The Building Blocks for a Successful API Strategy

Many companies have launched API programs, and many more will in 2011. Some have used their API to become unstoppable market forces by empowering a new indirect channel. Others have seen minimal API adoption, and are unclear on why they haven’t succeeded. Even more are in the “mushy middle” between success and failure.

At Apigee, we observe common patterns in API programs that succeed – in planning, management, and organization. Those that fail hit common pitfalls in these categories as well. So we have developed a nine-box model for API program management that helps track how both strategy and execution must come together to build a successful API effort.

Strategy: Know your market segment and channel partners (developers)

  1. Market segment. An API should be something that extends or accelerates the existing core business into a new part of the market. This may have been a segment that was previously unaddressable, or it may be a segment that is under attack. Without a clear picture of the market result that the company wants to produce, the API program will not only be unfocused, but immeasurable in the company’s standard key performance indicators.?Takeaway: Specify the segment(s) to target and the standard key performance indicators the API program should change.
  2. Channel model. An API program should incent third parties to adopt the API. The strongest reason to adopt an API is to make money. Given the segment targeted in the first step, what drives the developers that are your channel partners? If developers are building an app, their model may be app sales (including in-app purchases). If the developers will drive revenue for your company, then their model should be affiliate royalties. If the developers’ model is advertising then take some of the money you would have spent on web advertising and pay developers directly for promoting your brand in their app. If the developers already have a strong model but need more market awareness, then use your properties (advertising, branding, and PR) to extend your developers’ reach. Takeaway: Understand the business model of the targeted channel and ensure that the API program can contribute to it.
  3. Industry goal. An API should have a clear industry-level goal of either being a true platform or of serving existing partners. Building a dominant platform such as Amazon Web Services (s amzn), Twitter, or eBay (s ebay) requires tradeoffs in favor of openness, interoperability, and onboarding. When your goal is tens or hundreds of thousands of developers, you must cover a broad set of functions, use security models that are easy to understand, and deliver world-class self-service (from sign-up to documentation to support). Building a partner channel requires completeness in specific use cases, partner support, and business process. Partner channels typically have only hundreds to thousands of developers so security can be more customized and support can be hands-on. However, these developers won’t work to fill in gaps in your API and you must therefore expose entire processes (i.e. order-to-cash, trouble-to-resolution).?Takeaway: Decide whether you are targeting the platform or the partner model, and be consistent with that choice.

Execution: Plan, Manage, Organize

  1. Planning. Determine and document what will be accomplished for the segment, channel, or industry. Define requirements at the business, partner and technical levels.
  2. Management. Establish measurable dimensions of execution, rhythm of reporting, and key actions. Establish a common dashboard across the project including the key performance indicators and component metrics, executive reviews, and executive sponsor.
  3. Organization. A strategy area without a leader will fail. Grant yours the authority, support, and appropriate staffing to win.

This results in the following nine-box model for executing an API program. This assumes that the channel is developers but should be modified to match the way that your business needs to define the channel.

Planning Management Organization
Target Segment(s) Define market segment in detail including size and user persona; specify API profile needed to satisfy top use cases for each target segment Establish key performance indicator targets, traceability and dashboard Business-led
Segment-oriented workstreams
Engage Channel Specify business model and marketing driver for the channel that will reach each target segment Establish developer adoption targets, developer marketing and channel actions (community site, events, and communication) Channel-led
Community, developer, and business development workstreams
Industry Goal Specify roadmap of API deliverables, mechanics, integration, and business process to meet target segment needs Implement API roadmap, adjust and report on iteration cycle, and establish alpha developer team Engineering-led
API, infrastructure, and developer support workstreams

The top-left box should pull all of the others. And API programs’ key performance indicators should align with existing corporate business key performance indicators. With this framework in mind, the most common pitfalls in API programs we observe are a lack of a business goal and a lack of a channel leader.

Without a business goal and attendant core performance indicators the program will fail – because it’s not seen as a business or an ongoing program, but as a side project, solely led by engineering. But APIs are in fact lines of business in their own right – and companies have to manage them as such. Without this alignment – the team will get pulled in different directions, or company focus, funding, and commitment will falter.

Similarly, the lack of a channel leader ensures that the program will fail – because the channel itself is not understood. An effective leader for the developer channel understands both developers and business and is a full peer to the engineering and business leader. In many cases the de facto leader for a developer channel is a community manager, developer advocate, or API evangelist. Sometimes this person doesn’t exist as a full-time role, and in other failure cases the position is not granted the right level of authority. We will see this role become more understood in the coming year – especially among companies that have successful API programs.

Good luck in your API program, and let me know in the comments if you have questions based on the model above, or want to suggest further articles on API strategy and execution.

Sam Ramji is Vice President of Strategy at Apigee, a company that manages APIs. Prior to Apigee, Ramji led open source strategy across Microsoft.