🧠 Knowledge Series #1: How to develop an API product strategy

Understanding the value of the API economy

🔒The Knowledge Series is a series of easy to read guides designed to help you plug the gaps in your tech knowledge so that you feel more confident when chatting to colleagues. Clearly explained in plain English. One topic at a time.

 If you’re a free subscriber and you’d like to upgrade to receive them you can do so below. Or you can find out more about paid access here.

---

The Knowledge Series

Hi product people 👋,

Rich from the Department of Product here! Welcome to the first in our new series of guides we’re calling The Knowledge Series. 

This new series is designed to help you plug the gaps - and build upon - your knowledge in tech so that you can have more informed conversations with colleagues and build up a solid set of skills that you can apply day to day.

Throughout the series, we’ll be exploring practically useful topics including APIs, SQL, UX design, business strategy and more. All with the goal of making you smarter.

In this first of the series, we kick off with our first topic: developing an API product strategy. We’ll cover:

• API terminology - essential terms product teams need to know when integrating with APIs 

• How to develop an API product strategy - where APIs can fit into your wider product strategy

• The value of API integrations  - how integrating with third party APIs can add new functionality to your product quickly

• API monetization - how to turn your APIs into revenue generators

• Tools you can use - useful practical tools you can use

---

What is an API? A quick refresh

API stands for application programming interface, and just like the user interface in web products or mobile apps, an API is also an interface; except that you don’t see or interact with it quite in the same way as you would a traditional front end UI.

An API connects two separate systems and allows them to communicate with one another via API ‘calls’.

For folks who don’t come from a technical background, getting to grips with APIs can be overwhelming.

I remember early in my career when I first joined eBay as part of their shipping team. Within the first few days, I was given a bunch of API documentation and asked to own it and ensure we built new integrations with third party APIs effectively. When you’re dumped in the deep end, you have no choice but to just crack on and learn on the job. 

In this guide, we’re going to focus on API strategy and not API definitions, so we’ll assume you have some working knowledge of APIs. But for a refresh, here’s some key terminology worth knowing:

Key terminology

1. Authentication - instructions on how to connect with an API

2. API endpoints - what endpoints are available. An endpoint is a place that is exposed so that it can be called through an API call.

3. Resources - what resources are available for you to access. Different APIs will have different resources available to use.

4. Request format - requests are sent to APIs and in return they respond with information. The request format specifies how an HTTP request to the API should be formatted. 

5. Response format - APIs will respond when you call them with a request. The response format specifies how an HTTP response is formatted when you receive the response.

6. Response codes - what response codes are included in the response

Product teams and strategy - where do APIs fit in?

Over the last decade or so, the API ecosystem has evolved into a major category in its own right. You’ll now see dedicated API products and API product teams whose sole focus is on building and maintaining APIs.

Dedicated companies have emerged to allow developers to integrate into just one or fewer APIs that in return give engineers access to hundreds or thousands of other more complex APIs across multiple verticals.

Examples

1. Merge provides a single API across multiple industries including HR, payroll and accounting 

2. Aftership offers a single API for tracking shipments for ecommerce businesses

3. Plaid integrates with multiple banks to offer one API for open banking

The API economy is alive and well. And product teams can integrate APIs into their strategy in two distinct ways:

1. Integrating with third party APIs

2. Building your own APIs

Let’s explore each of these approaches.

1. Integrating with third party APIs