Open Innovation and distributed business model with API

Open Innovation can be sustainably supported by API and the cooperation assets it brings. API not only accelerate innovation endeavour, they generate new revenue streams, strengthen your marketing campaigns, and extend your reach in distributed business models. It’s time to realize API are a must-have for your business.

API ‘best kept secrets’

@CyrilVart (@Fabernovel) delivered a comprehensive presentation entitled ‘6 reasons why APIs are reshaping your business‘ at API days last December. Let’s go through it and mix it with our own experience, assessing what this new exciting territory holds in store.

An application programming interface (API) is a protocol used as an interface by software components to communicate with each other. In other words, API is the binding agent across functional components assembled similarly to Lego blocks.

Are you considering API as ‘Far Far West’ to your world?

Think again, some APIs are quite famous: we just don’t call them API!

• Facebook Like button, which lead Facebook to shape social recommendation pattern, is based on an API: you can activate it by embedding a simple line of code to your website;
• Twitter API enables among others features Tweets display in various apps: it is called 13 billion time /day and around 1,000 applications were developed based on Twitter API;
• Google APIs (including Google Maps API powering map feature in many web sites, or Google Adsense API allowing publishers to automatically serve text, image, video, and rich media on Google’s network websites) are called 5 billions time / day.

API for Collaborative Innovation

API foster innovation. We put it at the center of Modular Design and Rapid Innovation model. It unfolds various benefits:

• Acceptance: API modules facilitate innovation acceptance by letting others take control, develop their ownership and build their  value on top of your platform;
• Collective Creativity: API is modest, it unleashes other’s creativity,  it’s a ‘toolbox for design’, an application of  “Designing with, rather than designing for” mantra.
• Flexibility: as end-user applications and API components are decoupled, precious autonomy is provided to the API innovation team;
• Speed: API accelerates innovation penetration by enabling parallel implementations. Component can act as a hub and receive simultaneous connections from different applications.
• Crossfunctional Enhancement: Needs from different applications are mutualized and enrich the component functions in a virtuous circle of innovation. Progress of any member is benefitting to all.

Fabernovel highlights similar API assets for product development: “an API is a software brick that allows someone to share data, content and functionalities with others, for them to build new services based on this data, content and functionalities”. The point is backed up with Fitbit case study, a player in the Intelligent Things market: “Fitbit is a fitness tracker that records health and fitness data; it created an API to allow third party developers to craft fitness apps using Fitbit health data such as daily steps, calories burned, food eaten and weight. 20 apps were built on the Fitbit API, creating innovative uses of fitness and health data.

Rather than thinking of ‘R&D externalization’ through API exposure, I would rather stress API as a way to harness collective intelligence, and activate the skills of the many: lots of eyes can find lots of mistakes, fix them, and improve the ecosystem.

Open Innovation is about “using other people’s wheels to get you moving” claims Professor Chesbrough. While Open Innovation breaks boundaries to look for innovation in the outside world, there is no better currency than API.

API for distributed Business Model

In addition to fostering innovation, Fabernovel raises 5 key returns on using API for business:

1. New revenue streams;
2. New distribution channels;
3. Extending partnership;
4. Fine control tuning (API is not about opening everything, but also controlling it);
5. Organizational flexibility (internal API reinventing IT’s role, and accelerating collaborative work).

These sharp boosters make API scale up your business: API is much more than the sum of the parts!

I’ve picked up some emblematic companies which managed to harness all of API potential:

• Expedia opened up an API for their affiliates to enable them to pick up bookings, photos, search results, user reviewes: today, Expedia Affiliate Network includes 10,000 partners and makes $2 billion revenue per year, 90% of which comes from its API;
• Based on API providing a range of CRM services in the cloud, Salesforce  built a powerful business model alleviated from physical point of sales and on-site installation processes;
• Netflix opened an API in 2008 to allow developers to use its resources (Movie catalogue, Queue management, Rental history) and make creative business: today, 800+ devices can stream Netflix content, 20,000 developers use Netflix API;
• Facebook Connect allows users to log-in on any websites using their Facebook information. Third party developers can add a “Connect with Facebook” button by using Facebook Connect APIs. Facebook Connect API has standardized credentials, creating a universal ID for the digital world, and let Facebook build partnership on a worldwide scale at minimum cost;
• Amazon Web Services (AWS) offer a wide variety of services (storage, database, computing power, servers, application services, deployment & management) accessible through a set of API. Each of these services is charged following use pricing which means Amazon tracks very precisely each customer’s usage. AWS generated m$750 in 2011;
• Comcast, America’s largest TV cable provider created a dozen of internal API for teams to easily share data and solutions. Today, teams can build new products and user experience faster than ever, generating thus new revenue sources for Comcast. It takes now 30 minutes to share resources through internal API compared to months in the past;
• AT&T is now offering 79 APIs to third parties (Future Centre Blog), and Orange has redesigned its dedicated web site, Orange Partner, to expose its API.

“Operate API without noticing, just like the air”

API family is extending: Marc Andreessen distinguishes Acces API, Plug-In API, and  Online API, where code developed externally by third-party is run inside the platform, and which he considered as the most advanced level.

Developing API help you focus on your core business, while harnessing collaborative innovation, and creating new business streams, by connecting functional legos: ‘when every business is an API, new businesses can be formed almost instantly by linking’ observes Mark Pesce. API is a strategic tool to reshape your business.

Once you’ve tried it, you can’t give it up. In my case, since I start a new innovation project, I spontaneously think of two outputs: an end-user service and its corresponding API. Each of them requires its design involvement, to capture respective powerful meaning for its different user targets.

Processing API for your business stands for a new way of tailoring your organization and scale: as future system composed of many small independant units leverages any kind of connected object to exchange resources, growth can be at lightening speed.

We are witnessing a ‘business process API-ification‘ notes Robin Vasan, where businesses have to reinvent themselves as API (@mpesce). Now has come the time for innovators to step in, embracing API capabilities, and for marketers to think in terms of API.

Source: FaberNovel, 6 Reasons Why APIs Are Reshaping Your Business, November 2012

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