An API-driven approach to accelerating your digital transformation

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The proliferation of digital technologies over the last two decades has given rise to digital transformation, and with it, new challenges.

According to the MIT Center for Digital Business, enterprises that have embraced digital transformation are 26% more profitable than their average industry competitors and they enjoy a 12% higher market valuation.

According to a research report, executives predicted that nearly half of their revenue will be driven by digital already by 2020. So, how do enterprises really start getting this right?

They start by getting it right with the customer. Having a customer-centric approach and delivering great digital omnichannel experiences should drive your digital transformation. The customer defines value. For enterprises, this can get complex; a single customer journey, such as a web or mobile transaction, can require up to 40 different technology components, almost double what it was about seven years ago.

When the customer comes first, the customer will last. Are you putting your customer first?

Underpinning great digital customer experiences is data. As the fastest rising currency in today’s digital economy, data is the nucleus powering Industry 4.0. For enterprises, data can be the key to unlocking new digital growth, collaboration points and disruptive complements. The key to transforming this data dormancy into data dominance is connectivity.

Data is the new oil and connectivity is the new social. How are exploring connectivity through data?

Connectivity enables enterprises to link multiple technologies together to create unique and valuable offerings for multiple audiences. Central to connectivity are APIs. Historically limited to technical domains, APIs are now a significant engine for business growth – think API economy. They are the connective tissue for today’s ecosystems, so having an API-driven strategy is crucial,

APIs are the new building blocks for future-ready enterprises. Are you API-led as an enterprise?

How do enterprises unlock the strategic value of APIs?

    1. Thinking beyond your ecosystem

APIs allow enterprises to generate new growth in new ecosystems or strengthen it in existing ones. To achieve this, enterprises require a mindset shift from the traditional competitive strategy models. Horizontally, competitive forces can become co-opetitors or co-creators of value. Vertically, new value chain partners i.e. suppliers, or even customers can help extend and defend value.

Oral B created a new ecosystem by exposing their APIs to third-party developers( component suppliers), who created exciting customer experiences with tooth brushing, extending, and defending Oral B’s value.

 Beam Dental, another toothbrush manufacturer, extends this asymmetrical business model by offering dental insurance plans based on data gathered from their smart toothbrush – data such as brushing habits, brushing pressure, and brushing duration.

    1. Reusability

APIs can unlock the digital capabilities of an enterprise in new and exciting ways, foster innovation, and create new, sometimes unintended digital growth. But the greatest value of this asset lies in its reusability. Enterprises need to embed reusability as a core technology value at a leadership level. Leadership and executive support are crucial to unlocking the economic benefits of APIs for any enterprise, and this sets the foundations for an API economy.

It will also ensure that existing APIs are considered first when a new application needs to be integrated or a new functionality is introduced. This creates immense economic benefits, as the information shared by a specific API can have multiple consuming applications.

For example, a product API created for an ERP system may be reused by an eCommerce application across mobile and web.

    1. Legacy systems not legacy speed

Enterprises can use the network effect of APIs across the enterprise, not just in silos. If a CIO supports the purchase of SaaS applications without considering how the enterprise will connect them to their core systems, then a more strategic approach is needed as the short-term gain compromises enterprise benefits. The pace of today’s business requirements at an enterprise level calls for a more integrated thinking. Point-to-point connectivity works, but it eventually creates bottlenecks and slower delivery. Think end-to-end connectivity.

This requires a different approach. It requires exposing your legacy, back-end, core and third-party systems via Foundation APIs. These private, reusable APIs are designed to enable employees access system data faster without system knowledge or training and reduce third-party reliance, which often decelerates business operations.

Foundation APIs are designed to be exposed internally, undergo minimal change, rigorously governed with clearly defined SLAs and security contracts. As business processes evolve to cater to new business requirements, enterprises need faster, more economical and reliable ways to operate.

    1. Complements and collaboration

Economic complements can exponentially expand value for enterprises. They are aligned to asymmetric business models, where an enterprise identifies and collaborates with a complementor to commoditize and bundle their products to create a stronger value proposition. APIs are one of the best ways to attract complements. That interrelation between enterprise and complement is based on a decrease in price of one product leading to an increase in demand for the other.

Walgreens, a global drug retailing chain generates demand for its retail business by attracting users to get photos printed there. Walgreens allows third-party software developers (via a marketplace) to offer a “print-at-Walgreens” function to their photo applications, driving users of the photo apps to Walgreens. Walgreens collaborates via APIs to capture value outside their ecosystem.

Apple and Google are great examples. They expose APIs (via a marketplace) to third-party software developers who build apps. They commoditize the app market, lowering its value and increasing demand for their devices and advertising business respectively. This leads to collaboration with complementors – such as accessories and device manufacturers, respectively – which creates external network effects, exponentially extending and defending value for Apple and Google.

