APIcon: 5 Lessons on How to Transform Businesses and Industries Into Platforms

A panel presentation at ProgrammableWeb’s APIcon in San Francisco last week focused on the emerging business trend of “transforming into a Platform.”

Like Big Data — which businesses know they have to have, even if they aren't sure how to analyze it or what to do with it — the concept of reorienting a business toward becoming a "composable enterprise" is on every executive's to-do list. The central idea is that businesses need to break down their services, products and capabilities into discrete units so that external partners and customers can plug directly into the business experience they need. In this paradigm, the composable approach allows every business to become a platform. And APIs are seen as the key way a business can package itself up into the composable bits that will allow others to connect to it via an emerging platform model.

But how does this transformation occur in the real world? How do APIs enable businesses to move to a platform model? Moderated by ProgrammableWeb Executive Editor David Berlind, speakers including Joshua Greenough (Capital One), John Collison (Stripe), Bobby Napiltonia (Twilio) and Patrick McGrath (WalmartLabs) shared their thoughts and business experiences.

1. Platforms enable interactions, and interactions create platform value.

One of the key arguments made by business analyst Sangeet Paul Choudary, who specializes in platform thinking and will host a full-day workshop in San Francisco on June 12 with 500 Startups, is that the value of platforms is generated when businesses and customers can interact on that platform. He cites WhatsApp and Twitter as two examples where the business is not valuable in itself; it is the interactions that are generated on the platform that create the value.

It's a point made by Greenough from Capital One: “The life cycle and ecosystem of APIs is one of value-add,” he said. APIs are allowing businesses to transform at scale, “while still having the oxygen to innovate.” An industrialized API strategy within an enterprise helps create the mindset that is needed to move to a platform-thinking approach to business. (A similar comment was made by Ismail Elshareef, head of open platform at Edmunds, who has noted that his business would have missed market growth opportunities if it had not instituted an API and evolved to a platform mindset in its business culture.)

Collison from Stripe gave a commercial example of how quickly APIs are helping emerging businesses become a platform, even for the management of their own products, and in doing so are speeding up the monetization life cycle. “One of the exciting web trends is to build products and services around the world,” Collison said. But for some startups, the potential to monetize from their products on the web was difficult. “So the simplest way to generate money from their web app was to build an iOS app and charge for that,” he said.

McGrath from WalmartLabs says the data is all there to be able to track the interactions that show where a business’ platform value is being created: “You can derive sales data from website traffic, so you can make an assessment of whether you are tracking below average in your market. When you look at the numbers, you need to extend what you are good at. It all comes down to sales and traffic, and utilizing tech platforms like APIs allows us to do manage this.”

2. A platform connects a business with new, potentially more lucrative target markets.

Providing an open API that lets third-party developers integrate Walmart and Twilio into their product value chain lets the API providers reach new customer audiences.

McGrath explained: “Our main API product is for comparison shopping. We needed a fast, extensible, reliable API because the reality is that people don't come to walmart.com. They go to third-party sites, and we wanted to provide an API that gives our customers a great experience on those sites.

“We get 50 to 100 developers each week. A significant number are driving purchases to Walmart. So enabling the product catalog via API and extending the ability to delivery to the customer is an advantage,” he said.

Third-party products themselves are connecting Twilio to new customer audiences, not the Twilio API directly. “We see Fortune companies building on top of Twilio products rather than on Twilio itself,” confirmed Napiltonia.

It is a platform effect that Evernote — one of the most advanced pure-play businesses-as-platforms — is seeing in its integrations. Not only do end customers connect to an API via a product, but this chain can build out even further. In a rich and robust ecosystem like Evernote’s, developers of developers are integrating with the Evernote API. Following the panel session, Chris Traganos, director of developer relations at Evernote, offered an example of the way content reading service Feedly has integrated the use of Evernote API. Developers access Evernote via the Feedly API, rather than via aggregating the Evernote and Feedly APIs separately in their value chains.

3. Your CIO can be your chief innovation officer.

As Dion Hinchcliffe notes in his recent article on ZDNet, CIOs are often torn between maintaining existing infrastructure and applying new technologies that enable innovation. As Hinchcliffe sees it, this often leads to CIOs being left behind and instead it is “regional departments and far-flung divisions that are shifting companies into fast-moving and vital areas like market-facing mobile applications, cross-channel CRM, digital marketing, open APIs, online communities, and other high-visibility emerging business technologies.”

Napiltonia explained how, in previous roles, he has seen success both in use of APIs and in how businesses think about transforming into a platform, when "we turned the CIO into the chief innovation officer, and it made a tremendous amount of difference," he said.

Exactly how to do this was unclear, but certainly seeing a CIO internally as an advocacy target, instead of an obstacle that must be diverted around, is a key starting point.

4. Orienting your business to become a platform won’t happen overnight. (So pace yourself.)

As with big data, there is a sense of urgency in the discussions around platform transformation and API implementation. Businesses have a sense that they must do this now, and certainly, there are enough commentators stating that any business that doesn’t will be obsolete within 10 years. But internally, the transformation needs to be methodical, and the expected far-ranging results may not be immediately obvious.

“You need to be prepared to learn and to grow. We are fairly early. We still don’t have our core functions available by API,” said Greenough. “We have even turned away some people by saying we are not ready for their particular use case. You need to know who you are and know what you can do. Do what makes sense for your organization. You need to be prepared to learn and to grow.”

Collison pointed out there are two different life cycles occurring in the platform model: “There are two growth curves for API businesses,” he said. “There is the curve of acquiring new users, and then there is the curve for each one of those users: They are also growing. So you are not going to see a ton of usage from day one. We have seen some users grow to very large businesses on Stripe, but it has happened over three or four years. You need to communicate to the executive that this will take time.”

The pace of this transformation and new growth will not only require patience, but it also means business needs to maintain the appropriate level of resourcing, which leads to…

5. Thinking like a platform means investing in all of the platform components.

All panelists agreed: Developer relations are crucial for platform growth. Mirroring a comment made in a presentation by Mike Milinkovich from the Eclipse Foundation, developers are the new kingmakers and therefore become essential in any program aimed at building market adoption.

“After building it, they will come, but you also need to water and care and prune and grow,” said Greenough.

On a practical level, Collison and Greenough both agreed this means “there is a whole heap you have to fund behind the API: developer support, Documentation, marketing.”

And marketing isn’t just about "Hey, we have an API": “You have to think of each of the APIs as products and consider who you should be marketing each API product at, rather than just marketing everything as API.” Said Greenough. 

Using a platform model to drive a business is still very much in its nascent stage, but it goes hand in hand with a business’ growing API strategy. As an API strategy is implemented across a business, the concepts of a platform model become more than just theoretical: The advantages become clearer and a cultural mindset across the business’ leadership team can emerge.

For more on platform thinking, ProgrammableWeb will be speaking to Sangeet Paul Choudary next week in the lead up to his one-day workshop in San Francisco on 12 June.

Be sure to read the next APIcon article: APIcon 2014: Using XMPP to Create an Internet for Things