Lead to Win

Lead to WinHow to lever open APIs

May 2009

Michael Weiss and Peter Carbone

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Lead to Win

Objective

• Upon completion of this module, you will know:– difference between APIs and open APIs– how to lever user participation and benefit from

exposing data and functionality– lever mashups and issues to be aware of

• And you will be able to:– determine how to use open APIs as part of your offer

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Agenda

• How to lever user contributions• Using open APIs to your advantage• Adding mashups to your toolbox

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Value creation in Web 2.0

• Web 2.0 as basis for business models centered around decentralized value creation

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which one of your customer’s problems are

you solving and which needs are we satisfying?

through which means does your customer want

to be reached and addressed by you?

what type of relationships does your customer

expect you to establish and maintain with him?

what are your customer’s needs, problems, desires

and ambitions?

what value are your customers really willing to pay for and how would

they prefer to pay for it?

what is the cost structure of your business model and is it in harmony with the core idea of your business

model?

what key activities do you need to perform in your

business model and how easily can?

what can partners do better than you or at a lower cost (and thus

leverage your business model)?

what key resources does your business model

require?

value proposition

customer relationship

customer segment

key activities

key partners

key resources

distribution channels

revenue streams

cost structure

the business model canvas wall poster

Company

Customer

Product

Extract and

create value

Create value Locus of value

(Relations)

Locus of value

Briggs (2009)

Lead to Win

User participation

• Value co-creation is a foundation for Web 2.0• Users contribute most of your content• You provide a context for interaction: eg tools

for sharing and organizing content • Contributions can be active (uploads, resources)

and passive (clickstreams, transactions)• Examples: Flickr (photos), YouTube (videos),

Skype (resources), InnoCentive (R&D)

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Flickr

• Users can upload photos and add metadata, organize photos, link to maps, print

• Freemium business model: free + premium• Low marketing costs, low operating cost + ad

revenue, revenue from premium services• Network: number of users (amateurs, bloggers,

editors, professionals), traffic, and feedback• API turns Flickr into a platform: users can create

mashups, third parties build applications

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Flickr's value proposition

• Public sharing as default norm (CC-BY)• Users can share photos and knowledge: enables

community members to learn from each other• Users create categories, events, and groups• Flickr meets needs of underserved users (photo

storage, knowledge pool, ...)• Value increase is natural by-product of use• Value proposition evolved: introduce open API,

add mapping feature, enable mobile use

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Create a user contribution system

• Participate in user contribution systems• Communicate value through small experiments• Let enthusiasts lead the effort• Provide a sandbox for experimenters• Inhibit your natural control instincts (letting

outsiders contribute can be scary)• Use your existing customer base to jump-start• Let users vote, early and often

8Cook (2008)

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More examples

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Company Value creation activities

Twitter Provides API that allows external developers to invoke functionality and contribute data

SalesForce Provides API that allows external developers to build applications within the platform

Digg Allows users to create and annotate content

Threadless Allows users to design products

Briggs (2009)

Lead to Win

Open APIs

• Range of API motivations and implementation– Extend product: plug-ins, application API, and SDK– Externalize capabilities: web services, and open APIs– Unrestricted use or pre-approved only

• These are all different and require different business approach (eg Google loosely coupled APIs intended to attract users to monetize via distinct business model vs Apple App Store)

• An open API allows anybody to access the data or services of a platform (eg Google Maps)

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Benefits and risks of open APIs

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Benefits RisksCreates opportunities to benefit from the creativity of others (large design space)Allow users to meet their own needs since your resources are limited (long tail of needs)Drive traffic to your site or application and create ways of monetizing your dataUsers expect to get access to their data (no lock-in)

Somebody could obtain your data and replicate the service (make it hard to replicate)Aggregators become primary interface to users (incent users to come back for more)You do not generate revenue from free services (charge for finite resources, eg scale)Legal grey zone around how service/data can be used (state terms of use in a license)

Lead to Win

Design principles for open APIs

• Learn from other APIs (consider mimicking a big API, as this makes it simpler for consumers)

• Make the API easy to learn (documentation, toolkits for different languages)

• Use your own API on your application• Don’t try to control your API• Consider open sourcing your application• Embrace REST as it lowers barriers to entry for

developers and leverages web’s scalability

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Unbundling and recombination

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PJCICommunications + ITGreater than the Sum of the Parts

Communications Building Blocks IT Applications

Billing

Location

Video

Presence

Voice

SubscriberProfile

SharingWeb

Comms

CallHistory

Click-to-Call

Conf-erencing

Text-Chat

Purchasing E-Mail Fulfillment

OrderEntry

SAPImaging

HealthcareEnergy Mgmt

AnyVertical

New Tools to create new value

Global Competitors New Values Technology New Tools 20Carbone (2009)

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Ways to lever open APIs

• Open APIs allow unrestricted experimentation• Open APIs can be used by anyone for any

purpose (inhibit your desire to control)• Open API providers appropriate value through

complementary offers (eg scale)• Open API lower the barrier for composition and

integration with other APIs

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Mashups

• A mashup is an application that combines data or services obtained from multiple open APIs

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Harvest

ManageEnrich Manage

Assemble

Manage

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Mashup development model

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Role Create Search Maintenance

Component developer

Chooses data source & formatsDesigns API

Writes descriptionPublishes

Adds featuresStable interfaceMeets SLAs

Mashupcomposer

Mashes up components (tool or manual)

Discovers and selects

FollowsMonitors SLAs

Mashup user

Uses mashup Specifies need or discovers

Daniel, Matera, & Weiss (2009)

Lead to Win

How mashups can be used

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Use DescriptionIntegration Wrapping around legacy components, extract

APIs from components without oneSituated applications

Create one-off applications for a particular user and purpose (new spreadsheet)

Quick prototype Prove a concept to justify investment

Collaboration Connect people who need information with ones who have it through ad hoc communities

Sensemaking Uncover patterns in observations

Ogrinz (2009)

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Issues to watch out for

• Maintenance (adjust to changes in APIs)• Dependencies on APIs (service level, availability)• Licensing (use compatible with API licenses)

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Key lessons

• Create value outside your core product by exposing your data or functionality

• Don’t try to do everything yourself by allowing customers and partners to create value

• Capture value by giving away infinite resources for free, and charging for finite resources

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Further readings

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References

• Briggs, C. (2009), Web 2.0 business models as decentralized value creation systems, chapter 3, 37-52, in Lytras et al. (2009)

• Daniel, F., Matera, M., & Weiss, M. (2009), Web mashups: towards user-generated applications for the Web on the Web, submitted to IEEE Computer (posted on wiki)

• Cook, S. (2008), The contribution revolution: let volunteers build your business, Harvard Business Review, October, 60-69

• Lytras, M. et al. (2009), Web 2.0: The Business Model, Springer• OSBR.ca, special issue on open APIs, April 2009

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