The API Economy: Why It’s Crucial to Business Transformation
March 21, 2023
A grand digital transformation has swept through the economy, fundamentally remaking experiences for customers and employees. As retail stores went online in droves at the start of the Covid-19 pandemic, they had to find new ways to connect systems and scale up delivery networks.
To meet shopper demand for online purchases, businesses scaled up fulfilment operations for warehousing and shipping. Mobile apps and brick-and-mortar stores now also share the same backend. Powered by application programming interfaces (APIs), this new digital economy makes a drastic break from the old world of sales.
But it’s not just retail; it truly is an economy-wide API shift. No matter your industry, you must keep up with the times and make the digital jump to stay competitive as the API economy continues to flourish.
What Exactly Is the API Economy?
An API economy is, in simplest terms, an interconnected web of multiple business services through application programming interfaces. This network lets companies collaborate more instantaneously and efficiently than ever before.
It’s referred to as an “economy” because it functionally serves as an entire business world, where companies use APIs to communicate. Clearly established communication standards make it straightforward to join business components between companies, even as new features become available.
An API strategy maximises the value of your company’s data. Taking an API-first development approach—starting from the interconnections that your business services will need, rather than with code, as in traditional development practices—lets you break complex problems into simple, reliable, reusable components to be composited however businesses want.
APIs let you offer digital services and data that previously were not easily accessible. For example, a weather forecasting company can sell access to weather data through an API, which an online retailer may buy to adjust which products they suggest, on the basis of trends. Many unanticipated combinations will continue to arise as the API economy grows and people connect new apps.
Why Is It Important?
The API economy offers several key advantages that are winning over an increasing number of companies. APIs encourage innovation and speed up connections among different businesses and processes compared to legacy programs.
Just a few years ago APIs were a backwater and rarely mentioned outside of technical IT circles, yet now these interfaces see billions of dollars in investment every year. APIs make it easier to assemble profitable systems increasing flexibility and speed many times over. In fact, according to the 2020–2021 RapidAPI Developer Survey Report, nearly half of large companies now use 250 or more APIs.
This burgeoning business world offers a new and exciting profit avenue, enabling a second wave of retailers to take to the rapidly growing digital channels such as web and mobile. The API economy advances businesses from only dealing in products and services to offering platforms with larger revenue potential.
As an ecosystem develops around the company, the same core assets reach more customers. Consider these success stories:
- Revolutionary ride-share giant Uber has gone beyond the realm of being just another taxi company by using map and payment APIs to add value to partner businesses.
- Tech leader IBM has given cognitive computing to the public through its Watson API, which now powers a range of applications.
- Amazon has collaborated with several household names that also rely on APIs.
No longer just a connecting tool for a few niche categories, the API has grown into a dominant approach to growing one’s sales via digital channels. It can spark new partnerships with suppliers that were previously at arm’s length.
How Can the API Economy Benefit Your Business?
As APIs connect more and more processes, they offer an important competitive advantage not only for IT companies but for all growing businesses. APIs make your business more agile, and allow you to easily add new services as you grow. Now you can quickly hook new data from any supplier into your processes.
The API economy offers an unparalleled symbiosis. You can work hand-in-hand with other companies to build economies of scale. For instance, if one company sells data through an API that another company uses to build a new service, both businesses—and their joint customer base—benefit.
Third parties can quickly expand available services in the API economy to keep up with industry trends and consumer demands. This results in more customer satisfaction instead of frustration regarding unavailable services.
Standardised tools are on hand to build whatever the market demands. Businesses of any size or segment can take advantage of the API economy by combining readily available features, even if they lack technical expertise.
Leveraging the API economy opens the door to innovation that simply couldn’t occur otherwise. You can assemble your own unique business building blocks to turn new ideas into reality. APIs serve as the studs connecting the blocks, enabling the construction of complex, sprawling, profitable enterprises.
Getting Started With Your Enterprise API Strategy
Before diving into the API economy, you want to clearly establish your strategy. This will direct your efforts to ensure a successful transition, and set you up for future build-out. Here are some questions your company should consider when developing your API strategy:
- What are your overarching company goals?
- What is the current state of your data assets?
- Do you consider your data and technology to be core business products or assets?
- What do you want to accomplish and who will be your target audience from the get-go?
- What functionality and security measures will you need?
- How can APIs leverage your data estate towards your goals?
- How will your products and services benefit from being API-enabled?
As with many other endeavours, transition into the API economy gradually. Having big plans in mind, start with simple steps. This produces faster returns while reducing your investments and risks—the process can be complex enough anyway!
Some of the steps that your team can expect to take include:
- Calculating your expected business benefits.
- Familiarising decision-makers with knowledge of which technologies or features will maximise returns on investment (before making any platform decision).
- Educating personnel and prospective customers about the changes.
- Unpicking and analysing the old and new systems, answering practical implementation questions as you go (such as understanding the data locked in current systems or API management platform to use).
- Assessing whether you have data of the right quality to successfully enable your APIs.
- Testing your systems thoroughly to prevent errors from interfering with users’ experiences.
Given the complexity of these assessments, most companies cannot develop an effective enterprise API strategy on their own. Rather, you should engage a partner who truly understands APIs. A partner like Prolifics brings the experience and know-how to streamline the digital transformation process and avoid costly mistakes. Prolifics offers a workshop-based API strategy assessment to assist your organisation.
Join the API Economy With Prolifics
The API economy is no longer the future, it’s the present—for those who embrace it. Companies that want to stay competitive as they journey through the so-called ‘Fourth Industrial Revolution’—the tech revolution—should adopt an API-first mindset ASAP. However, it’s not practical for companies to transition on their own without the help of proven IT experts.
In comes Prolifics. As a leading UK-based digital engineering consultancy with expertise in all aspects of digital transformation, including APIs, middleware and integration. Our consultative, end-to-end approach goes from planning to building and maintaining solutions.
Going API-first is crucial to digital transformation. It’s a complete overhaul of managing data. To join the ecosystem, you need to act as a contributing member—and the way to do so is to modernise your backend in a thorough API-first reconstruction.
Reap the rewards of connecting to the API economy. Your organisation will become more nimble and collaborative, delivering next-generation customer services, only achievable through strategic and methodical digital transformation. Talk with Prolifics about your API strategy today!