Image by Brian Solis / bub.blicio.us via CrunchBase
Here's a tip. Scale your operations around a business platform with an open API. But does that kind of language mean a whole lot to a decision maker with, say, a finance background? And, could businesses be losing out on huge opportunity because they fail to grasp concepts that the CIO thinks of as second nature?
I was mulling over that question with Oren Michels, pictured, CEO of API management provider Mashery at this weekend's f.ounders conference.
The executive you want to convince is an early adopter of technology but not a tech expert. She is not a geek though she has an iPhone, a Mac Air and the air of a competent decision maker. But would she or her male equivalent grasp the significance of an open API?
A recent presentation by Expedia would help.
Without an open API companies are missing out on a unique ability to scale. There's a simple formula. Business platform with open API = new business ecosystem and a whole community of developers and businesses scaling opportunity with you. Expedia shared their experience of open APIs at the recent Business of APIs conference. Oren and I tried to boil it down to a few principles.
The true benefit of an open API is that the world's best developers can create new applications from your core service and data. But actually there is nothing unique in that principle. Most companies are taking on new types of partnerships - an increasing number of outlets, for example in hotels, serve Starbucks coffee, or their cafes are run by Starbucks. That's a new application for hotels and for Starbucks.
In the physical world the hotel is a series of connectors. They connect to the local golf course or to the nearby Disney Park or to local events, and to their own restaurants (which are also being run increasingly by people who know how to do extremely good restaurants) or Spas run by Spa consultants.
In a sense the hotel is a platform for a range of other services and products.
If hoteliers focused on their promise - a good night's sleep - and let partners do all these other things then they could expand rapidly. At the same time they could localize well and in all likelihood provide far better levels of service. So a hotel that doesn't have a golf course can connect with an fitness guru in your location or with an organic garden or some other locally impassioned business.
The API is a way to build connections. It can help companies create an infinite number of combinations suited to local markets. It allows them to do that while focusing on their core assets, leaving the heft of localization and local marketing to partners who know how to work the API (or application programming interface).
Expedia is a great example of the open API at work.
Expedia runs an affiliate network of about 10,000 partners. In its core business of selling hotels and flights, it seemed to hit a ceiling. Numerous websites offer beautiful images of hotels from all across the world, as well as reviews by guests.
The problem is not just that this process lacks differentiation but that it leaves visitors frustrated. My own example might help explain why - I can spend an hour choosing a hotel in London and I visit twice a month on business. The user reviews don't quite tell me enough and the hotel images are often a joke. Besides even a really great hotel can be suffering temporal challenges - like a refit. And I always need a good price so will easily shift loyalty to save £20.
What Expedia have done is open up an API to their services that now allows all of their partners to localise and personalise their core data.
It means for example that a local London-based affiliate could provide me with much better information about the facilities in and around the hotels in the area I want to visit. My decision might be tipped by knowing there are building works nearby one hotel. Not that I rule that hotel out for future visits but right now it is going to be noisy. Or the decision might revolve around a nearby gym or restaurant.
The point is Expedia could not hope to catalogue all the temporal changes at all locations as well as a group of local affiliates can.
In the past Expedia provided only the templates that affiliate networks normally have access to - you've seen the buttons and the page templates across many websites.
But now they see their business as a platform business. They currently have 3,600 active API partners and delivered $137 million in revenues into their affiliate network in the past twelve months on the back of $2 billion in sales. That platform serves its affiliates and its hotel and flight partners. Expedia becomes somewhat neutral as it tries to maximise opportunity for both by creating a platform that eliminates the friction of doing business at the same time as deepening capabilities.
Still you have a business ecosystem of hundreds and possibly thousands of critical developers and businesses to look after. That is a new core competence. The three main benefits of platforms and APIs?
- It lifts the lid off expansion - scale becomes easier and creates a more social business milieu in which to grow
- It fires up an ecosystem of advocates
- The ecosystem is closer to your clients that you are so it deepens and improves your customer relationships.
Or as Expedia put in: Platform is the new product.
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