API strategy or design is the process of identifying and developing data-sharing and compatibility between systems.
The ability to streamline applications and products with APIs (or Application Program Interfaces) has become an invaluable business strategy for numerous companies, both large and small. It can increase the value of your offerings and make them more appealing to a wider variety of users.
A well-developed API has the power to attract users at a rate that was unimaginable prior to the existence of today’s hyperconnectivity. With their workflow automation and data-sharing capabilities, APIs can drastically cut down time to market and reduce business workload and costs.
Whether you’re developing a new product or hoping to improve the performance and appeal of a current product, an API business strategy could be your ticket to greater success.
Developing an API Business Strategy
An effective API business strategy begins with knowing your target customers. Think about your business and products and investigate the answers to the following two questions–you may want to conduct research to verify your assumptions:
1. Consider your ideal user. What other tools and systems are they currently using?
2. Now, take inventory of those tools and systems. Is there a common denominator–one tool or system that all your target users are already using? If so, then you may have just found a golden opportunity to lure them into using your product as well. All you have to do is offer an API integration.
Take Salesforce, for example. The popular sales tool built APIs to integrate with a large handful of other applications like Mailchimp and Quickbooks. Because of its compatibility with these other programs, Salesforce offers users more options and a smoother experience than it could without the APIs. Not only that, but their tool is a viable solution for far more people than it would be on its own.
Freshbooks is another example of a product that leverages API business strategy to draw in and retain users. Freshbooks offers invoicing and billing for small, service-based shops, firms, and agencies. Supported by their API, integrations with other products like Basecamp make it easy for Freshbooks users to capture and bill their time no matter where they log timesheets.
Building Reproducible APIs for Explosive Growth
The possibilities for your API business strategy are almost limitless. Not only can you integrate an API into your products to make them more compatible with other programs, but you can also earn revenue directly from the APIs themselves. That’s what Amazon did.
Over the last decade, Amazon has built more than thirty different APIs, all of which are available for public use.
Ever wonder how Amazon became the mother of all success stories? Several years ago, Amazon’s founder, Jeff Bezos, in a famous document called the Bezos Memo, mandated that any new functionality developed for the Marketplace needed to be built with an open API. This meant that developers would need to do more work to ensure each feature was openly accessible and reusable by other parts of the organization.
For example, when Amazon built their sales tax API (the software that calculates taxes owed for the products they sell), they did so in a strategic way that enabled other departments to leverage that functionality. Then they went further and opened up their API to the public. This meant that other businesses could use Amazon’s tool for calculating sales tax.
These APIs rake in tens of billions of dollars in annual revenue, excluding the profits generated from Amazon Marketplace! With all those additional revenue streams, it’s no wonder that Amazon was able to blow Walmart out of the water as the world’s largest retailer.
If you like to dream big, take Amazon’s model of reproducible APIs into account as you develop your API business strategy. Like Amazon, you could unlock additional value streams and dominate the competition by developing web apps with open APIs.
Hyper-Connected and More Competitive
The underlying purpose for all API business strategy is to facilitate hyper-connectivity. That makes it a hot topic in today’s IoT-dominated market, where growth and success often hinge on a company’s ability to streamline with other products and devices.
While not every business is sitting on a potential API-induced gold mine, it’s likely that your customers could benefit in some way from a more integrated user experience. Whether you’re creating a new product or just seeking to improve current sales, an API business strategy could greatly increase your user base and may even be your key to multiplicative revenue.
About Tim Hamilton
Tim Hamilton founded Praxent when he was 16. He has since grown the company into Austin’s leading custom software development firm. Today, Tim passionately invests in perfecting Praxent’s software development process and world-class culture.
A graduate in MIS and economics from UT, Austin, Tim has extensive experience with software development, enterprise IT, and business management.