How APIs Drive Company Performance
Here’s a new way to explain what “API” stands for: “a profit increase.”
Initial findings from groundbreaking research reveal that the amount of data that flows through an organization’s modern web APIs is positively and significantly associated with sales, net income, and market capitalization.
This shouldn’t come as a shock. Digital transactions, whether with Amazon or Netflix, Walgreens or theBBC, are powered by APIs. Visualizations by The Center for Global Enterprise enable us to literally see the scale of today’s public “API economy.”
But why have we been working with economists to create empirical quantitative benchmarks—and what does it mean to you?
Our research agenda has always focused on helping our customers achieve more business impact, faster, while also accelerating growth of the overall API ecosystem.
We saw a need for new tools in the toolbox to drive change quickly as digital transformation was increasingly a priority in boardrooms and C-suites.
As recently as three years ago, simply meeting customer expectations for modern mobile apps motivated a lot of the interest in APIs at large companies.
While this was (and still is) important, we knew from our interactions with first-movers and visionaries that APIs were a vital part of bigger changes in business models.
So we invested in a program of survey research that did two things. It confirmed our hypothesis that companies with stronger digital capabilities were outperforming their weaker peers on business outcomes like revenue and profit. And it uncovered best practices for building and exploiting those capabilities.
We’ve since found ourselves in great company, with empirical research conducted by experts from theMIT Center for Digital Business andHarvard Business School also validating the connection between digital leadership and competitive advantage.
The days when a small, passionate mobile team might lack evidence to convince top management that APIs are more broadly relevant to competitiveness are behind us.
Today’s balance of risk is different. As boards and CEOs wrestle with digital transformation, the urgency of “getting in the game” of doing business with APIs might get lost in a larger change initiative that, for most, will take years to fully unfold.
We know from our customers that leaders learn by doing, accelerate growth by firing up an ecosystem, and discover more mash-up opportunities by having more APIs in play. Sitting on the sidelines leads to disadvantage, in both insight and assets.
Walgreens built their PhotoPrints API for their own app. Now more than 100 third-party apps generate revenue shared between Walgreens and its ecosystem. TicketMaster’s CTO describes the company’s API as growing over four years “from a $1MM/year business to a $1B/year business.” Some of our own engineers built an app that makes Philips Hue light bulbs and Uber better together, thanks to APIs.
Marshal Van Alstyne was one of the pioneers in describing the economics of how and why harnessing external innovation and user-created value beats traditional supply chains.
