The benefits of APIs ( Application Programming Interface) are becoming more clear in an ever-evolving tech landscape, yet ITDMs still struggle to convince executives and investors to buy into an API-first strategy. Here’s a look at the importance of APIs in a changing world, and how ITDMs can make the business case in order to secure the best API strategy for their organization.
According to Google Cloud’s new “State of the API Economy 2021” report, a majority of IT decision-makers view application programming interfaces, or APIs, as essential ingredients in improved customers experiences, expanded partner engagement, accelerated innovation, and other demands of today’s business environment. This is encouraging: APIs are how software talks to other software, and since much of digital transformation involves combining disparate data and functionality into rich user experiences and process automations, APIs are an essential ingredient in modern business strategies.
What’s less encouraging: the research surveys primarily IT professionals, not business leaders. It’s clear that IT people see the benefits of APIs in the ever-changing tech landscape, but we still hear regular concerns from these same people that they have trouble convincing executives and investors to buy into an API-first strategy. In this article, we’ll look into why they are having these difficulties and some proven ways to successfully position an API strategy not just as a technological solution, but also as a business requirement.
The importance of APIs in a changing world
The rise of APIs has been heavily influenced by the introduction of disruptive new business models and evolving customer preferences that traditional technologies are not positioned to quickly and efficiently address.
For example, traditionally, if your business sold tickets to events, it would build physical ticket booths and maybe a website or first-party mobile app. Today, tickets in many cases aren’t so much a physical thing presented to an usher as a digital code that an usher scans. Likewise, tickets are less-often purchased in person as opposed to online, and reliance on a first-party website can be unnecessarily restrictive. It places the burden on the business to attract customers, whereas surfacing organically in social media, search engine results, and other digital experiences lets the business meet customers where they’re already assembled.
Moreover, as COVID-19 continues to disrupt events throughout the world, many ticket sellers—and most organizations, for that matter—have pivoted to digital-first business interactions as a matter of necessity. All of these changes in the business model, and all of the interacting systems and functionality that underpin them, rely on communication among APIs.
Similarly, today’s banks cannot grow by simply building more branches or hiring more tellers. Instead, they need to make financial information and functionality available when and where customers require it, whether that means via an ATM, a first-party app, or within some other digital experience. Many banks also need to do more than just present this functionality, as customers are increasingly interested in the analytics and insights their spending patterns can yield. Again, all of these interactions—from customers making a purchase within an app to banks applying machine learning in order to offer customers financial insights—are enabled by APIs.
Related: The “State of API Economy 2021” report describes how digital transformation initiatives evolved throughout 2020, as well as where they’re headed in the years to come. Download for free.
When guidance meets resistance
These examples do not illustrate technology that updates the status quo, but rather technology that unlocks business opportunities that transcend the status quo—and that help businesses to thrive even as the status quo fades into irrelevance and obsolescence. APIs are thus not just an IT topic but also important business enablers that should be understood by everyone involved with the enterprise’s investments, from internal stakeholders approving business strategies to external shareholders trying to assess an organization’s trajectory.
The challenge for investor relations is to convey these financial and operational benefits in a way that clearly communicates the need for a new business model rather than refinements to the existing models. It’s essential that IT professionals understand APIs, but it’s also essential for business leaders to understand them too.
This is even trickier given that arguments for API investments are often based on future potential, while arguments for more conservative alternatives are based on past success.
At a high level, the API value proposition is clear: In the past, valuable functionality and data have been encased in systems and applications, making them difficult to scale or leverage for new, evolving use cases. In contrast, APIs make functionality and data infinitely reusable, infinitely scalable, and modular such that APIs can easily be combined for new uses. All of this accrues to richer user experiences and more flexibility than ever for companies to monetize their digital assets, share them with partners, or combine them with assets from third parties.
It’s essential that IT professionals understand APIs, but it’s also essential for business leaders to understand them too.
But investors typically want as much information as possible because their decisions can affect not just productivity and output, but company stock prices and potential future growth. High-level arguments may not be persuasive. The deeper assurances investors crave would normally come from guidance.
