New Publication – Research Policy: The role of Web APIs in digital innovation ecosystems.

I’m happy to share that our paper “The value and structuring role of web APIs in digital innovation ecosystems: The case of the online travel ecosystem” co-authored with Roser Pujadas and Erika Valderrama has been published in Research Policy. It is available free from here (open access). The paper examines the role of interfaces (specifically APIs) within digital ecosystems.

Pujadas, R., Valderrama, E., & Venters, W. (2024). The value and structuring role of web APIs in digital innovation ecosystems: The case of the online travel ecosystem. Research Policy, 53(2), 104931. https://doi.org/https://doi.org/10.1016/j.respol.2023.104931

– We show a dynamic ecosystem where decentralized interfaces enable decentralized governance.

– We show Web APIs are easily replicated and so switching costs are relatively low. Thus, they do not easily lock-in complementors.

– We show Web APIs create synergistic interdependencies between ecosystem actors which are not only cooperative.

– We show Web APIs create networks of interorganizational systems through which services are co-produced.

– We show Web APIs are important sources of value creation and capture in digital innovation ecosystems.

We do all this through an analysis of 26 years of the online hotel booking ecosystem (1995-2021). Within the paper we present network analysis which reveals the complexity of actors involved in booking a hotel room today – see the following image for evidence of how complex this hotel booking ecosystem has become!

Some random choice quotes from the discussion section:

“Our research uncovers the distinctive structuring role and economic value of web APIs within a digital innovation ecosystem that is decentralized, and not organized around a platform technology as the focal value proposition”

“uncovers a dynamic and competitive digital ecosystem, where web APIs are not centrally controlled, and they are not only developed by incumbents, but also by new entrants offering new services or reintermediating existing ones.

“the competitive advantage that interfaces provide to a platform or firm does not lie so much in the capacity to lock in complementors, nor even on data collection per se, but upon increasing the capacity to process and analyze data in real time, gaining valuable contextual insights within value-adding services, which can be directly monetized.”

The structuring role of web APIs in digital innovation ecosystems

interfaces can structure directly competitive relationships within an ecosystem. For instance, by revealing, what we term, surreptitious interfacing through web scraping (e.g. by early metasearchers), we show how interfaces can be imposed upon another actor against their will. Jacobides et al. (2018 p. 2285) define an ecosystem as ‘a group of interacting firms that depend on each other’s activities’ –we might add to this: or exploit each other’s activities.

“our research shows an ecosystem without a single orchestrator, and where a wide range of interfaces are designed and controlled by a range of actors, in a highly decentralized manner. Our research thus contributes to ecosystem orchestration and governance theory.”

The strategic value of web APIs

Web APIs do not enable control over standards. As web APIs draw upon open shared web standards, parsing them is relatively simple and understandable, and they are agnostic to the systems they interface. This makes them relatively easy to imitate and adapt.”

Web APIs proved ineffective tools to lock in complementors and so to establish leadership. Once an actor uses a web API, the cost of connecting to a different web API that offers the same or similar service is low, thus potentially increasing the power of suppliers and customers (Porter, 2008).”

A “consequence of low specialization costs is that the cost of establishing connections with multiple firms is relatively low…our research provides evidence of large-scale multihoming in an ecosystem built around decentralized web APIs”  

“We see firms constantly adapting, changing their roles, and adding existing services by replicating web APIs, but also offering new web APIs over time. Together, this helps explain the dynamism, growth, and decentralized governance of the ecosystem”

Web APIs in value creation and capture within the digital economy

“web APIs are used by actors within a decentralized ecosystem to interface their information systems and so, to co-produce services and products…the value of web APIs is not only as a design rule…but also as a technology-in-use that enables the interaction of distributed systems.”

“…the value of web APIs is … in facilitating the production of meaningful data… attention should be focused on the exchange of information and integration of digital capabilities through web APIs, and on the real-time production of information and prediction that web APIs enable.”

“An indirect… form of value that web APIs enable is access to potential customers.”

The problem with Web APIs, AI and policy.

“We also reveal how data analytics and AI are becoming deeply embedded across such decentralized web API-based ecosystems. As AI can benefit from harvesting data from multiple sources so we expect it to become increasingly ingrained. This embedding will make it hard to research and trace AI’s impact within the digital economy– with policy implications for those regulating AI.”

