Welcome to the API economy

By: Kristin R. Moyer President and distinguished Analyst at Gartner

As the Internet of Things (IoT) gets smarter, things using an application programming interface (API) to communicate, transact and even negotiate with one another will become the norm. You can remotely adjust the temperature of a room by using an app that calls the API controlling your thermostat, or when buying movie tickets online, an API is used to verify your credit card information.

We live in an API economy, a set of business models and channels based on secure access of functionality and exchange of data. APIs make it easier to integrate and connect people, places, systems, data, things and algorithms, create new user experiences, share data and information, authenticate people and things, enable transactions and algorithms, leverage third-party algorithms, and create new product/services and business models.

The API economy is an enabler for turning a business or organization into a platform. Platforms multiply value creation because they enable business ecosystems inside and outside of the enterprise to consummate matches among users and facilitate the creation and/or exchange of goods, services and social currency so that all participants are able to capture value.

Uber, for instance, is an example of a business built on a platform because it leverages Google Maps through an API to enable its entire business model of matching drivers who have a vehicle with passengers who need a ride. Walgreens offers an API for its in-store photo printing services that enables others to offer photo apps on its platform. It moves from being a photo printer to being a photo platform.

This is the sort of industry vision enterprises must create in order to turn their business into a platform. This vision should consist of four parts:

Concept

An industry vision seeks fundamental change that will affect many dimensions of the business and operations. Using APIs to turn a business into a platform involves three main building blocks:

Digital business– enable ecosystems of people, businesses and things to create value from outside in.

Business model platforms – enable digital business by exposing existing enterprise assets like algorithms, information, resources and analytics.

Business ecosystems – leverage the business model platform to create new solutions.

Capabilities

The CIO will need a set of new capabilities to turn their business into a platform, to include:

An IT culture that embraces openness.

A biomodal IT to launch business model platforms and ecosystems.

An asset management lifecycle discipline that catalogues and manages things like algorithms, creates new ones and retires old ones when appropriate.

An organizational and compensation structure aligned around business model platforms, rather than products/services.

New approaches to risk management and intellectual property that adapt to a digital business model that shares critical assets with ecosystem partners.

Assets

The CIO will need new technology assets to turn their business into a platform, for example:

APIs that expose assets like data, algorithms and transactions.

API management software to enable the deployment of the business model platform, and the protection of data and enterprise systems.

Intelligent business processes to scale the curation of what ecosystem partners have created, and to ensure solutions are ethical, reliable, secure and compliant.

Research

Developments around digital business models are dynamic; they are changing rapidly and will expand into new areas. The chief strategy officer (CSO) will, therefore, have to maintain a research program designed to monitor and adapt an enterprise’s industry vision of becoming a platform company. The CSO will need to model/evaluate continually with new digital business possibilities.