Open Interfaces: Future Business Strategy

On Habré you can hardly meet someone who would not know what an API is. The role of open interfaces in recent years is growing at a rapid pace, more and more services are opening their systems to third-party developers, which helps them to increase the audience, and to end users to get a more convenient way to solve their problems. But API is not just a technical element to improve certain indicators; in the 21st century, API technologies have a huge impact on business, product development and even supply chain management. That is why more and more companies from traditional sectors of the economy, not originally related to the Internet, are beginning to implement an API approach in their business.

In the course of researching the opportunities that API technology gives businesses, we studied cases from 5 Japanese companies: they clearly demonstrate new trends in using private or partner APIs to update business models and search for new sources of monetization. Today we want to share this interesting information with you.
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Future

API, since the 90s, allowed to develop applications for operating systems. Now the number of devices connected to the Internet is increasing exponentially. Computers, tablets, smartphones, wearable gadgets, smart glasses are connected via API. Soon we will see a rapid growth in the Internet connection of various household appliances, designer items, interior items, sports equipment, etc. These trends are known as the “Internet of Things” (IoT) or the “Internet of Everything” (IoE).

A large number of startups have already been created to work in these markets that are trying to “grope” for sustainable business models. According to conservative forecasts of Ericsson, the number of devices connected to the Internet will increase from one billion in 2013 to 50 billion by 2020, and this figure will double every 5 years.



Open interfaces / platforms create a network effect, and the technology business makes extensive use of these tools to build successful business models. For example, 30% of Twitter messages are generated through connecting third parties to the company's official API, the Netflix streaming video platform processes 14 billion requests daily through the API, and AWS's cloudy Amazon infrastructure earns $ 3.8 billion thanks to the fact that it has open interfaces.

API approaches of traditional companies

Let's look at a few case studies of companies that fundamentally updated their business models using API technologies.

Seven eleven

7-Eleven, the operator of small supermarkets, experienced serious financial difficulties. As a result, it was bought by the Seven & I holding, which created on its basis a network of supermarkets with an integrated and flexible cloud infrastructure. Now it allows the company to receive and analyze customer information from 15 thousand cash registers connected to the Internet. The assortment on the store shelves can change up to 3 times a day, based on Big Data analytics and forecasting customer behavior. Currently, the holding has a capitalization of $ 29 billion, and its revenue for 2013 was about $ 65 billion and continues to grow steadily.

Omron

Omron, a manufacturer of medical devices for private clients, entered the “e-health” market in 2012, together with a telecom operator, providing a whole range of services, starting with visualization of information for users and ending with the sale of data to external developers. The set of services for external clients includes the sale of data for mobile developers, the visualization of information, the prediction of epidemics, the observation of clinical patients. More than 1,500 medical institutions have already been connected to the platform. The growth of the company's turnover due to the provision of services in the B2B segment was 30% in 2013, Omron aims to reach a capitalization level of 130 million dollars by 2015.

Cookpad

Cookpad, which began as a simple user-created recipe website, now sells analytical data on customer preferences to the food industry.

Fujitsu

The company launched a new service called AKISAI, which aggregates data from across the country using sensors and cameras installed in the fields and on farms. As a result, data are collected on soil temperature, air humidity or precipitation. AKISAI uses cloud technology to store and process data. As a result, based on historical data, the service can generate recommendations on the use of available resources and visualize the collected statistics.



By 2016, the number of farmers-customers of the AKISAI platform according to Fujitsu's forecast will be 200,000.

Honda

Honda became the first automaker, which in 1983 released a navigation system. In 2003, the company launched the InterNavi Floating Cars service, which, through the API, connects a fleet of cars to provide navigation services. Currently 2 million cars are connected to the service in Japan. Thanks to the internal API, all machines connected to InterNavi can send data about their location and speed, as well as request location information. As a result, Honda has already received an array of data describing a billion kilometers of travel in Japan.

In addition, in Silicon Valley, the company opened the Innovation Lab, whose tasks include working with potential partners in the search for new applications of API technologies. As a result, two projects were developed. The first of them allows using the data collected through the API to predict the condition on the roads of a certain region after the disaster that occurred there (earthquake, flood, etc.). The second project is the organization of a special hackathon together with Evernote, during which developers can create various applications.

Like Apple, which has built a whole ecosystem of applications around the AppStore, Honda is creating a similar ecosystem around its Navy System. It is obvious that in the future, cars will be much more like smartphones: for them there will be special content platforms with applications that meet any possible needs of the car owner.



API interfaces have become new product / service channels and are used to provide services to customers, partners, the public and, of course, for interaction within the company. In order to understand the model of successful development of this channel, it is necessary to understand the key elements, the participants and the structure of the value chain in this channel. First you need to answer the following questions:

1. Who is the API provider?
2. Who is the target audience and what is its size? What is her motivation to use the interface?
3. What business assets will be delivered through the API? What information, services, products will be available using the API?
4. What functions or applications will be used through the interface?
5. Who is the end user of API-based applications?

Answering these questions, we understand the elements of the value chain that includes: business assets (information, services, products), API-interface that provides access to these assets, external developers (create API-based applications), applications themselves, end users of applications. For the successful development of the API, chain members should receive value from the use of the channel and support the API economy.

An important condition for the success of an API strategy in a company is the participation of an interdisciplinary team in creating an API, namely: marketing experts, communities, product managers, evangelists, business experts who can help set the right business goals and success criteria for the project, as well as think about issues of promoting applications to end users and allocate additional resources, if necessary.

Risks and prospects

API technologies have not only supporters, but also opponents who point to the various risks of using an open approach. The main arguments include:

• incorrect use of content;
• possible system overload;
• security threats.

As for the first argument, the company that gives access to its API is fairly well protected from such risks, because it can control access to the interface. Overloading systems, in general, is a good sign, indicating the growth of the business, and you cannot insure yourself against a hacker attack without even having an API.

It is important to use the methodology of startups when developing new services / products (Lean Startup, Agile Development, Business Model Generation), as this will help to avoid premature investments and test the main hypotheses in the value chain. In addition, you need to move in stages and step by step to cover different segments and applications, rather than trying to do everything at once.

API technologies allow to effectively solve three problems of any business: its development, development of products and services, resource management and supply. That is why it can be argued that the future is behind the open approach, and many large companies understand this. In the markets of Europe and the USA, one can already see how such conservative players like banking organizations and telecom operators (Credit Agricole, Verizon, T Mobile, World Bank, Orange, etc.) are beginning to look towards open interfaces and develop prototypes of their own API platforms. to get new competitive advantages or even to counteract “disruptive” innovations from active venture startups.