Patterns for co-creating value in the API ecosystem

API ecosystems

As the API economy matures, not only are more and more companies publishing their digital services through APIs; an increasing number of organizations are working together to deliver API-based products that are mutually beneficial for themselves, and valuable for their collective customers.

This “co-creation of value” is not unique to APIs. In a business-to-consumer (B2C) context, its prominence has been studied in social networks. However, for business-to-business co-creation of value, even academic studies underline the power of APIs in this context.

API-based collaboration offers great potential for organizations who are just getting started in the API economy. Maybe your organization has adopted an API first approach internally and is looking to surface some of those capabilities into the public or partner realms. Perhaps you have a robust set of mobile APIs that could make sense when consumed externally. It could be that you have a need to consume APIs from external sources in order to close a gap on a new product offering. Whatever the case, understanding the patterns of API value co-creation can help you identify the right opportunities for your business.

The peer-to-peer pattern

api economy peer-to-peer pattern

In this pattern, two organizations identify a customer experience or product that they can deliver together, utilizing their respective core competencies. When this joint venture approach works most effectively, the value resulting solution is greater than the sum of its parts. The organizations involved form a symbiotic relationship: the offering creates a mutual dependency, but also offers mutual benefit.

An example of the peer-to-peer pattern is Lyft’s recently launched Concierge API. Although the Concierge service from Lyft Business allows organizations in any industry to incorporate Lyft’s transportation services, the Concierge API has a particular focus on the healthcare industry. To help achieve Lyft’s mission of removing transportation barriers for patients, they needed an industry partner. They turned to healthcare solutions provider AllScripts, which embedded Concierge through its API, thus making affordable, on-demand transportation available to all of their client companies.

The manufacturer-supplier pattern

api economy manufacturer-supplier pattern

This pattern may be the most common collaboration in the API ecosystem. One organization – the “manufacturer” in this context – is building a new API product they will bring to market. In order to do so, they evaluate the landscape of available APIs that match the “parts” they need. If available, they will consume APIs from “suppliers.” There are benefits for all parties involved. API manufacturers are able to deliver their new products more quickly, with less cost, and with higher quality functions. API suppliers have a new distribution channel for their services.

There are many examples to choose from that illustrate this pattern. Consider the case where Airbnb is the manufacturer, and Google Maps the supplier. Imagine the investment of time and money it would have taken for Airbnb to build and operate equivalent mapping capability if they were not able to take advantage of Google Maps’ robust offering. As an interesting side note, Airbnb has subsequently launched their own maps API that mimics and uses the Google Maps v2 API but offers a layer of resiliency on top.

The retailer-wholesaler pattern

api economy retailer-wholesaler pattern

Like the manufacturer-supplier pattern, the retailer-wholesaler pattern involves a single organization – the “retailer” – offering APIs that utilize multiple third party – ”wholesaler” – APIs under the covers. In this pattern, however, the retailer’s APIs present the underlying wholesalers’ APIs in a way that is appealing to a specific audience. The retailer benefits by accelerating their offerings through existing APIs, and the wholesalers benefit by having their services accessible to an otherwise unreachable set of consumers.

A good example of the retailer-wholesaler pattern is the way Twilio was able to aggregate telecommunications APIs and tailor them to fit the burgeoning mobile application market. Mobile developers needed the services provided by the big carriers, but they needed APIs consumable by mobile apps in order to get to market quickly, and needed global coverage that individual carriers could not provide. By filling this need, Twilio was able to build a billion dollar business, and the carriers were able to increase their revenues through the riches of the mobile application economy.

The maker-platform pattern

api economy maker-platform pattern

The rarest pattern in API value co-creation is the maker-platform pattern. In this scenario, one organization – the “platform” – provides a set of API-based tools that other organizations – ”makers” – can use to build new businesses. Not only can the makers offer products through the platform, they can oversee their operations as well. Makers are provided with an entrepreneurial sandbox to test their ideas rapidly, while the platform organization builds recurring revenue streams from customers who would have great difficulty pulling up stakes.

Amazon Web Services is the clearest example of a platform provider, having a track record of companies like Instagram and Pinterest as makers that started up their businesses using AWS services. The Salesforce AppExchange is another good platform example, offering its makers a marketplace to sell their applications.

There are many ways that organizations can collaborate in the API economy. In fact, a single organization can potentially collaborate in all of these ways. This simple classification scheme is intended to help you identify collaboration opportunities for your organization as you contemplate the possibilities of the ever-expanding API ecosystem.

For more information on how to empower your digital strategy with APIs, read the API Strategy Essentials whitepaper.

Thanks to Stephen Fishman for helping shape this piece.



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