Digitisation and the growth of APIs are making the role of traditional inter-firm partnerships obsolete, according to a recent article by Bala Iyer and Mohan Subramaniam for Harvard Business Review.
APIs allow companies to share informational assets and connect customers with parallel services in a way never deemed possible before. This streamlined method of communication and interaction creates an environment where everybody benefits, and this is thanks to three contributing factors.
Scalability of Operations
Forming a traditional alliance with other companies involves a huge amount of planning and negotiating to determine how revenue, data and physical assets will be shared, at significant financial cost. However, APIs allow the terms of engagement and revenue sharing to be highly automated, reducing the burden. In addition to this, shifting the focus of shared resources from physical to informational assets allows scaling far beyond the traditional sense with few associated complexities.
Flexibility in Acquiring Partners
Two of the main reasons to form a corporate alliance are to mitigate risks or leverage complementary resources, such as an established delivery network in a foreign market. APIs remove the need for a company to search for a potential partner by encouraging potential partners to find them. This strategy of “ubiquity first, revenue later” is called the URL strategy. It involves attracting a wide range of companies to partner with in the hope that a few of those partnerships may bear significant fruit in the long run.
Fluidity in business Goals
Due to the risks and costs associated with traditional alliances, companies almost always have very specific objectives in mind before they enter into one. But, APIs allow companies to quickly pivot and pursue updated goals as opportunities arise. One example of this is Twilio, who provide text-, voice- and picture-messaging capabilities that can be embedded into any application. Rather than limit their product by focussing on one particular industry sector, Twilio exercised the fluidity that technology offers and opened its APIs to any third-party developers to integrate with. This has made Twilio a hugely popular communication engine for a host of well-known companies, thanks to its focus on building a community around its APIs.
By leveraging these three factors; scalability, flexibility and fluidity, APIs can revolutionise traditional business alliances to help companies form partnerships that benefit everyone.