Using APIs to innovate faster in a space between “buy” and “build”

Chris Busse Profile picture for user Chris Busse May 5, 2022 Audio mode
Summary:
When it comes to new technology, the obvious choices are buy, or build. But there is a third option, as Chris Busse of Terazo demonstrates with some real-word examples, for Tercera.

Buy vs build - Traffic sign with two options - appeal to be creative, skillful and dexterous to be able create, make, build own product © M-SUR - Shutterstock
(© M-SUR - Shutterstock)

Bringing in new technology to support business innovation has traditionally come down to a “buy vs. build” decision. Businesses could buy software and configure it to their needs, or they could engage a software development vendor to build what they think they need – often learning costly lessons along the way about how they thought wrong. Today, APIs are enabling a third option coming up through the middle.

This is just as well, since digital innovation within businesses is becoming increasingly federated throughout enterprises. No longer is this kind of transformational change solely the domain of “technologists”. An individual or small working group charged with driving innovation may come from any line of business or back-office function and may have goals that range broadly from rethinking processes for cost savings to opening entirely new areas of revenue. 

These modern innovators often welcome this middle approach in the fuzzy area between “buy” and “build”. It combines the convenience and agility of an API-first product that can be bought on a subscription or by metered usage like a SaaS solution, together with some degree of development to ease integration with the organization’s existing systems.

A simple and yet very impactful example that we’ve seen across many clients that Terazo has worked with is some basic variation of a notification process:

When a record or records change in an enterprise system, send a text message to those affected for informational purposes, or to solicit a simple confirmation or update from the affected person. 

This kind of interaction can support both cost savings and revenue generation goals. A text message can inform a customer of an order status – as we’ll show in a moment – or create the opportunity to upsell or offer a discount on a future order. This may be the simplest example of a presentation layer for frictionless enterprise – and one that gets a 98% open rate. However, this capability is often missing from traditional ERP systems and isn’t likely to warrant their wholesale replacement.

An innovator looking to create this kind of customer engagement is likely to find themselves reading about API products such as Twilio’s Programmable Messaging API for one-way notifications, or Conversation API for two-way SMS interactions. These APIs are marketed to both developers and “product managers”, regardless of what job title they hold. But these are not simple ‘citizen developer’ solutions – at some level, IT needs to be involved as well. When the innovator gets deep enough into the documentation it quickly becomes apparent that some level of development is necessary to unlock the value in these services.

Real-world examples 

In one real-world example I can share with you, we worked with a global logistics solutions provider. The company had already worked with Terazo to publish its own APIs to replace legacy EDI integrations common throughout the shipping and logistics industry. These APIS are consumed by its customers, including many major big box stores and online retailers in the furniture trade.

The next step was to work on notifications these retailers could share with their own end customers. Consumers have become accustomed to getting real-time shipment notifications and progress updates for their regular online retail purchases, but the complexities of getting something like a sofa from a manufacturer or warehouse to an end customer do not make those kinds of updates easy. One of the first APIs that we worked on building together was Shipment Tracking, so that the websites of the online retailers the company served could display updates to their customers.

More recently, the company saw an opportunity to add an SMS text messaging option to the APIs it offered its retailers, to further improve their service in a B2B2C manner. The team worked with Terazo to implement Twilio’s Messaging API to push out shipping updates as they occur, including freight location changes.

Once this was live, an interesting behavioral trend became evident. Between updates, people were replying to these messages asking for shipment updates. The company collected all these text messages for six months and then studied them. 80% of the replies were some variation of the same question: “Where is my order?” The team wondered if there was a way to respond to these queries automatically.

To address this, we worked together to implement a Natural Language Processing solution that responds to text replies, creating a simple but effective conversational computing interface that most importantly answers the customers’ questions in real-time. At the same time, we’ve tapped a broader set of Twilio APIs to expand these messages to voice and email, reaching their customers on the channels they want to use to communicate. In 2020 the company saw an 18% increase in shipment volume, but a 22% decrease in customer calls as a result of implementing this approach.

What can we learn from this innovation journey?

Rather than “build vs. buy”, two key questions have guided this company’s thinking when evaluating what technology to integrate into its platform:
 

  1. How can we use technology to improve our customer’s experience?
  2. How can we use technology more efficiently?

There is a bit of advice often given to startups, “outsource everything that isn’t your core competency.” This applies just as much to innovators in an existing business. The decision to use Twilio API products for omnichannel communications was driven largely by the incredible challenge and expense that would need to be undertaken to build in-house communications solutions. SMS and the necessary connections to telecommunications carriers are complex and highly regulated. Twilio eliminates this complexity through its ready-made APIs, offering enterprises functionality that they simply can’t build themselves.

This approach enabled the company to stay focused on what really mattered: customer experience. In doing so they identified the next opportunity to be able to respond to text message replies in an automated and intelligent way. This feature initially wasn’t high on their priority list, but when they looked at the data and the sheer volume of responses, they changed course and took advantage of a window of opportunity to improve customer experience even further.

That nimbleness and agility is something that sets an API-driven approach apart, rather than either just buying the same SaaS package your competitor is using and hoping that you can differentiate in other areas, or investing heavily in building everything from the ground up with the hope that you’re building the right thing. This company was able to make smart choices about what it “bought” to integrate into what the team were “building” - and created something truly unique in the end.

In another example, we worked with a franchised pet waste removal service to implement Twilio Frontline to standardize the communications between 80+ franchises and the customers they serve directly on channels that include Facebook Messenger and phone calls. A robust process was built so that if franchises didn’t respond in a timely manner, the messages would be routed further on to a Twilio Flex instance for an agent response, so that business would not be lost. This solution integrates with the existing CRM to provide visibility across all digital customer touchpoints. Once this was in production, our client had the confidence to have another go at modernizing an older application for new customer intake just in time for the spring busy season – when winter snows melt and the need for a clean-up becomes more evident.

Two very different stories but one common theme. An API platform like Twilio lets you innovate without having to create your own custom infrastructure from scratch, creating a new sweet spot between ‘build’ and ‘buy’.

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