Pujadas, R., Valderrama, E., & Venters, W. (2024). The value and structuring role of web APIs in digital innovation ecosystems: The case of the online travel ecosystem. Research Policy, 53(2), 104931. https://doi.org/https://doi.org/10.1016/j.respol.2023.104931

Understanding AI and Large Language Models: Spiders Webs and LSD.

The following light-hearted script was for an evening talk at the London Stock Exchange for Enterprise Technology Meetup in June 2023. The speech is based on research with Dr Roser Pujadas of UCL and Dr Erika Valderamma of UMEA in Sweden.

—–

Last Tuesday the news went wild as industry and AI leaders warned that AI might pose an “existential threat” and that “Mitigating the risk of extinction from A.I. should be a global priority alongside other societal-scale risks, such as pandemics and nuclear war,”[1].  I want to address this important topic but I want to paint my own picture of what I think is wrong with some of the contemporary focus on AI, why we need to expand the frame of reference in this debate to think in terms of what I will term “Algorithmic Infrastructure”[2].

But before I do that I want to talk about spiderman.  Who has seen the new spiderman animated movie? I have no idea why I went to see it since I don’t like superheroes or animated movies! We had childcare, didn’t want to eat so ended up at the movies and it beat Fast and Furious 26… Anyway I took two things from this – the first was that most of the visuals were like someone was animating on LSD, and second was that everything was connected in some spiders web of influence and connections. And that’s going what I am going to talk about – LSD and spider’s webs.

LSD Lysergic acid diethylamide – commonly known to cause hallucinations in humans.

Alongside concerns such as putting huge numbers out of work, of spoofing identity, of affecting democracy through fake news is the concern that AI will hallucinate and so provide misinformation, and just tell plain falsehoods. But the AI like LLMs haven’t taken LSD – they are just identifying and weighing erroneous data supplied. The problem is that they learn – like a child learns – from their experience of the world. LLMs and reinforcement learning AI are a kind of modern-day Pinocchio being led astray by each experience within each element of language or photo they experience.  

Pinocchio can probably pass the Turing Test  that famously asks “can a machine pass off as a human”.

The problem with the turning test is that it accepts a fake human – it does not demand humanity or human level responses. In response Philosopher John Searle’s “Chinese Room Argument” from 1980 argues something different– Imagine yourself in a room alone following a computer programme for responding to Chinese characters slipped under the door. You know nothing of Chinese and yet by following the program for manipulating the symbols and numerals you send appropriate strings of Chinese characters out under the door and this leads the outside to mistakenly assume you speak Chinese. Your only experience of Chinese are the symbols you receive – is that enough?

Our Pinocchios are just machines locked inside the room of silicon they inhabit. They can only speak Chinese by following rules from the programme they got – in our case the experience of Pinocchios neural network to data it was fed in training.

For an LLM or any ML solution … their “programme” is based on the rules embedded in the data they have ingested, compared, quantified and explored within their networks and pathways. LLM Pinocchio is built from documents gleaned from the internet. This is impressive because “Language is not just words, but “a representation of the underlying complexity” of the world, observes Percy Liang, a professor at Stanford University – except where it isn’t I would argue.

Take the word “Love” or “Pain”– what does it actually mean? No matter how much you read only a human can experience these emotions. Can anything other than a human truly understand pain? 

Or another way, as Wittgenstein argued, can a human know what it is to be a lion – and could a lion ever explain that to a human? Can our Pinocchio’s ever know what it is to be a human?

But worse – how can a non-lion ever know truly whether it has managed to simulate being a lion? How can the LLM police itself since it is has never experienced our reality, our lives, our culture, our way of being?  It will never be able to know whether it is tripping on an LSD false-world or the real-expressed and experienced world.

If you don’t believe in the partiality of written and recorded data then think of the following example (sorry about this) visiting the restroom…. We all do it but our LLM Pinocchio will never really know that …. Nobody ever does that in books, on tv, in movies, (except in comedy ), and very seldom in written documents except medical textbooks… yet we all experience it, we all know about it as an experience but no LLM will have anything to say on that – except from a medical perspective.  

This is sometimes called the frame problem. And it is easy to reveal how much context is involved in language (But less so in other forms of data which also has similar problems).

