24 want to expose APIs via an API program?
Traditional translation solutions often couldn’t address the range of customer content or rapid deadlines required, particularly for larger customers with diverse needs across business functions. Lingo24 wanted to open up their translation platform via an API program in order to provide easier, deeper integration with existing and new customers who value simplified and automated workflows. They also wanted to engage with channel partners, to grow a partner eco-system, and allow those partners to embed translation within their solutions as a value-add. This would enable the development community to build on their service.
What did Lingo24 want to achieve with the API program?
In a market typically characterized by low-cost, variable quality commodity offerings, translation quality and client experience are core to Lingo24’s business strategy. They wanted to be able to deliver highly customizable solutions based on a customer’s type of content or business priority. Their API program would enable them to integrate directly with customers to automate translation workflows, and work closely with them as partners — what their enterprise customers were really looking for.
Their API program served as an extension of their strategy by building on existing translation assets and technologies — such as their Premium Machine Translation engines that focus on specific business domains, and their Coach Computer Assisted-Translation tool — and enabling easy access for customers to use these services.
How did Lingo24 design the API program to achieve that?
To design their API program, Lingo24 first looked at their key resources and services. They asked how those resources and services matched with the market by exploring various customer profiles, what those customer were looking for in a translation service, and how an API would fit with them. They used this information to develop a product vision and roadmap for their API offering. The roadmap was used, not only to frame and prioritize their development effort, but also to enable early conversations with prospective customers and partners.
While developing the roadmap, it became clear that they needed the two distinct offerings: a machine translation based offering that would provide direct access to raw machine translation, and a professional human translation. This was necessary since the two services had different pricing structure needs, sales and marketing challenges, and scalability requirements. Although they split their offering across two APIs, they were conscious to develop a shared developer portal using the 3scale platform. This created one clear point of access to Lingo24 development resources and a consistent way of interacting with users. The shared developer portal also provides a single integration point for both their sales and global support functions.
Since Lingo24 prioritized making integration with potential clients as simple as possible, especially for those who do not have development expertise, they have been developing a number of connectors for key client systems such as Demandware and Magento. For customer with more technical expertise, they have been lowering the barrier of entry for creating bespoke solutions or integrations by developing client libraries for major programming languages.
- Make sure that the API program is fully embedded in the organization’s overarching business strategy.
- Make sure that the API program contributes measurably to the organization’s objectives.
- Use best-practices (like the typical API use case from the Winning in the API Economy ebook) as a guideline to identify the API use case(s) that should be covered by your API program.
- Don’t think what’s the value of the API per-se. Think what’s the value of the effect of the API. Regard the API as a channel.
- Understand the internal and external view of strategy and how you can position your API program within that.
- Derive tactics for the API program from this positioning.
- Develop and communicate a clear plan of your API program that includes a development roadmap, a commitment to features and versions, and a definition of rules of engagement.
- Be aware of the core elements of effective API programs: the right business model, API design and implementation, API operations, marketing of the API program, and developer experience.
In the next part of this series, we will cover APIs and business models.