API-Enabled Digital Ecosystems: From Product to Platform

The role of the API in enabling new Platform Business Models

Massive new startups like Uber taxis, Airbnb and many more are pioneering the ‘On Demand Economy’, implementing a Cloud-based On Demand Business Framework which overlays a ‘digital mesh’ across a marketplace of vendors, such as taxi drivers or travel accommodation.

The repeatable secret sauce is the Platform Business Model, described in detail through academic literature and popular business books. For example the MIT book ‘Platform Revolution‘ describes these hyper-scale disruptors like Netflix, Uber, Airbnb, Facebook, Twitter et al, as the book describes:

“Facebook, PayPal, Alibaba, Uber-these seemingly disparate companies have upended entire industries by harnessing a single phenomenon: the platform business model.”

The book builds on prior MIT research, such as this detailed 2007 research report on Platform Networks, this highly recommended presentation Platform Strategy and Open Business Models, and in a simpler format in this presentation, which defines:

“A “Network platform” is defined by the subset of components used in common across a suite of products (Boudreau, 2006) that also exhibit network effects. Value is exchanged among a triangular set of relationships including users, component suppliers (co-developers), and platform firms.”

The ‘Platform Manifesto‘ describes APIs as one of the key building blocks of a Platform Business Model.

APIs are about making the business ‘programmable’, like how it enabled the ‘platformication‘ of the Evernote business model, and Digital leaders like Pearson have pioneered them to underpin their platform strategies.

Chris Gambino, Google Customer Engineer, documents a case study of documenting a Restful API for Walmart.

John Musser, CEO of API Science and founder of ProgrammableWeb, offers 20 API models in 20 mins discussing the progression of API business models and offers examples of companies that have successfully matched their strategy with the appropriate model. (also shared via this Slideshare presentation), and explores Real API Models that Worked – a number of startup scenarios that successfully employed an API model.

The strategic role of the API is eloquently framed by the Swisscom team from their experiences of developing APIs to enable new customer services, where they came to think about it instead as a ‘VPI’ – Value Proposition Interface, and with this in mind Google engineers recommend managing APIs as products.

From Product to Platform

Harvard explores the specific scenario of companies that already have established products and expand their business models to Platforms, discussing different ways and competitive advantage perspectives for how to build upon an existing brand and user base, and extend the business model via opening it up to an ecosystem approach.

A great example is Pitney Bowes, enabling a new portfolio of digital services that build upon their traditional mailing machines, through the use of API enablement.

“Using Apigee Pitney makes APIs for services such as location intelligence, customer engagement, and shipping and mailing available through developer.pitneybowes.com. There developers can add to their ecommerce apps the capability to rate a package, validate an address, refill an account or by a United States Postal Service label. They may also “geo-enhance” apps with location coordinates, place names, points of interest and time zones.”

Platform expert Simone Cicero offers 12 Platform Patterns, such as enabling a Market Network with SaaS, a scenario that MIT explores in deep detail in this presentation.

They describe it as a transition to a multi-sided market model, the shift as ‘From Warehouse-Powered Store (with a goal of liquidating inventory) to Ecosystem-Powered Marketplace (with a goal of governing ecosystem interactions)”. (Slide 26).

Open Banking

Open Banking gurus The ID Co. provide a snapshot of the growing use of API’s to enable dynamic new FinTech models:

Further insights

Insights from the 2016 Platform Conference – Speakers from Google, Microsoft, Airbnb, Spotify, Volvo, and other companies offering broad insights into API scalability, future reliability, and use case assessments of fine grained technologies like microservices, GraphQL, serverless architecture and more.

This selection of Youtube videos offer examples of such an envisioning process for the Platform model, to populate a Business Model Canvas based on these principles.

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