Businesses must embrace the programmable world. Or die.
FORTUNE — The havoc the Internet has wrought on traditional business already dwarfs previous economic transformations, but we haven’t seen anything yet.
Companies of all sizes and across all industries are now facing a massive digital disruption that will permeate their cores. Information technology has been working its way into business processes for decades, but this is different: The apps, data and APIs that are driving this digital transformation are not just enabling business; they are becoming its very fabric. Whether digital native or analog immigrant, today’s digital pioneers recognize that an app strategy is the key to customer engagement, user experience and business success.
The programmable world depends on a powerful and flexible digital-ecosystem infrastructure that is invisible to the user. Implementing and managing all this hidden complexity is a massive undertaking, and most companies lack the necessary resources.
One element critical to the programmable world — API management — is particularly complex. Fortunately, this complexity can be offloaded onto API platforms like Apigee (disclaimer: one of our portfolio companies), which is already enabling businesses such as Walgreens (WAG), Marks & Spencer and eBay (EBAY) to build powerful digital ecosystems that transform their business, without losing their focus on core competencies.
For example, Walgreens uses APIs to leverage existing photo-printing services, letting customers print photos directly from their mobile phones to a local Walgreens store. The company has found that customers who engage with Walgreens in person, online and via mobile apps spend six times more than those who only visit stores.
Similarly, AppDirect uses open APIs and IaaS with a new platform that connects developers to channel partners across different industries. This lets companies like Staples (SPLS) and Bell Canada (BCE) launch state-of-the-art app stores in just a matter of weeks.
These app stores have ushered in a mobile post-PC era in which people increasingly expect a rich and personalized experience that seamlessly spans any app and device. Open-API platforms like Twilio help to enrich the mobile experience by letting developers add voice and messaging functionality to their applications.
In the transportation industry, Twilio powers the Uber mobile communications platform that connects passengers to drivers of vehicles for hire. Customers tap a smartphone button, and the Uber cloud matches them to the nearest available member limo. Payment is made through the smartphone, so no cash is involved.
In the hospitality industry, Twilio underlies Airbnb, which provides a trusted community for listing, finding, and booking unique accommodations around the world. The Airbnb cloud matches travelers with lodgings ranging from apartments for a night to villas for a month, and helps property owners to promote and monetize unused spaces. Participants can text each other through Airbnb anonymously, without revealing their phone numbers.
Emerging digital ecosystems
However, the really big opportunity is in helping traditionally analog industries — such as healthcare, professional services, manufacturing and consumer packaged goods — to emigrate to the programmable world.
Let’s focus on one: Healthcare, a largely disconnected industry with outdated information technology that is struggling with a huge government-mandated disruption. Here, APIs are enabling more advanced healthcare technologies.
For example, CareCloud (another one of ours), which serves as the digital connective tissue between physicians, patients, medical records depositories, labs and other key healthcare stakeholders. CareCloud’s automation streamlines office processes, reducing administrative overhead while improving patient care.
One app lets patients change their appointment after-hours and select an alternative slot. Other apps let your doctor know in real time that you showed up at a lab for your prescribed test; display the results as soon as the test is done; auto-populate them into your chart; and alert you via your mobile phone to schedule a follow-up appointment with your doctor. You can even have your provider store your medical records in your own Box account.
With such automation, doctors can close the clinical loops of their workflow much more quickly, and patients are more connected to their health information. Compare this to traditional paper-based processes, where work piles up, and customers spend far too much time tracking down their health information.
APIs are also enabling more intelligent medical devices. For example, OrthoSensor makes sensors that constantly monitor the performance of orthopedic implants and report remotely on any problems. This information, which can be passed on in real time to doctors and other healthcare professionals, improves post-operative care, enables earlier intervention and facilitates more targeted rehabilitation.
Platforms, not products
We are rapidly becoming a programmable world. By 2025, the earth will contain more than 25 trillion connected devices that can communicate with smartphones and each other. This creates a major opportunity for entire industries to build digital ecosystems.
It is also a mandate for individual businesses, because their very survival now depends on a digital strategy. Businesses must make apps central to their operations, and use them to solve real customer needs. Consumer apps have heightened human expectations, and playing the old product game is a recipe for failure.
As with the Internet revolution, businesses must embrace the programmable world — or die.