Everybody is talking about APIs, API products in particular, and its key role in digitalisation and digital transformation. Generally, we associate APIs with agility, rapid innovation, business transformation and digitalisation. No wonder that everybody wants to adopt APIs. So far, so good.
Well, when we start our API journey and build APIs, we quickly realise that reality doesn't meet our expectations. For example, we may build APIs on top of Web services and end up with yet another layer of abstraction. Or we build an API to integrate two specific computer systems and replace one integration pattern (e.g., Service-Oriented Architecture a.k.a. SOA) with another one. Both adoptions of API are typically far away from what we want, namely agility, rapid innovation, and digitalisation. But why does it go wrong?
There are two breeds of APIs, namely API solutions and API products. Both are different in nature how they provide value to an organisation, how they impact business strategy, how they relate to digitalisation and digital transformation, and what approach we need to get it.
In this article, we provide you a model to understand where in an organisation API solutions and API products prosper and how both relate to business strategy, tactics, and operations. Further, we'll show the business value of API solutions and API products with respect to digitalisation and digital transformation.
In the following, we present the two breeds of APIs, where in an organisation each prospers and the reasons why. This forms the model for understanding both breeds of APIs. It will help you either to setup API journey/program or to make the right adaption to your current journey to meet your goals.
Two Breeds of API and Paradigm of Change
[Peter Drucker](https://de.wikipedia.org/wiki/Peter_Drucker) was a master in the field of business thinking. I stumbled upon his Paradigm of Change Model, which I found very useful to understand both breeds of APIs.
Peter Ducker's Paradigm of Change model suggest that an organisation can be described with the following three components:
Strategy (What-Should-Be): strategy describes what an organisation wants to accomplish. In other words, where the company should be. Strategy is transformational.
Tactics (What-Will-Be): tactics describes how the organisation is accomplishing the goal. In other words, what the company will do. Tactics is transitional.
Operations (What-Is): operations describes what an organisation is doing. In other words, what the company is right now. Operations is traditional.
Strategy, tactics, and operations are the components that describe the constant fluctuations of an organisation.
The three components are depicted as Venn diagram in the following figure. As you see, they overlap. The intersection of strategy/tactics, strategy/operations, and tactics/operations is where the real power of APIs are.
In the following, we'll use this model to present the two breeds of APIs, where the prosper and why, and how the provide business value.
API Solution is the Breed of Operations
Every organisation has to ensure that their operative business runs as smoothly as possible. It's the foundation of a healthy organisation and sustainable success.
Hence, it's important standardise processes to optimise them with respect to time, cost, and quality. When you standardise processes, you can define meaningful metrics, start measuring, and monitor KPIs.
Naturally, every organisation runs into business problems, which needs to be solved. To this goal, organisations typically apply critical thinking to solve business problems.
"Critical thinking is the objective analysis of facts to form a judgement", Wikipedia, Critical Thinking.
Hence, critical thinking is appropriate to solve business processes because you can analyse them and evaluate KPIs to make fact-based decision about what to improve or change.
Generally, API solutions are built to reduce costs and improve quality of processes through standardisation.
What is an API Solution?
An API solution consists of one or several APIs that solve an integration problem. More specifically, an API solution is an integration solution between computer systems to enable inter-communication.
In the beginning of an API journey, API solutions are the most popular breeds. If designed well, they may provide a simple layer of abstraction that can be used by engineers without profound domain knowledge. E.g., an organisation may have various systems with customer info. An API solution may provide one single endpoint that consolidates this info.
How can you spot an API solution? Typically, IT architects and business analyst work on API solutions. The computer systems are known during the API design phase. The reuse of an API solution is often limited due to its design dedicated to the involved computer systems.
Architects and engineers strive for generic solutions in general to enable reuse. This is no different for API solutions. In theory that works perfectly in practice. However, in practice theory doesn't work.
We tried to create API products from API solutions. We had two motivations to try it:
API solutions are funded by projects. So, let's be smart and use it as seed money to build an MVP or enhance an API product.
We may satisfy the project with an API solution and leverage the work for our own agenda. Let's exploit synergies.
However, projects have many stakeholders (e.g., business project manager, architects, product owners) and goals (e.g., budget, schedules, staffing). Generally, time, budget, and staffing constraints are quite tight and don't provide you enough space to create new products. Nevertheless, projects may be useful to enhance your existing product. But be careful not to add specialisations to your API products, which will render it less reusable. A clear product vision will be is key.