    1. API models

Determining your API priorities is important and requires further investigation into the different API models. Here are some models, each with a different priority:

  • Internal or private APIs, most commonly used, are designed primarily for cost reduction and operational efficiency. They can be used to improve software development and simplify systems and operational processes.
  • Partner APIs provide data access for external firms to capture value by creating new products and services or extend value by enhancing existing ones. They can be used to reduce partnering costs and monetize APIs.
  • Public APIs expose data, products and services to communities of developers to foster innovation and commercialization. Public APIs can be used to create economic complements allowing you unearth avenues for new digital growth.

Over 60% of APIs in enterprises are internal and it is common for all three API models to be used. In multi-speed digital transformation initiatives, using all three API models can accelerate digitizing your core systems and unlocking new digital growth.

How are enterprises extending value through their operating model execution?

    1. API technology model 

From a technology perspective, it starts with a building or setting up a central API management platform. This will act as a single source of truth for lines of businesses and developers within an enterprise. A single platform eliminates duplication and promotes reusability of core assets, architecture and support.

Using APIs effectively requires a new way of thinking about partnerships as well. Finding the right technology partner is crucial to setting the operational foundations for your API-driven growth.

    1. API layers model

Consider how you layer your APIs. It should be aligned to your API model and should reflect your intended business outcomes and strategic priorities. By introducing layers of abstraction and control between critical legacy systems and front-end components exposed to developers, enterprises can be better suited to handle business requirements.

Mulesoft’s API-led connectivity categorizes APIs into three layers to cater to legacy or core systems, business processes, and customer experiences.

  • Experience APIs – designed to make your products and services available to customers via omnichannels and devices.
  • Process APIs – designed to reflect your business operations, functions, and processes.
  • System APIs – designed to unlock your core systems, legacy systems, backend and third-party applications, and expose their data. Think Foundation APIs.

 

    1. API funding model 

Enterprises need to consider the funding model to support API growth and commercialization. It is fundamental to dedicate specific funding to develop a set number of APIs aligned to your intended business outcomes and strategic priorities. Innovation should be the core driver of your funding model.

The funding model should have enough rigor and business alignment, accommodate enough flexibility to accelerate emergent ideas and chart new digital growth. This approach ensures the focus is on supporting the opportunities that offer the highest value for the enterprise.

    1. API governance model

Setting up a dedicated center for API development, delivery, and operations is crucial to unlocking network effects of APIs in your enterprise. Think Amazon’s API economy. It could be a community or center of API excellence, practice, or enablement. The mission of the center is to foster and nurture the growth of API practice in your enterprise. Starting off centralized and progressing to a decentralized structure is always a good strategy. This often ensures you capitalize on reusability fast, act as a focal point for learning, build API best practice, and gain critical mass.

As enterprises mature in API practice and grow in confidence, they can decouple and federate out delivery capability, enabling self-service for lines of business. This approach ensures more customer focus, reduced time to market, accelerated scalability, and utilization of the network effects.

    1. API delivery model

Whether centralized or decentralized, enterprises need to think about what works best for them. In both structures, a centralized function within your structure is necessary. This function ensures alignment to business and technology strategy, KPI and value reporting, API service governance, automation and tooling, deployment, training, asset reusability, platform support, and more. In centralized structures, the delivery capabilities tend to remain central.

In decentralized structures, delivery capabilities are federated as the principles become embedded and a critical mass of requirements need to be fulfilled. Here, we see lines of businesses with their own delivery capability building experience APIs to cater to customer needs faster and with more autonomy. In decentralized structures, delivery mechanisms are fully decoupled from the center to ensure speed and autonomy in value delivery.

    1. API development model

When thinking of development at a more tactical level, consider API-first development. This is a strategy which begins with developing (and designing) an API that puts your target developer’s interests first and then build the product on top of it i.e. website, SaaS software, mobile application. Doing so sets the right foundations for other developers to build on.

This aligns with the open innovation model as enterprises setting the right API foundations empower their developer community build services with interactions and dependencies without the integration issues. It all starts with recognising APIs as a first-class artifact of the development process, API-first gives teams the ability to work against each other’s public contracts without interfering with internal development processes.

Enterprise giving serious thought to APIs at a strategic and operational level give themselves a fighting chance to navigate sustaining and disruptive innovation within and outside their ecosystems. 

Chuks Anochie is a Lean, Agile and DevOps-certified Digital Transformation Consultant. He has spent over a decade advising and supporting companies on the best strategies for digital transformation and guiding them through implementation. He is currently supporting organisations drive API acceleration.

To learn more about how Capgemini’s Digital Transformation offering can stimulate enterprise digital transformation, improve the speed and direction of delivery to generate better and new sources of value, contact chuks.anochie@capgemini.com

Find leading thinking on Digital Transformation as well as other key topics and trends at: https://www.capgemini.com/gb-en/experts

If you are interested in working with people like Chuks, take a look at our career opportunities here.

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