McKinsey finds that upward of $1 trillion in global economic profit is “up for grabs through the redistribution of revenues across sectors within ecosystems,” and APIs are at the heart of it. However, API programs are still far from maturity in many businesses. In an article for McKinsey & Company, Keerthi Iyengar, Somesh Khanna, Srinivas Ramadath, and Daniel Stephens share four steps to help your business develop a worthwhile API strategy:
- Identify and prioritize the value.
- Manage monetization actively.
- Create a centralized governance and organizational model.
- Drive usage and adoption to gain scale.
API on the Prize
For identifying areas where APIs might bring value, look at your customer experience and the junctures at which service could be better. A bank identified opportunities for calculator APIs, “know-your-customer” APIs, and product-aggregation APIs from taking this step, for instance. To subsequently prioritize identified opportunities, consider these four dimensions: business impact, strategic alignment, complexity to execute, and business readiness. If an API is strategically attractive and easy to execute, it becomes a top priority. If an API is neither, it may be no priority at all.
When an API is built, and you intend to profit from it with partners, you need to decide how much said API is truly worth. That in itself could be a long, labored discussion. But the general pricing options businesses offer include pay-for-use, revenue sharing, and freemium. The nature of the app might dictate which of these models is ideal. And furthermore, on the other end of that, consider how APIs can save money internally. Consider for example the savings that could result from maintaining a standardized library of APIs for internal development use.
About the significance of governance, the authors write this:
Establishing a centralized body, such as an API Center of Excellence (CoE), is crucial for overseeing API design and development across the organization. With the help of visual dashboards and related tools, the CoE can manage all the APIs in the catalog to avoid duplication, enable reuse, and assist with developer access. Effective API leadership establishes clear decision rights (about what APIs to develop, for example, or how to resolve conflicts) and identifies both what API capabilities are needed and what new APIs the business needs to evolve. At one large business, the API CoE reported to the chief technology officer.
A CoE would establish security standards, manage funding requests, and ultimately ensure that the API program is sufficiently staffed.
The last step then is to get people to use the APIs. This entails starting with pilot projects, segueing into formal production, and ultimately scaling “to achieve critical mass.” Along the way, be measuring usage and traffic metrics as indicators of where teams should target improvements.
For several examples and useful diagrams, you can view the original article here: http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/what-it-really-takes-to-capture-the-value-of-apis