How to Build an API Strategy in 5 Easy Steps

By now, most companies understand that if they do not embrace digital ecosystems, they will trail behind those that do. Imagine an airline refusing to share its flight schedules and pricing data with third-party travel sites — an exchange that is common in the travel industry and that typifies a digital ecosystem. Such an airline wouldn't survive. When consumers search for flights on popular sites like Travelocity, Expedia, and Kayak, the digitally-estranged airline won't appear anywhere in the search results. This would cost the airline hundreds of thousands of dollars in missed bookings and revenue.

The above example is but one of thousands, if not millions, that shows why aligning your business with a digital ecosystem is becoming a strategic imperative. This holds true for those in industries where digital ecosystems are thriving ­— like the travel industry — and in sectors where such ecosystems are merely budding.

Indeed, businesses that reject digital ecosystems will end up with a whole lot less of everything:

• Less revenue
• Less competitiveness
• Less agility
• Less adaptability to market shifts
• Less innovation

No APIs? No Digital Ecosystem

Application programming interfaces (APIs) make modern digital ecosystems possible. They lessen the problem of data silos by enabling you to create reusable integration workflows for your applications and data internally. They also create better customer experiences and more effective partner relationships by letting you share relevant data externally. What's more, APIs give developers in and outside your organization a way to come up with product and service innovations that, by drawing upon your proprietary data, can generate new business for you.

To build or enter a digital ecosystem with APIs, you must first devise an API strategy. Your strategy should at least include the following five broad steps. Consider these steps the secret to your API success.

1. Define the Goal

Typically, you'll want to set a goal that doesn't explicitly deal with data and then work backward from there. Such goals might include creating a new revenue channel or driving leads or removing IT bottlenecks. In the airline example, the airline's goal is to increase flight bookings. To achieve that goal, it must publish APIs for third-party travel sites to consume.

Once you've established a clear business goal, the next step is to figure out which data you need to share and with whom to achieve that goal. After all, when you create and publish an API, you're simply choosing specific applications and data to share with specific people. The airline, for example, would want approved partner websites to consume APIs granting access to the flight schedules and pricing data from specific backend applications and databases.

It's wise to start with small attainable goals. After achieving those goals, build on that success in future API initiatives.

2. Understand Your IT Environment

Your company's data architecture will dictate how you implement your APIs. There are a lot of variables to consider in this process. For instance, you need to figure out where the data you're trying to integrate resides. Is it housed in an enterprise resource planning (ERP) system, a customer relationship management (CRM) application, a human capital management (HCM) solution, a cloud data warehouse, or somewhere else? Will you be pulling data from multiple sources? Is your data hosted on-premises, in the cloud, both? What securities and policies will you need to implement to give various stakeholders access to the data from these applications? These are the kinds of questions you need to answer.

Business and IT teams must work closely together to successfully deploy and maintain the API within your company's data architecture. IT can help business teams navigate this data architecture to reach their goals with APIs. What's more, if you adopt a multi-point integration platform as a service (iPaaS) that supports hybrid integrations across cloud and on-premises endpoints, it will make this part of your API strategy decidedly easier.

3. Run a Pilot API Project First

It's best to start with a small, low-stakes API project before publishing an API for the whole world to use. Define the use case and create an execution plan so you can measure the success of the API project. Experimentation is key in these early stages. You need to see what is and is not working, uncover potential vulnerabilities in your integrations, and identify ways to drive adoption for your API when it goes live.

In the airline example, before publishing an API that gives partners access to scheduling and pricing data, an airline would publish a beta version of the API to a few developers internally. These developers might test the API by creating business intelligence (BI) dashboards that reveal buying trends month over month. Once the API meets the objectives for which it was constructed and passes all the security tests, the airline can start rolling it out to a broader audience internally with the eventual goal of publishing it for external consumption.

This is where your digital ecosystem can really start taking off.

4. Roll Your API Out to a Broader Audience Incrementally

Once your API performs well for the few developers in the pilot program, you should then make it available to an entire department. In the airline example, developers might make ready-to-use APIs available to the BI team to track and measure their flight bookings.

And once the API provides measurable value for that department, other departments can start leveraging it to unlock value in their data. As API adoption grows and spans the enterprise, start taking steps to create API-led digital experiences for your customers and partners. When you've forged all of these reusable integrations that unite internal stakeholders, partners, and customers, then you'll have built a rich digital ecosystem.

5. Manage Your APIs

To sustain your digital ecosystem, you need to manage your APIs. Since APIs are intrinsically linked to application and data integration, the best approach to managing them is to leverage an iPaaS with API management capabilities contained in the same platform. Such a solution allows you to plan, design, implement, test, publish, operate, maintain, version, and, ultimately, retire your APIs with greater success. The ability to do API version control, for example, is important because it prevents service disruptions for developers, partners, and customers due to version incompatibility. API monitoring, another feature of an API management solution, is also critical because it allows you to track API usage trends — information that can inform new revenue-generating API initiatives.

Start Building a Digital Ecosystem

Organizations that embrace a digital ecosystem will expand the reach of their core business, strengthen their connections with partners and customers, and encourage and develop innovations that deliver recurring profits. Creating, integrating, and managing APIs effectively is a critical prerequisite for participating in a digital ecosystem. And to leverage APIs effectively, you must put a clear, realistic API strategy in place. If you start with small wins and then build on them, you'll be a part of a thriving digital ecosystem in no time.