An API recipe for the disruption of traditional industries

How traditional industries can become digital players by using APIs

The use of APIs is a good indicator of an enterprise’s ability to adapt to the digital needs of customers. APIs are at the heart of a business’ ability to develop products faster, seamlessly integrate data systems, and extend their reach to new partners and other value co-creators.

Business readiness for digital

You can often tell a business’ API readiness just by looking at their website. If they have an online chat system for customers to reach out, offer email or white paper downloads, have an intuitive, engaging design, and offer some way to contact them via mobile devices, chances are they are at least taking steps towards being digitally ready.

Beyond website signals, tools like Clearbit’s Prospector uncover what SaaS products a business might be using on their website. My analysis earlier this year showed some traditional industries lag in their use of SaaS products beyond marketing technology. There were fewer signs of uptake of tools that suggest an enterprise uses APIs for content storage (an indicator of potential automated workflows), customer segmentation, IT operations or business development. 

Industry example: buildings management

A recent talk by Deb Noller, CEO of smart building software platform Switch Automation, gives us some deeper insights into the lack of API usage in traditional industries and what can be done to encourage positive disruption.

“The buildings business model is broken,” Noller told an audience of API professionals at APIdays Australia earlier this year. “It is shockingly unsophisticated. It is very silo based.”

She gives the example of installing engineered building systems, such as mechanical and electrical equipment, in office buildings. When constructing a building, separate tenders are put out to install systems and equipment, such as elevators and heating and air conditioning. Each tender, almost without exception, goes to the lowest bidder, and each contractor works independently, never thinking through how their systems work in tandem with other parts of a building.

“In each building, you will have a range of systems, and none of them are connected. Now extrapolate that to a portfolio of 300 buildings,” Noller says, meaning you do the math around the costs and added burden that this level of disconnection could cost a business manager.

Switch Automation provides a cloud-hosted, API-enabled data aggregation system to bring together all data points about a building or portfolio.

With this core focus, they use APIs to overcome the broken industry model. For example, they work with Forest City, a real estate company that owns and develops over 150 retail, commercial and residential buildings across the U.S. The way some of Forest City’s building stock had been fitted out—with siloed engineering and mechanical approaches—was already inefficient in places, so data reports were just continuing to show business as usual, not that any anomalies were occurring in spikes of energy usage, for example.

The API-enabled model for disruption

It is fascinating to hear Noller speak about her model of disruption. When beginning to offer a cloud-based service to a traditional industry, she says Switch Automation needed three things:

  • Infrastructure: Data needed to be made available to buildings. 
  • Application layer: Hardware and software needed to be decoupled to enable new connections and insights.
  • Customers: Confidence and trust could be built by Switch Automation if they supported open standards, ensured customers retained data ownership and assisted customers with ROI in tenant satisfaction, meeting environmental standards, and reducing costs. 

That’s basically a recipe for introducing APIs into any traditional industry.

disruption slide from switch automation

The API recipe to digitally disrupt an industry

Switch Automation was able to leverage APIs to drive disruption across those three areas.

1. Switch Automation built a product whereby they could add data access to sensors and hardware that manage buildings.

Sometimes they were able to do this by integrating existing hardware APIs into their dashboard interface so that building owners could have a global view of all of their building capabilities. In other cases, they had to work with their building customers to introduce API-enabled sensors onto existing machinery, but by doing so they were building a repeatable process for later customers.

Where they also integrated existing hardware APIs into their system, they were widening their catalog, again reducing the costs of this work with a subsequent customer using the same hardware devices. This is often the case with introducing APIs; the initial integration costs are higher, of course, as you need to build APIs, but that flattens out the more your APIs are reused.

2. By creating data accessibility, Switch Automation decoupled the hardware and software.

Now all of that data is available across the whole facilities management operation, not locked inside one HVAC system or one lighting system. This was key in Switch Automation’s ability to identify savings for Forest City: One property had not been utilizing free cooling from outside air when temperatures were cool outside, increasing air conditioning and energy costs that could have been avoided.

This decoupling also means the business can start thinking about facilities management data as an asset that can be shared or even sold externally to others who may want to benchmark against them, to third-party services that may need better understanding of building processes, or to be used in negotiating future utility company partnerships, for example.

3. Customer acquisition was achieved by having a proven platform for the enterprise, transparent pricing and a clear path to ROI.

The software platform that Switch Automation provides has a reliable ongoing cost, and any one-off introduction of sensor technologies is clearly costed. So, businesses can be confident about the business case of migrating to this type of system and can better calculate the cost savings that will be generated across the year.

How APIs are used

Noller’s experience in smart buildings isn’t that dissimilar to the way many traditional enterprises are struggling with siloed systems, service delivery and data assets. This disruption recipe uses APIs in three ways:

  1. To ensure greater data insight into existing systems
  2. To aid in decoupling hardware and software
  3. To create a transparent pricing model

That’s all that is needed for a traditional industry to get started thinking about how to survive when the next startup comes looking into their backyard.

Copyright © 2017 IDG Communications, Inc.