Hi Reader,

API is programmatic connectivity of two components so that the functionality of one component is accessed by another component in an uniform way - commonly called protocol.

This uniform access helps in re-usability of components leading to efficiency gain and productivity improvement from engineering perspective.

From Architecture thinking perspective, API based capability and connectivity has far-reaching consequences for business outcome.

These consequences are so pervasive and impactful for business that Solution Architects must know these and apply these thought experiments for customers.

Let’s dive in.

Please feel free to write to me if you have any views w.r.t. any points above or about any specific topic that you want me to write upon in the coming weeks!

APIs maximize the value of the enterprise

If you have gone through Digital Architecture blueprint - you know there are ten layers in a digital enterprise. By connecting these layers (e.g. the inter-connectivity of digital channels with the services of experience layer, enterprise services layer, enterprise application layer and other layers) you can create a compelling proposition for the enterprise - both internally as well as for the market-facing enterprise:

1. Improve Customer experience - The digital channels integrated with experience APIs and process APIs externalize data, curated insights, recommendations, workflows, automation for the customer and makes the customer experience as efficient and meaningful as possible.
2. Unlock the value of enterprise systems (including legacy) - Enterprise APIs (typically data APIs) externalize the data locked in enterprise systems (e.g. - core banking/lending solutions, policy administration (insurance), production information system (retail). Externalized data is used for orchestrating the customer journey, business decision making thereby adding value to the processes performed by the
3. Improve efficiency of the enterprise - In addition to unlocking value by harnessing enterprise data, APIs help in automating business processes and orchestration of those processes by invocation of APIs. Automation & orchestration help to scale up the operation of the enterprise - efficiency of the enterprise increases in a non-linear manner. So does the profitability.

APIs expand business value chain by flow of information

APIs help in expanding the business value chain or deepening the operation within value stream components by providing to access to complimentary or new capabilities on the value chain. In several ways

1. Establish Business Partnership - Partnership is built on complimentary capabilities. For example one partner manufactures product (OEM), another partner provides services across the lifecycle of the product and they combine the offering and go to market together. In digital world, APIs play a big role in selling, distribution of these offerings
2. Insert offering in new way in the journey of the customer - No customer looks for a loan product, customer looks for means to own a car. So - enhancing the journey of a customer in searching a car, assessing the features, finding the financing options, availing the service/maintenance are important from the customer’s point of view. This journey of the customer is orchestrated by connecting capabilities of multiple players - the OEMs, dealers, distributors, loan providers, aggregators, servicing partners - through a shared set of APIs among themselves - thereby inserting the offering of all the players in the journey of the customer.

Public APIs create new revenue streams

India has topped the list for digital payments and recorded 89.5 million transactions in 2022 followed by Brazil and China with 29.2 and 17.6 million transactions respectively.

Reference: https://timesofindia.indiatimes.com/gadgets-news/india-tops-world-ranking-in-digital-payments-beats-china-by-huge-margin-report/articleshow/100944643.cms

UPI accounted for more than 70% of non-cash retail payments in India. That - in a way - highlights the importance of open banking APIs. Although open banking is an industry standard, exposing information through public API can create new business opportunities even for an enterprise:

1. Integrations and partnership with 3rd parties: By offering public APIs, an enterprise can attract third-party developers and businesses to integrate their services or products with the company’s platform. These API based integrations can enhance the overall customer experience and attract new customers. The enterprise can charge fees or commissions for using their API, creating a new revenue stream.
2. Value-added services and analytics: In addition to the core API to integrate products and services, enterprises can offer value-added services as API, such as advanced analytics, reporting, or insights - basis the customer transaction information hold by them. These premium APIs can be monetized separately, providing an extra source of revenue.
3. White-label solutions: Enterprises can offer their platform, service, product offering as a white-label solution through API accessible in public domain. This allows other businesses to customize and rebrand the platform as their own, paying a licensing fee or revenue share to the enterprise.

APIs create connected business ecosystems

Strategic use of APIs can transform an enterprise into an ecosystem with three sub-enterprises with complimentary capabilities and offering. This not only gives an enterprise a new life, but also creates multiple revenue streams for a business. At a fundamental level level a connected enterprise is composed of three sub-enterprises -

1. Traditional enterprise - A traditional bank with physical branches, a retailer with brick & mortar store, a telecom player with only voice services.
2. Digital-first enterprise - A traditional enterprise gets a new lease of life by adoption of digital channels for the customers and end users. New customers look for convenience; millennial glued to the habit forming UPS (U = Uber, P = PayTM, S=Swiggy) apps can be acquired only through digital channels. APIs enable the integration of digital channel with rest of the enterprise.
3. Challenger enterprise - Building partnership with a tech company, partner and even a competitor (frenemy = friend + enemy) to create a new entity that presents a compelling market proposition (e.g. - a Fintech’s peer-to-peer lending product white-labeled by a Financial Service provider).

APIs make the evolution of a traditional enterprise (e.g. a bank) to Digital-first enterprise (Digital Bank) and a Challenger enterprise (Neo-Bank or Challenger bank) to provide services to customers in innovative ways.

Conclusion

Digital Solution Architects must think strategically about the art of possible.

In a way that gets reflected in the solution architecture created by them. More strategic approach creates outcomes not just in short term but in the long run.

API is the lifeblood of a Digital Enterprise and strategic approach for API design and deployment of APIs in context of the business make a big difference in the long run.

Success is all about playing long game and creating impacts.

I am sure you are game for it!

That’s all this week.

Till next week…

Please feel free to write to me if you have any views w.r.t. any points above or about any specific topic that you want me to write upon in the coming weeks!