Understanding the API Value Chain

An API is an indirect channel for working with partners and more importantly reaching end users, providing much needed distribution for the company. Offering an API is not just a technology problem; it’s a people and process problem as well and it is imperative to understand all the players and all the different pressure points.

The first thing to do is to ask the  following key questions in order to understand what is happening when an API is being used to advance a business

  • Who is the API provider? How will the API be published and promoted?
  • Who is the target audience for the API? – Size, Motivation and benefits.
  • What business assets are going to be provided through the API? What information, services, and products will be available?
  • What types of apps will the API support? What features and functions will these apps have?
  • Who will use the apps created using the API? What benefits will the developers, the API provider, and the owner of the business assets get from their use?

The answers to these questions give us the elements of the API value chain. It uncovers the motivations of everyone involved in bringing an API to life as a way to help a business execute its strategy.

The value chain starts with business assets, something that a business wants to allow others to use. It is vital to understand how exposing the business assets will eventually benefit the owner of the business assets.

The next step is to create an API to expose those business assets. The API provider’s job is to design the API so that the intended audiences can make the best use of it. Most of the time the provider is the same as the owner of the business assets, but not always. If they are the same organization, then the benefits simply flow back to the business owner.

However, if the provider is a different organization, the provider usually needs to establish an agreement for redistribution to reward both the owner of the business assets and the API provider. Once the API is published, some population of developers will hopefully put the API to use to create apps.

Once created, the application must then find its way into the hands of users. This means that the app must somehow be discoverable and obtainable by the intended user population.

Finally, end users will hopefully use the apps in some way that they benefit from but also provide value to the owner of the business assets, the provider, and the developer. When API strategies fail, it is often because one or more of the links in this value chain are too weak to support the creation of a healthy API economy.

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