What will help small businesses grab a share of the digital pie? APIs!

Every small business must understand APIs!

If they don’t, they will be missing out on a $1 trillion* profit pool from value-creation on digital ecosystems that will be up for grabs by 2025.?

As things stand, this sum seems to be reserved for big players who are building a full-fledged digital ecosystem by buying into new sectors (beyond their core competencies).?

So, what will help small and mid-sized businesses secure a share of this profit pie?

Participating in the API economy!

For those of you whose understanding of APIs (Application Programming Interface) is hazy, think of them as neurons — messengers that help different parts of the body communicate, except that in this case it helps apps talk to each other.?

Here’s an example to make better sense of APIs. When you track your ride on Uber or Ola, here’s what happens behind the scenes — APIs access information from Google Maps and integrate them into your ride-sharing app, giving you real-time updates, just as neurons send and receive information from one tissue to another.??

This way businesses that need navigation and tracking features can save themselves the trouble and cost of building it from scratch. In turn, Google generates revenue as businesses use its APIs.?

How do APIs play out for small businesses?

APIs are both a growth tool and an efficiency driver. They have made the app economy fertile for small businesses to create new business models, streamline internal operations, and generate new revenue streams.?

Source: Capegemini

With APIs, a small business can transform itself to a full-fledged data-driven entity and unlock a slew of business opportunities, as shown in the illustration above. Here are a few ways small businesses can leverage the digital ecosystem and have a share of the pie.??

1. Create New Business

Mere presence online will not help you win the digital game. To be able to sell to the modern digital consumer, you have to be quick, easy, and fun. With public APIs, perfecting customer journeys isn't a daunting task.?

A few lines of code can help you integrate and build a full stack of APIs that can do a wide range of things for you — from managing your leads and email marketing strategy to perfecting your customer relationship management efforts.?

1. Encourage Innovation

APIs help you innovate and benefit from partnerships. Opportunities in the API economy for revenue sharing models are endless. Share your API key and open up your inventory and data to the whole world. This way you enable any online seller to check with you real-time and sell your products on their portals.?

2. Shorten time to market

APIs are not just connectors but also packaged solutions. Should you decide to build an app of your own, you can use a host of retail APIs such as catalogue and inventory APIs to help your customers search for an item or recommendations API to suggest items based on preferences from previous searches. You don’t have to build things from scratch; with a game of plug and play you can be market-ready within weeks.?

3. Decoupling and resiliency

For a business to hum like a well-played symphony, it takes planning, collaboration, and coordination. This is where a well-managed API lifecycle shines. It integrates the business’ internal architecture, optimises it, adds efficiencies, makes organisations resilient, and above all cuts cost.

4. Enhance connected customers

Personalised customer experiences are no longer add-ons, they are essential. Take millennials for instance; their average attention span is 8 seconds — which means your brand should stand out in the memory of a goldfish. And this is no mean feat.?

To deliver rich customer experiences, you need a single view of the customer. That’s exactly what the API-led connectivity does; it allows teams to compose, recompose and adapt APIs to meet rapidly changing needs of customers.?

APIs are great. But you need an API strategy to make the most of it.?

The API economy is getting bigger with firms currently offering over 22,000 APIs. A deluge of APIs in your system can add to complexity, and beat its original purpose - simplifying processes.?

Therefore, to strike it rich with APIs, you must carefully design a neural network that works in line with your business objectives.?

This essentially means that the value lies not in simply using APIs, but how you implement and manage them.

Credit: Virpi Oinonen, businessillustrator.com?

Some digital players have got it right. Cases in point, Expedia generates 90% of their revenue from APIs, eBay 60%, and Salesforce 50%. This essentially means that more than half of the revenue of these companies comes from third-party apps.?

?You can tap into the API economy too. Here are a few points to consider while planning your API strategy.

• Define your business broadly

The first question to ask yourself is what’s the business you want to be in. Say, you are a ride hailing app, would you consider scaling up as a public transport aggregator or a logistics aggregator??

Before you deploy APIs you need to have a vision of the digital ecosystem you are aiming to build or be part of.

• Know the value of each API business model

Annual budgets for APIs and related infrastructure range from $3 million up to $100 million. If you don’t have that extensive a budget, you can still be in the game through partner/customer APIs — private and shared only with integration partners. This API helps create shared or marketed revenue.

If you want to take the revenue game to a whole new level, go the Expedia way — put external APIs out there and you can take a percentage cut of the API transaction or charge a fixed rate based on the volume of API transactions.?

• Perfect your API architecture as you would a product

A product mindset is important to make the most of it. According to the State of the API report, 70.3% of the respondents consider sophisticated API documentation as the key factor that influences their decision to integrate. Without top-notch documentation, even the most digitally innovative players fall behind — probably why you don’t hear Airbnb alongside Expedia when it comes to API geniuses.??

Create sandboxes so that your developers can test your APIs and start experimenting with them. And when you launch your API, its adoption will depend on how you market it. So, set KPIs to measure the value your APIs are generating and optimise as you go along.?

• Draft an API governance policy?

Using many APIs leads to redundancy. Businesses typically face the challenge of employees using APIs without organisational oversight, say, a business analyst may use APIs to gather market data, and then software developers add their own share. This can lead to a haphazard pile. Hence, it is a must to have a governance policy — one that accounts security as well.

Charge yourself up with the API drink!

Credit: Siscadraws