a16z Podcast: The API Economy -- The Why, What, and How
Mar 13, 2018
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Cristina Cordova leads partnerships at Stripe, Augusto Marietti is the CEO of Kong, and Laura Behrens Wu is the CEO of Shippo. They dive into the transformative power of APIs, comparing them to everything from Lego blocks to the veins in a body. The conversation covers how APIs allow businesses to focus on core competencies while accessing greater data, democratizing technology. They also discuss the evolution of APIs from utilities to microservices, and how small businesses can leverage this landscape to compete with giants like Amazon.
The API economy empowers businesses to leverage external services, allowing them to concentrate on core functions and innovate efficiently.
Adopting an API-first approach is essential for sustainable growth, ensuring that API development is integral to a company's strategy.
Deep dives
Defining the API Economy
The API economy allows businesses to focus on their core competencies while leveraging external services to handle various operational tasks. Companies can now build and innovate without needing expertise in every aspect, such as payments or shipping, thanks to API integrations. The shift is not limited to tech startups; traditional businesses are also embracing APIs as they transition to e-commerce models. For instance, a soap brand that initially operated through physical stores is now utilizing APIs to enhance its online shipping capabilities.
Historical Insights and Efficiency
Analogies drawn between the API economy and historical innovations, like the assembly line, highlight how APIs facilitate efficiency and integration of diverse components. Just as Ford's assembly line combined various parts to create cars, APIs enable software products to integrate numerous functionalities seamlessly. This distribution of resources allows businesses to scale and innovate without becoming bogged down in developing every component from scratch. Experts emphasize that the real advantage lies in democratizing access to technology, resembling how the assembly line made automobiles accessible to the masses.
The Power of Specialization
The API ecosystem empowers businesses to specialize in their offerings while relying on external APIs to handle complex functionalities, such as payments and shipping. A prime example is Lyft, which integrates various APIs like Google Maps and Stripe to build its services without developing each element in-house. This concentration allows small businesses to compete against larger retailers by adopting advanced functionalities that would typically require substantial capital and resources. However, as businesses grow, they must navigate the complexities of integrating APIs while maintaining operational control.
API First Mindset for Future Success
Adopting an API-first approach is crucial for companies aiming for sustainable growth and innovation. This mindset encourages organizations to prioritize API development as a core component of their strategy rather than an afterthought. Businesses should focus on developing APIs that align with their strengths while considering the long-term implications of their choices. By ensuring that APIs become integral to their operations, companies can unlock new opportunities, similar to how major players like Amazon have successfully evolved their offerings.
with Cristina Cordova (@cjc), Augusto Marietti (@sonicaghi), Laura Behrens Wu (@laurabehrenswu), and Sonal Chokshi (@smc90)
APIs (application programming interfaces), observe the guests in this episode of the a16z Podcast, can be described as everything from Lego building blocks to Tetris to front doors to even veins in the human body. Because the defining property of APIs is that they're ways to send and receive information between different parts, that is, communicate between software applications (which often map onto different organizational functions/services in a company too). APIs therefore give companies access to data and competencies they wouldn't otherwise have -- or better yet, that they no longer need -- by letting even non-tech and small companies combine these building blocks to get exactly what they want.
Which means companies today -- including non-tech companies and small companies -- can focus on their core competency instead, access bigger data, and get superpowers to scale and compete with the Amazons of the world. But what does all this mean for design -- after all, APIs are interfaces between software, not people -- and for other stakeholders (finance, ops, etc.) beyond developers? Who do you sell to? How are APIs changing not only the (inter)face of business today, but how entire companies are being formed from -- or around -- them? This conversation considers all this and more, featuring: Cristina Cordova, who leads partnerships for Stripe, which builds infrastructure for the movement of money including payments processing; Augusto Marietti, CEO and co-founder of Kong, which helps companies manage secure APIs and microservices; Laura Behrens Wu, CEO and co-founder of Shippo, which powers multi-carrier shipping for all kinds of commerce; in conversation with Sonal Chokshi.
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