Creating Digital Value Chains with APIs
Amazon, Uber, Netflix, and Tesla are all examples of businesses that have disrupted their markets, to dominate their traditional counterparts. These companies, and others like them, are using technology to change the way products are designed, manufactured, sold and serviced around the globe. Digital manufacturing, digital market places, connected value chains, dynamic and on-demand servicing and others reflect how a basket of new digitally enabled technologies are changing traditional businesses.
Core to this technology-led disruption is the ability for companies to create value by connecting individuals, businesses and machines in a new “digital-thread”. These connections are dynamic, immediate, contextual in nature, and are usually powered by APIs. Digital value chains enable businesses to operate with greater efficiency and agility, reach more customers and partners, and boost consumers’ access to innovative products.
How APIs Create Value
Although the focus of most analysts and media has been on how digitization impacts consumerism, it is essential for businesses to see the bigger picture - the truly revolutionary possibilities available by harnessing the synergies of a fully integrated digital value chain. These chains can be categorized as internal or external. External value chains can be further broken down by a difference between the businesses and their customers and the businesses and their partners.
In this post, I discuss the value of each of these types of digital value chains, how they affect businesses, and why successful businesses need all three value chains implemented and integrated to truly differentiate themselves in the new digital era. Businesses that adopt only one will be left behind by the ones that embrace and integrate all three.
Connecting, Engaging and Serving CUSTOMERS
In 2013 there were 5.3 billion phones, some 3 billion people connected to the Internet and the Internet contributed approximately $1.5 trillion to the global GDP. Your clients and consumers are conducting business from wherever they are, and businesses that are providing customers with the information and ability to do so are the ones that are winning the game. Reaching customers where they are, whether it be through mobile apps, digital watches, connected cars or their homes, requires a deep understanding of customers’ contextual needs and opportunistically providing them services that meet these needs.
APIs allow businesses to expose a specific contextual service and data for a specific customer need so that it can be seamlessly integrated at the point of interaction, whether it is a mobile device, a kiosk or a cloud app. Whether it be a B2B company like Salesforce or Marketo, or a B2C company like Uber or Amazon, they are providing meaningful contextual apps on all sorts of mobile phones and connected devices, so their customers can transact their business when and where they want to. This B2C digital value chain is the one that is most obvious and most discussed in the media. The next two value chains are as important, but not that well understood.
Growing and empowering your PARTNERS
Partners have always been critical to businesses, and the digital economy makes them even more strategic, but only if they are integrated with the digital fabric of a business. Partners today need to have immediate and secure access to your critical business data to help them to make important decisions on your behalf. Similarly, your business requires insights into partners’ data and digital activities. For instance, enterprises need immediate insights into constraints in your suppliers’ inventory that might adversely impact manufacturing commitments. APIs are enabling businesses to integrate their applications and systems with each other in real-time, while maintaining the security and integrity of their data.
More importantly, APIs help businesses leverage partners to extend the reach of their products and services to a larger set of customers, often the ones to which they themselves do not have direct access. The simplest example of this is the Facebook “Like” API, which allows Facebook to engage users that are not directly on Facebook owned properties. Another example is the Concur API, which allows travel and hospitality apps (such as Uber, United, TripIt, etc.) to directly upload schedule and expense details to business travelers’ enterprise expense applications.
Innovating Within the INTERNAL Corporate Value Chain
A successful implementation of a digital value chain starts with connecting internal applications and systems of records with employees. This has been the traditional focus of enterprise IT for the last couple of decades, but getting it right has been elusive. Innovative digital solutions can reduce costs and add value throughout a company’s lifecycle, both within each stage of the value chain and across its entirety, providing employees and critical stakeholders with information and collaboration tools enabling them to make quick, accurate and intelligent decisions. Integrating internal applications and services has been challenging due to organizational silos, legacy home grown applications, and the sheer number of undocumented applications and services that exist internally.
However, by creating internal API catalogs, enterprises have a better way of documenting and sharing application and service interfaces, leading to better consumption and integration. Clear documentation, and providing self-service but secured onboarding to APIs is lending to efficient value chains across large enterprises like Bank of America, Monsanto and Caterpillar. By creating internal, integrated value chains across new product development, procurement, manufacturing, marketing, distribution, after-sales services, and other LoBs, these companies are not only enabling more complex modeling that blurs the line between sequential isolated phases of activity, but also allows business leaders to think about value in more holistic terms.
At the end, its about breaking silos and sharing data. There is nothing new to this mantra. However, APIs are the "digital-glue" that efficiently help break down these silos and create value-chains that can seamlessly exchange data on demand.
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