Take another example – imagine a man and a women. The man says “I am leaving you!” – The women asks “Who is she?”  You instinctively know what happened, what it means, where it fits in social convention. LLMs can answer questions within the scope of human imagining and human writing – not in their own logic or understanding. My 1 year old experiences the world and lives within it (including lots of deficating) … an LLM does not.

Pinocchios can learn from high quality quantified and clear data (e.g. playing Go or Atari Video Games) or poor quality data (e.g. most data in the real world or business and enterprise). Real world data, like real-world language, is always culturally situated. Choices are made on what to keep, sensors are designed to capture what we believe and record.  For example, in the seventeen centuries UK death record (around the time of plague) you could die of excessive drinking, fainting in the bath, Flox, being Found dead in street, Grief, HeadAche…

So now we need to think about what world the LLM or AI does live in… and so we turn back to Spiderman … or  rather back to the spiders web of connections in the crazy multi-verse universe it talks about.

LLMs and many other generative AI learn from a spiders web of data.

At the moment, most people talk about AI and LLMs as a “product” – a thing – with we interact with. We need to avoid this firm/product centric position (Pujadas et al 2023) and instead think of webs of services within an increasingly complex API-AI Economy.

In reality, LLMs, ML etc are a service – with an input (the training data and stream of questions) and an output (answers). This is perfectly amenable to integration into the digital infrastructure of cloud-based services which underpin our modern economy. This is where my team’s research is leading.

We talk about Cloud Service Integration as the modern day enterprise development approach in which these Pinocchios are weaved and configured to provide business service through ever more Application Programming Interface connected services. We have seen an explosion of this type of cloud service integration in the last decade as cloud computing has reduced the latency of API calls such that multiple requests can occur within a normal transaction (e.g. opening a webpage can involve a multitude of API calls to a multitude of different services companies who themselves call upon multiple APIs). The spiders web of connected AI-enabled services taking inputs, undertaking complex processing, and providing outputs. Each service though has training data from the past experiences of that services (which may or may not be limited or problematic data) and driving the nature of the next.   

So, to end, my worry is not that a rogue AI trips out on LSD… rather than we build an API-AI economy in which it is simply impossible to identify hallucinations, bias, unethical practices within potentially thousands of different Pinocchio’s within the spidersweb of connected interlinked services that forms such algorithmic infrastructure.

Thank you.

© Will Venters, 2023.


[1] Statement on AI Risk | CAIS (safe.ai)

[2] Pujadas, Valderrama and Venters (2023) Forthcoming presentation at the Academy of Management Conference, Boston, USA.

Spiderman image (cc): https://commons.wikimedia.org/wiki/File:Spiderman.JPG by bortescristian used with thanks.

Wardley Mapping and building situational awareness in the age of service ecosystems.

How do executives make sense of their complex digital ecosystem of cloud services? How do they gain situational awareness? One method gaining increasing popularity in a large number of organisations is Simon Wardley’s “Wardley Mapping” technique. With Simon, and with Roser Pujadas and Mark Thompson, we have been developing and researching of how and why this technique is used. The following paper, to be presented in June at ECIS Stockholm[1], outlines the basics of the technique and our early findings.

Pujadas, R, Thompson, M., Venters, W., Wardley, S. (2019) Building situational awareness in the age of service ecosystems. 27th European Conference on Information Systems, Stockholm & Uppsala, June 2019. 

Paper Abstract:

We discuss the little-explored construct of situational awareness, which will arguably become increasingly important for strategic decision-making in the age of distributed service ecosystems, digital infrastructures, and microservices. Guided by a design science approach, we introduce a mapping artefact with the ability to enhance situational awareness within, and across, horizontal value chains, and evaluate its application in the field amongst both IS practitioners and IS researchers. We make suggestions for further research into both construct and artefact, and provide insights on their use in practice.

Keywords: Situational awareness, Distributed systems, Design Science, Strategy, Digital Ecosystems, Digital Infrastructure, modularity, servitization.

[1] ECIS, the European Conference on Information Systems, is the meeting platform for European and international researchers in the field of Information Systems. This 27th edition will take place in Sweden. We will present our paper in the “Rethinking IS Strategy and Governance in the Digital Age” research track.

For more on Simon’s Wardley Mapping see: https://en.wikipedia.org/wiki/Wardley_map or https://www.wardleymaps.com/