The API Economy: It’s Game Time
Source from deloite.wsj.com
APIs are rearrangeable software blocks that can be used and reused to democratize innovation and generate new value for a wide range of stakeholders.
Humans are innately builders, whether building life, a sprawling city, or a mobile app. It’s in large part why LEGO is one of the most popular toy companies globally. As CEO Jorgen Vig Knudstorp said, “People just love to make things. It’s deep in every human being.”
While my own dreams of becoming a LEGO designer didn’t pan out, I built a $6.5 billion company based on building blocks made from software instead of plastic—building blocks called APIs. These software intermediaries allow systems, applications, and devices to talk to each other by sharing business capabilities and data, regardless of where the capabilities and data reside or what format they’re in. Like LEGO bricks, APIs can be endlessly rearranged to make something unique.
With more than 20,000 public APIs on the web underpinning the apps we use every day, the new economy these APIs are driving is changing the way companies are built. According to a recent report, 35 percent of today’s technology leaders generated more than a quarter of their organizations’ revenue as a direct result of APIs. Think of McDonald’s delivering food directly to doorsteps via Uber Eats without deploying its own delivery services, or HSBC providing a single financial dashboard for customers regardless of where they bank, or Expedia aggregating flight information from various airlines in a single view—all are possible because of APIs.
At its heart, the API economy is about the exchange of value between those providing APIs and those consuming them. For example, an app developer can spend a fortune writing millions of lines of code to create a mapping capability—or achieve the same result with one line of code that imports the necessary capability from the Google Maps API, saving time and money while speeding up the application’s time to market. Google benefits from a branding perspective and, in some cases, by driving revenue through millions of developers using its public API.
‘By leveraging this open plug-and-play application network of business capabilities, organizations can adapt faster and deliver differentiated customer experiences.’
Organizations today cannot afford to be centralized monoliths. They can benefit from deconstructing into discrete, API-based building blocks to be used and reused by internal and, in some cases, external stakeholders to democratize innovation and generate new value. By leveraging this open plug-and-play application network of business capabilities, organizations can adapt faster and deliver differentiated customer experiences.
HSBC, for example, announced this past fall that it will launch a Digital Partner Platform through a series of APIs. As a result, companies will be able to directly apply for commercial banking accounts online through the digital properties of HSBC or its third-party partners, including fintechs. HSBC is using APIs to expose its business capabilities to a digital ecosystem that invites partners to participate in the co-creation of value.
With customer requirements, partnership opportunities, and competitive landscapes constantly changing, business leaders can re-envision their companies as rapidly adaptable digital platforms that can import, export, and rearrange business capabilities much in the same way a LEGO project can be decomposed, reimagined, and recomposed at a moment’s notice.