It’s the playbook of tight vertical integration – famously catapulting Apple to the top of the stock market time and again. The thinking goes like this: the more of the stack you own, the more of the ecosystem you control. And the more control you have, the better you can manage the end customer experience, and thereby create value.
Sounds like a winning strategy, but it’s not one that’s easily copied. Owning the entire value chain serving the customer is expensive, especially since customer needs change quickly. Huge investments can suddenly become worthless when you lose that customer to something new and better.
Companies compete fiercely on experience for this very reason – after all, a user’s experience is the front door to this entire value chain and justifies the investment a company makes in the rest of their stack.
Here, Apple employs a smart hedge: charge a premium, and make switching costs high. And that’s a fine workaround at their scale. The economics still work even when Android’s market share is nearly four times that of iOS.
The problem with this line of thinking is that it frames the competition in zero-sum terms, with everyone vying for the same customer in essentially the same way. You may be missing an incredible business opportunity by only considering the very top of this stack.
The Jobs to Be Done framework offers a helpful way to reason why customers derive value from a product. In a nutshell, customers ‘hire’ your product to do a job for them – and only while such jobs are relevant or meaningful to the customer will your product be a valued solution for them.
Which brings us back to the stack. It’s a stack precisely because new forms of value are created when businesses combine the lower elements of the stack in interesting ways. But each time a business stitches these things together, it too is a customer with a job to be done.
The beauty of the technology landscape today is that many problems at lower levels of the stack are being solved well, so it’s much easier for a business to ‘hire’ products to solve them and free up their resources to compete at higher levels of the stack. Would you rather:
If you look sideways at your competition, all competing for the same customer at the top of the stack, you may find them solving similar problems to you at lower levels of the same stack. If you can solve those problems better, faster and cheaper than the competition can, you’ve got an opportunity to turn them into your customers too.
Treating these opportunities with the same meticulous attention you pay to customers at the top of the stack is the essence of the API Product approach.
Far from a new paradigm, it’s already being exploited by many of the most valuable companies in digital today. Offering up feature capabilities, like Stripe’s processing payments, as a paid API Product has not only simplified e-commerce for any business needing to transact directly with their customers, it has led to an incredibly profitable business for Stripe valued in the tens of billions (and growing)!
Nor is the opportunity purely in exposing your feature capabilities to the rest of the market you compete in. Increasingly, data generated by a business’s operations is its own source of competitive advantage, and access to that data is readily monetised through APIs and data services.
A great example comes from Bloomberg’s Anywhere service, which forms part of a cohesive ecosystem of business intelligence services and media that have fueled the company’s horizontal economies of scale, rewarding it with annual revenue in the billions.
There are only so many jobs to be done by end customers at the top of the stack, but a multitude of jobs to be done across the entire stack.
Competing at every level of their own stack is an untapped opportunity most businesses don’t consider in their race to the top. You’ve already got first hand experience solving those intermediary problems in pursuit of your own customer – there’s real value in sharing those capabilities and data within your ecosystem, and becoming part of the tide that raises all ships.
What untapped opportunities exist for your business? We have experience helping large organisations in financial services, hospitality and public health to identify and get the most out of their API Products.
Building a quality API Product isn't easy, but you don't have to do it alone. Let’s talk if you’re looking for a sparring partner to figure this out with.