In the end, we were usually left with a highly specific API solution and many dependencies.
API solutions prospers within operations or the What-Is. The reasons are that the problems to solve are precise and the outcome measurable. Typical problems are integration of two computer systems or automation of business process X to improve speed and reduce costs.
What is the Business Value of API Solutions?
API solutions enable faster and cheaper business processes. Right, but how? Organisations leverage digital technologies such as APIs to enable, improve, or even transform business processes. This is digitalisation and API solutions are one approach to digitalisation.
An API solution enables the automation of the interaction between computer systems. Automation may reduce significantly manual efforts and thus making processes cheaper and faster. Automation requires standardisation, which fosters higher quality.
API Product is the Breed of Tactics
A sustainable organisation needs the ability to adapt or it will die. The proper adaption of new technologies is one element for sustainable business success.
As our friend once stated and became the slogan of one major API conference:
"Adapt or Die", Kay Lummitsch
The right business strategy is essential. However, good execution of a strategy is often challenging without the proper tactics. The goal is clear but the problems to solve not. This is when design thinking shines. What is design thinking?
"Design thinking in business uses the designer's sensibility and methods to match people's needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity.", Wikipedia, Design Thinking.
Thus, design thinking is a feasible method to find optimal solutions that satisfies the strategy, limitations of an organisation and customer needs. Limitations of an organisation can be staff resources, skills, time, money, etc.
Generally, API products help customers getting the job done. To this goal, API products address customer pains and offer gains. API products have a business model and thus creating value for both the organisation and its customers.
API products prospers within tactics or the What-Will-Be. The reasons are that the problems to solve are precise and the outcome measurable. Typical goal is to explore and find new business models thus, impacting the strategy it self. This is digital transformation in its core.
What is an API Product?
An API product consists of one or several APIs that provide an interface to a value proposition. In other words, an API product consists of value proposition interfaces or rather VPIs. In contrast, API solutions consists of API, which don't provide an interface to a value proposition. The value proposition of API solutions is creating the communication link between computer systems.
From my experience, every organisation has at least one obvious opportunity for an API product. For telcos, it's SMS, an API to send SMS to people's mobile phones. We call it the "Hello World" product, which demonstrates the simplest form of an API product: a monetized API that provides one simple interface to a digital product.
How can you spot an API product? Typically, an API product is owned by a dedicated API product manager. Nevertheless, APIs can also be used as an extra feature of an existing product. But that's a feature and not an API product. Please note that there is a great potential for conflicts and opportunities between API product managers and product managers.
Since an API product has a business model, it targets a market out side of the organisation. But that shouldn't restrict its usage only to the external market. You might apply a different business model within the organisation or rather internal market.
What is the Business Value of an API Product?
API products are the key to new or enhanced business models. You can target existing or new markets with an improved or new digital products powered by APIs.
It becomes interesting when an API product doesn't support the current business strategy. Your management will either trash it or it will transition the strategy into a new one. This is digital transformation, leveraging the full capability of digital technologies that transforms the business of your organisation.
Essentially, there are two different breeds of APIs: API solutions and API products.
API solutions are APIs to solve an integration problem. For example, API solutions can integrate some computer systems or automate a business process. API solutions is an approach to adopt the capability of API as digital technology to current integration tasks and business processes.
API solutions enable the digitalisation of business processes, which become often automated. The business value of API solutions are typically faster, cheaper, and standardised business processes.
API products are APIs that provide an interface to a value proposition, i.e., [VPI](http://api-as-a-product.com/articles/api-vpi-value-proposition-interface/). A business model is fundamental part of API products. Products powered by APIs are an approach to fully leverage the capabilities of APIs as digital technology and thus, enabling digital transformation. API products are a tool of tactics to meet the goals of a business strategy.
API products enable digital transformation of your business models and strategy. The business value are complementary or supplementary business model. This helps an organisation to adapt to changing customer needs and market situation. This is crucial for sustainable success.
Be aware about the three components of this model that are operations, tactics, and strategy. Define your ambition and goals and how you want to contribute to the strategy. Do you want to drive digitalisation or digital transformation. Both have a different motivation and scope.
The API Product Management book focus on methods to create API products. Nevertheless, you can apply the methods to create API solutions as well.