Until few years back, creating economic value proposition was mostly about integrated horizontal or vertical value chain. Core competency and economies of the scale mattered most and it was difficult for small scale organisations to compete with big giants. Business and Operating models were set for years, if not decades.
But in the current age of Digital, an organisation success depends on how quick it can understand emerging needs of the customer, craft a value proposition and launch before competition does. Today’s Digital start-ups are busy identifying gaps in value proposition and reusing what incumbents have got, they are not recreating what already exist. Example of this is ApplePay using traditional banks, card providers as backend payment service providers.
Composition through connections and interactions
Digital visionaries harness platforms to create this value through connections and interactions (reuse what is already available across industry), rather than ownership of individual resources. This creates semi porous boundaries between an organization and the resources and components outside its domain. APIs play a very critical role in adoption of this interaction within and outside the organisation. E.g. IBM buying WeatherCo to get a slice of $500bn a year commerce that is heavily dependent on the weather, by making these APIs available on their digital platform for other business to use.
Sourcing Innovations from outside
Organisations can launch their products & services through open APIs, that would provide 3rd party developer community access to experiment. This way, organisation can source innovation outside of its wall at fraction of cost. Some of the early adopter of Digital (e.g. BBVA API Days) are running API hackathon to tap usage ideas and innovation around their APIs.This approach also encourage partnership and collaboration with FinTech (for banks) and digital start-ups.
Reuse, Share and Monetise
An organisations core assets can be reused, shared and monetised through APIs that can extend the reach of existing service or provide new revenue streams. E.g. Banks aggregating, anonymised and sharing data as corporate social responsibility or exploring new revenue streams. One such example is Worldpay market insights.
Given the strategic importance and revenue potential APIs, this should not only be remit of CIO but CMO, CSO (sales) with a sponsorship from CEO. And, if organisations are not already discussing and putting a plan towards APIs, they would be left behind.