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Thursday
Aug042011

Every Business Needs An API

Service companies throughout the economy are urgently searching for new markets, while simultaneously struggling to find ways to become more valuable to their existing customers. 

The answer, I believe, is for them to take a leaf out of the world of software application development and build themselves the equivalent of an Application Programmer’s Interface - an API. In layman’s terms, they should give customers a set of keys. At least to a few of the company's doors.

Peter Drucker, perhaps the world’s best-known consultant, once said that the purpose of every business is to create a customer. Not get, or find or satisfy. But, create.

Which means not being satisfied with responding to customer wants, but fulfilling needs customers haven't yet identified. After all, as Henry Ford famously observed, “If I had asked my customers what they wanted, they would have said ‘a faster horse.’”

The best contemporary example of this is, of course, Apple, whose capacity for developing products we didn’t know we couldn’t live without was perfectly summed up by a New York Times reporter, who said of Steve Jobs, “First he creates black holes. Then he fills them with stars.” 

But Apple is a rare exception, and most service businesses still focus only on meeting needs as defined by their customers. 

The problem with which is that a customer defines what they want of your business based on their view of what you sell. Which is defined by your view of what they want. And so we go round.

The result is that most service companies continue to be built on narrowly defined customer interactions that typically contain four elements: 

  • Sales
  • Customer service
  • The scope of a project or a relationship
  • A pricing template.  

This is usually a streamlined process for both company and customer, and provides a reassuring set of parameters that reduce the likelihood of an unsatisfactory outcome for either party. The customer gets the work they want, and the company gets paid a price they had some say in negotiating.

The problem with which is that it also narrows the point of connection between company and customer to the tip of an extra-fine needle. 

The price isn’t right, the timing isn’t right, the offer isn’t right, the quality to cost ratio isn’t right, the level of service isn’t right; all will make the company or its customer unwilling or unable to work together. 

Miss that needle-thin point of connection and the company has no way of working with the people it was built to serve.

The result is a general stagnation in many service business sectors. The results? Working harder for lower margins while struggling to distinguish yourself from your competition. Sound familiar?

Instead, we need a way to let customers explore how else they might use your company’s capabilities to satisfy their needs, without being filtered by your pre-conceived ideas of how they should see you. After all, a customer that finds you is historically worth 30 percent more than a customer you have found.

The answer is the service company equivalent of an API.

Today, Google is a household verb. A decade ago it was a misspelling. 

The space between those two was filled in part by the genius of Google engineers producing endlessly innovative additions to Google’s core functionality. 

But the rest of that space was filled by ideas and suggestions driven by Google’s own customer community. A community created by the company’s willingness to do one simple, but very brave thing.

Share.

Instead of locking the code and all of its capacity into tightly defined, Google-designed pre-packaged boxes, Google gave the community access. 

At first, this was a largely philosophical decision, driven by writing the code for capabilities like Google Maps on platforms that they knew could be reverse engineered. 

But sooner rather than later, Google adopted a formal protocol that created easier and more reliable ways for developers to adapt Google to their own needs. 

This protocol is called an Application Programmer’s Interface, or an API.

When a software owner publishes an API, it gives developers both permission and the ability to incorporate the essential value of the software into other applications. Thus, content created in one place can be dynamically posted and updated anywhere across the web. When you open Google Maps for instance on your smart phone, it’s the API that provides your app with the ability to show Google’s most current map data.

The value of an API, however, is not simply that it provides a one-to-many relationship for real-time data, but that it gives the community the ability to invent new ways to use the data in the first place. Ways that are driven by the community’s collective insight and experimentation into how the data could be more valuably used. 

If, as a service business you simply substitute ‘expertise’ or ‘service’ for ‘data’, then the possibilities for building an ‘API’ for your company start to loom large.

If, for a few moments, you took away, the sales, account management and pricing matrix under which your company operates ever day, and asked instead how you could give potential clients access to your core services within an ‘open source’ framework, what would that look like?

Would you publish a step by step ‘how to’ in exchange only for a credit and notification of when it was used?

Would you offer a bank of hours of your expertise in exchange for public acknowledgement of what powered the idea?

Would you give away for free everything you do for a limited time in the belief that you would establish new, loyal customers whose interests you could cater to, and only charge them once a mutually beneficial relationship had been established?

Would you create an open marketplace in which you worked on the two most innovative ideas submitted to you each month in exchange for an ownership interest?

There are examples of this kind of thinking beginning to emerge in various places. 

The App Store

Apple’s App Store, Android’s Market and Window’s Marketplace have all been built in such a way as to allow the community to have enormous influence over the future utility of smart phones and devices. At the latest count, there are over 600,000 apps in the Apple and Android online stores alone, and with each new app the popularity and value is determined by the marketplace. Both Apple and Android have leaned heavily on the innovation of app developers to help guide them to decide which capabilities and refinements to incorporate into both their hardware and their software. And instead of the companies having to decide what’s important, or hire thousands of developers, the community does much of that for them. 

Lawyers on Demand

www.legalzoom.com is essentially an API into the expertise of lawyers like Robert Shapiro. Opening up the industry to support the development of new kinds of businesses and addressing emerging challenges in specific areas like copyright and trademark law. The company doesn’t have to determine the kinds of law in which it should invest, the community guides them towards that. And the volume of demand for each kind of law gives LegalZoom a set of analytics about how to balance future hiring that beats any HR department’s projections, and insights into emerging business trends that are ahead of any industry forecast.

The New York Times Digital

The New York Times website is an API to the newspapers’ journalistic and editorial expertise. Before its website, the NYT had 900,000 daily print subscribers. Today, its website has more than 33 million unique monthly users. But the underlying value of its digital presence is the ability of the paper to receive instant feedback from its customers about which areas they find most valuable and to invest resources into developing those capabilities. That insight gave the New York Times the confidence to create one of the industry’s most significant pay-wall models, creating both new profit streams and long-term economic viability. The initial investment being the Times’ willingness to give away almost everything for free until a mutually valuable relationship was established.

The simple fact is that once you give a customer an opportunity to explore their own interests, they rarely stop. Which is exactly what any business should want.

With imagination, every company can build an API. Pathways that allow you not just to listen to your customers more attentively, but that give them the ability to experiment with what you have to offer. Experimentation that is key.

How could you open up the possibilities for your customers’ imagination to start to play. Without risk. Without expectations. 

In other words, what would an API look like in your business and how far would you go to develop one?

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