Imagine a world where everything is done for you. Crazy, right? Trust me we are getting there.
Let’s start with the basics.
The economy is the system of production, distribution, and consumption of goods and services in a society. It involves the interactions between individuals, businesses, and governments, driven by supply and demand. The overall objective is to allocate resources efficiently to meet societal needs and wants.
A business, on the other hand, creates and delivers value to customers in exchange for money. Businesses acquire resources, like time from individuals or goods and services from suppliers. And combine these resources in a new way that increases their overall value than the sum of its parts and sell them to someone else.
Let’s discuss what an API is. An API, or Application Programming Interface is a set of rules and protocols that allows different software applications to communicate with each other. It enables the exchange of information and functionality between distinct systems. In software engineering, an API exposes different functionalities to the outside without exposing the internal structure and logic.
Think of an API as a waiter in a restaurant. The menu represents the API, the waiter takes your order and communicates it to the kitchen (the server), and then brings your food back. You don’t need to know how the kitchen operates; you just interact with the waiter. Similarly, APIs let you interact with software without understanding how it works internally.
You can also see the API as a capability or ability to do something.
In the old economy people call there supplier do some discussions and eventually get their goods, and maybe there is some back and fort you know it.
Applying an API to a traditional business. We call the API of our supplier, do some internal magic and expose the result to our customer with our own API. It does not expose what we do internally and this allows us to optimize our delivery without changing what we offer.
So a business buys resources from someone else e.g. an individual — usually time. Or from a supplier — usually a good or a service. Combine these resources in a new way that increases their overall value and sell them to someone else.
In the API economy your system calls the API (a capability) of the supplier at the time it needs it who then fulfils exactly what you requested in whatever way. No human interaction, no unnecessary admin work and everything in real time. This transformative shift enables seamless, end-to-end integration across various sectors, reducing administrative overhead and fostering innovation.
1. Example — A traditional Taxi business
Consider a traditional taxi company that offers an API to order a taxi at a specific location and time. This API can be utilized by a hotel to arrange transportation for its guests from the airport to the hotel. The process is automated. The hotel system interacts with the taxi company’s API, requests a taxi, and provides the necessary details about the pickup location and time.
The beauty of this integration is that it doesn’t matter how the taxi company fulfils the request. Whether the taxis are driven by humans or are autonomous vehicles, the hotel business only cares about the final service being delivered. This integration not only saves time and reduces administrative workload but also enhances the guest experience by ensuring smooth and reliable transportation (Uber has done just this).
2. Example — A Cloud Provider (Microsoft Azure, Amazon AWS)
A cloud provider sells nothing more than an API that makes it possible to provision physical servers all over the world with a single click/call. I have no idea how Microsoft or Amazon fulfil the service internally, but I get my server in the region where I requested it.
Let’s put this together in a value chain
Just like in the traditional economy, there is a chain of businesses delivering an outcome to a consumer. The difference now is the use of APIs to connect these businesses, enabling seamless integration and operational effectiveness. Standardized inputs and outputs via APIs allow companies to optimize and automate processes over time.
Operational effectiveness
We have standardized our inputs and outputs with an API. This allows us to change our internal processes to get better over time and optimize our delivery. Whether it’s done by humans or machines, it doesn’t matter.
IoT, Automation, Data, Artificial Intelligence and other modern technologies
Other modern technologies like IoT, Automation, Data, Artificial Intelligence further accelerate this trend where we need APIs to seamlessly integrate and interconnect our modern business world.
You may no longer call your technician when something breaks down. It just does it for you and before you recognize it someone rings the bell and is here to fix it. This all works with integrated businesses and APIs.
Regardless the industry you are in, APIs are for everyone. So think about your offering, product or service and expose the endpoints of your business in an API.
Modern entrepreneur build not just a company, they build a system that runs as long someone else comes up with a better or cheaper way of doing it. There will be massive companies run by a few individuals just by leveraging automation, modern technologies and exposing their product and services with an API for someone else to consume it. Either virtual or physical.
As a small off-topic bonus. Crypto currencies play a very interesting role for the API Economy as they enable real-time micro-transactions between two parties.