The not-so-secret strategy behind Walgreens’ ecosystem advantage

Disclosure: Walgreens is a customer of my employer, Apigee.

Sometimes, strategic advantage relies on concealment. The formula for Coca-Cola, for example, is a famously well-kept secret.

In other cases, a company’s secret advantage is as plain as day, and their success is premised on focused execution (as well as, perhaps, competitors hesitating to pick up the gauntlet and raise their game to the same level).

Consider Amazon’s emphasis on its third-party retail marketplace — a not-so-concealed strategy. In his 2014 shareholder letter, Amazon CEO Jeff Bezos made no bones about the scope and scale of the company’s third-party marketplace and the importance of the positive network effects it generates (the “Amazon flywheel,” as he calls them) to the company’s overall strategy.

Fast forward to 2016. Traditional retail giant Walmart now has a third-party marketplace of its own. Touting more than 20 million items (and even making the CEO’s latest earnings call highlight reel), the brick-and-mortar juggernaut’s third-party marketplace is certainly making progress — but it still pales in comparison to Amazon’s 365 million.

For businesses with roots in brick and mortar, the Amazon versus Walmart story should serve as a cautionary tale. The lesson is simple: when it comes to digital, playing catch-up is often a lost cause. The key to digital isn’t replicating what your competitors are doing — it’s expanding into new lines of digital business by leveraging digital assets in unique and innovative ways.

Those looking for inspiration should consider looking to Walgreens as a company to study alongside Amazon for tips on turning digital into a strategic advantage.

Like me, you may already have a sense of the Walgreens physical-world strategy from simply walking around your neighborhood or visiting different cities: the company’s stores are located within 5 minutes of a staggering 76 percent of the U.S. population. Walgreens’ digital strategy complements it well: my favorite pithy (but accurate) articulation highlighting a key component of their digital strategy is “putting an API around the stores.”

They have a clear vision for making digital and physical experiences “better together.” But the beauty of Walgreens as a case study is that the “secret sauce” to their success isn’t Silicon Valley voodoo or the stuff of science fiction. It comes from focused execution that is within the reach of any enterprise.

I wanted to understand Walgreens’ approach in greater detail, so I spoke with Drew Schweinfurth, developer evangelist at Walgreens and one of the key people behind the company’s successful and growing developer ecosystem — now well into the hundreds.

Drew spends many of his days having conversations with different lines of Walgreens business to identify high-impact products to take to market. However, in this case the products are digital services and the market being served consists of potential consumers of the APIs with which they’re implemented.

What struck me about Drew is that he’s not a geek — he’s a brilliant, good-old-fashioned product manager (although, to be sure, he does have some serious “geek cred”). Now, while being a geek may help a great deal when it comes to attracting developers, for Drew, it’s all about finding the sweet spot across value to the business, feasibility and marketability — classic product management.

Finding these digital sweet spots isn’t an exact science for Drew — not all bets have paid off big — but the trajectory is impressive. It’s also all out in the open on the Walgreens developer blog.

Consider the Heart Partner app from Novartis, which helps heart failure patients coordinate care and monitor vital signs, medication compliance, and activity — with the added incentive and reward of loyalty points from Walgreens’ loyalty program, of course, thanks to the Balance Rewards API.

Novartis is one of 50 fitness and health partners tapping this API. Similarly, more than 100 partners are printing photos in Walgreens stores via the Photo Prints API.

So where did this supply of digital services come from? Did Walgreens have to hire hundreds or thousands of developer evangelists to roam the halls of its corporate offices, infusing thousands of employees with Silicon Valley mojo? Nope.

To the contrary, filling the pipeline took only a strong will and few words. Walgreens leadership told every technology team at the company to build for “web scale” — that is, to build the internal services they felt were needed, and to build them to scale across an external ecosystem.

The internal teams were not required to know anything about developer evangelism or digital service product management. They simply needed direction to build digital products with the potential for externalization — which, in our cloud- and microservices-centric world, is simply good practice anyway!

As Drew describes it, “Our team is the toaster. We ask other teams to give us bread, and then we make toast. We just need the power supply to keep delivering.”

Walgreens’ success highlights the path every leadership team can follow to achieve focused digital execution:

• Every enterprise knows how to set standards
• Every enterprise knows how to do product management
• Every enterprise has the wherewithal to hire a few strategically placed and empowered geeks

It follows from these three premises that most enterprises have the power to use APIs that deliver digital services that move the needle on revenue and brand equity — which means that winning scores of third-party partners ought to be within their grasps too. 

Unless, that is, there’s a barrier concealed within the organization: something like a hidden strategic disadvantage. If that’s the case, now might be a good time to identify it, root it out, and raise your digital ecosystem game.