At industry conferences, in boardrooms, blogs and PowerPoint decks, the new corporate obsession is rapid “digital transformation.” According to KPMG, 93 percent of multinational companies are overhauling their business models. They have to. They realize that customer demand is evolving faster than they can adapt. They see they need to accelerate product development, reach buyers on mobile devices and analyze real-time data from storefronts and warehouses. Essentially, they need to act like much smaller companies—the kind that can turn on a dime. For the Fortune 500, where ‘real-time’ can mean ‘sometime this quarter,’ that’s a serious transformation indeed.
The challenge they’re up against is to connect the unconnected. The more effectively they can combine applications, data, clouds, supply chains and partner ecosystems, and the more services they can create for outside developers, the faster and more agile they become, and the better they can compete. It’s not theory. They’ve seen the evidence.
Take airlines, for example. In the past, each airline had its own walled-off system for tickets, reservations and seating. Now they make all that data available to partners like Kayak, Expedia and Hotwire to drive customers to their flights.
Why? Because connectivity is the new path to revenue. Any airline that didn’t provide data to companies like Expedia could never stay in business today. And for its part, Expedia doesn’t just consume data. It generates more than $2 billion annually from partners of its own, who pay to access its listings. Take another example: Salesforce, gets 75% of its revenue from connected services.
Big, traditional companies desperately want this kind of transformation, but they crave stability. Increasingly, the way they get both is by turning to APIs.
The term ‘API’ might sound like technical jargon, but it’s actually a simple concept. It’s software that other software can use to access applications, data or infrastructure, like storage or network resources. Think of an API as a power socket for digital products and services. Your product might be a mobile app for customers, partners or employees, a B2B exchange, a connected supply-chain, an affiliate-network or website. Any of them can request what your API provides and be sure of getting it.
APIs are much more than a way to provide access to services. They’re a way to change your business without disrupting it. Suppose you develop a sales app, which accesses an important customer database. The salespeople use the app to do their jobs. They want it to keep improving. IT wants to protect the database. They don’t want developers mucking it up. The upshot? Gridlock.
Organizations often resolve this dilemma by having IT approve (or worse, help design) each new version of the app to make sure it doesn’t damage the database. You can imagine how much time and effort that wastes. A much better approach is to create an API that gives the mobile developers just the data access they need. That way, the developers can experiment to their hearts content, and IT can rest easy, knowing nothing will happen to the database that they haven’t authorized.
The same principle applies throughout the enterprise. When it comes to digital transformation, direct connections are your enemy. They slow you down. They break your workflows. They lock you up. APIs give you a flexible way to manage interactions between your legacy IT—procurement, financials, personnel—and your fast-changing front-end applications: mobile apps, analytics, business exchanges, and everything in between. Your end users get newer and better services, while IT maintains control over your systems of record. That way, your business can move fast without endangering security or data governance. If you’ve heard of “bimodal IT.” [Bimodal Business leads to Bimodal IT], this is what it looks like.
Uber, for example, was able to expand to 54 countries in three years because it made its back-end connectivity available through APIs. From a technological perspective, rolling Uber out in a new country simply meant switching on a new currency and modeling new billing rules in the back-end systems. Uber expanded its business into tens of new markets just by tweaking its app.
Make no mistake: successful revolutions take planning to pull off, and a digital transformation is no exception. The good news is, transformation can happen incrementally. You must think big, but you can start small. The key is to have a plan for your first APIs and how they connect. Then start building. You’ll learn how to do it, and pretty soon you’ll want more. Just begin. You have nothing to lose but your grey flannel suit.