Guidance in this context refers to insights based on growth forecasts and customer adoption, but this can be difficult early in market entry. Robust forecasting processes need to be developed to demonstrate the efficacy and value of the API economy, which can be hard to predict: whereas APIs are well understood in some sectors, and especially among digital natives, they are in the early stages of the growth rate in other verticals, making it challenging to forecast developer adoption of a given API. And since there is a shortage of information, trying to use traditional guidance comes with a risk of being wrong and thus of little value to investors.
How to deliver a more useful value proposition
While guidance may be premature during the early stages of market entry, investor relations teams still need to convey the full value of an enterprise to investors. To do this, they need a value proposition that emphasizes the intrinsic value of the investment while reinforcing the benefits that can best drive business and stock growth. Considering how large an investment of time, effort, and money transitioning to an API economy can be, it is vital to convey that the benefits are substantial.
A solid value proposition should demonstrate maximum returns, and while this shouldn’t include far-fetched or unobtainable claims, it can include reasonable aspirational visions alongside statistical insights. To craft these aspirational narratives, investor relations teams should look to their organization’s existing business needs and challenges, and then demonstrate how APIs can benefit the organization in these areas. Here are some options that speak to a number of common business requirements:
- Sales channel: API investments are reusable, improve speed to market, enable automated processes and partner onboarding, and can uncover unanticipated opportunities.
- Cost: Businesses can reduce operational costs by using and reusing APIs for innovation and business development, and by using the services native to your partner’s digital surface, you can further reduce innovation costs and risks.
- Earnings: API-enabled digital ecosystems unlock a variety of partner services that leverage the business’s shared data to drive new customer acquisition, new market positions, new transaction volumes, and direct API monetization.
- Risk mitigation: By investing in a credible API, businesses can mitigate downside risks that traditional enterprises can face from market disruptors, industry-wide shifts to digital tools, and inabilities to ingest and analyze growing data sources.
- Intellectual property: Unlike project-driven innovation and customized, point-to-point integration that traps enterprise knowledge in small teams and divisional silos, APIs are reusable and modular, breaking down silos and encouraging intra-organizational collaboration.
- Speed to market: The efficient, repeatable API interface informs improvements to the fulfillment process with consistent access to data from across the organization, which drives solutions that more quickly and efficiently meet customer needs.
- Ethics: APIs offer the flexibility and economical advantages that give organizations the capacity to focus on their brand’s ethical “reason for being” beyond profitability by serving economically marginal and underserved market segments.
- Customer credibility: Organizations can deliver the extended, connected digital experiences that customers expect with the tools and flexibility included with API products.
- Employee retention: Businesses can avoid losing key employees by updating their legacy technologies with APIs, giving employees the opportunity to enhance their skills with modern technologies.
- Corporate strategy: Enterprises that use APIs’ reusable, modular structure and tools are more capable of adapting to rapid structural shifts in customer demand patterns and sectoral changes in the economy.
Whichever of these business challenges a team speaks to, it is imperative that they demonstrate the benefits of APIs, and that once they’ve determined the angle they intend to use, they keep their message consistent. While we’ve seen a number of viable ways to position APIs as a winning strategy, switching among them could make the presentation—and APIs in general—seem insubstantial and unreliable.
This is why it’s key to decide on the most relevant business concerns, and once you’ve tailored your presentation, to make sure that you have message alignment, including buy-in and support from C-level executives. With a strong pitch built around solving existing business concerns and solidarity from relevant stakeholders, you can go into your investor meeting with the confidence to secure the best API strategy for your organization.
Strengthen your pitch with additional insights. Here are five key trends in 2021 for API-first digital transformation.
Paul Rohan is a researcher on Open Banking and a Google Cloud solutions consultant. Paul works with banking C-Suites that are examining the impact of the Platform Economy and Digital Ecosystems on financial services industry growth, market structures and governance. Paul is the author of “PSD2 in Plain English” and “Open Banking Strategy Formation”.
What’s driving businesses to adopt application programming interfaces (APIs)? In this video, Red Hat’s Steven Willmott outlines the business needs that are driving Red Hat customers to adopt APIs and explains how APIs can improve communications between partners to enable a more flexible business ecosystem. For more videos and resources, visit http://www.rtinsights.com/red-hat-agi…
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