Business model innovation is the most exciting thing about APIs

Business model innovation is the most exciting thing about APIs

By Paul Winters

APIs and the API economy are transforming the way that businesses interact with consumers and other businesses. APIs allow enterprise functionality to be exposed and reused via multiple digital channels. Many people think that APIs are a technology solution to allow consumers and partners to interact with enterprises. This view misses the real benefits of providing an API.

A lot of people think that APIs overcome the technical challenges for digital channels. It's easy to see why people have this view. Firstly, people with a technical background often see APIs as the next evolution of technical ideas such as SOA and Web Services. Others see this as a technology innovation that belongs in the IT department and used only by developers.

In reality, the biggest impact for business will be using APIs to create innovative business models. Gartner shares this view and shows the biggest net profit increase from adopting APIs is due to creating new business models. Companies must move on this topic or risk being overtaken by digital disruption. You don't know your next competitor's product or model. Richard N Foster, Managing Partner at Millbrook Management Group LLC, has found that on average an S&P 500 company is now being replaced about once every two weeks.

There is evidence that companies are already using APIs to implement new business models. Twilio has disrupted the traditional telco industry by providing an API for SMS, VoIP and voice. Another example is the Google Maps API that has transformed the way physical locations are shown on online and how people navigate. This has reduced the market share and requirement for stand-alone GPS devices. Imagine what functionality you could have in the future if you linked the two APIs.

I believe that APIs are becoming popular and allow for even more disruptive business models. This will take APIs out of the technology realm into the realm of business strategy.

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Paul Winters is a Director at Syntegrity Solutions, a specialist IT consultancy that focuses on digital innovation enablement. He has over 10 years experience in the IT industry and has consulted on APIs, integration and security to enterprises including top-tier banks and insurers.

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