API Business models

Are you an API Consumer or an API Provider and how does that affect your business strategy?

Revenue model is part of the business model.

Revenue model, indirect or direct, only covers the way in which the company receives money or compensation from a product or service. What we need to consider is that APIs can play many roles in a company’s business model.

The business model covers all aspects of running a business or a product line, from customer segments, to channels, to operational activities, resources, and costs.

APIs provide a way to improve, change or add to your current business models. APIs are important if your goal is to create an internal and/or external platform. APIs can also help cut costs by re-using and sharing resources or to create a network effect in your business model.

These are all examples of APIs role in the business model from the book API Economy 101 (in Finnish, API-talous 101).

Each API and each endpoint should be evaluated and designed based on:

  • What data or functionality is our customer willing to pay for?
  • What will make them more committed to engage with us and co-create with us?
  • What data or functionality should we expose to our partners?
  • What will make them engage with us more efficiently and be able to support us and our customers in a better way
  • What is the data or functionality most needed by our customers and partners or our own service development?
  • Which of those needs are easiest to implement and contains the lowest risk but highest potential

In broadest sense value proposition can be described as a formula where Value = Benefits - Cost (cost includes economic risk).

Developing a value proposition is based on a review and analysis of the benefits, costs, and value that our company can deliver to its customers, prospective customers and other members in the network of our company and within our company.

Treating APIs as digital products means they can be bought, sold and shared. Below is a useful list for assessing the business opportunity with APIs.

Assessing API opportunities:

  1. Exactly what problem will this API or endpoint solve? (value proposition)
  2. For whom do we solve that problem? (target market)
  3. How big is the opportunity? (market size)
  4. What are the alternatives out there? (competitive landscape)
  5. Why are we best suited to pursue this? (our unique value proposition)
  6. Why now? (market window)
  7. How will we get this API product to market? (go-to-market strategy)
  8. How will we measure success/make money from this product? (metrics/revenue strategy)
  9. What factors are critical to success? (solution requirements)
  10. Given the above, what’s the recommendation? (go or no-go)

Source: Marty Cagan, Silicon Valley and MindTheProduct -network guru of product management: http://svpg.com/assessing-product-opportunities/

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