The network effect is so unbelievably powerful.
In case you haven’t heard of this theory before, let me quickly explain. In my simple words, the network effect describes the value an additional user of goods/service brings to other users (check Wikipedia for detailed description).
Although there are different types of network effects, the telephone is probably the most prominent example. The value of a phone can be defined by the number of people that are connected to the phone network — or, in other words, the number of potential connections.
Let’s make a quick trip back in time when the telephone was invented.
Well, the first two people who owned a phone didn’t enjoy the network effect since there was precisely one person they can call. With the third person, the number of possible connections increased to three. Still not amazing.
Let’s take a few steps forward: Once ten people owned a phone, the number of possible connections rapidly jumped to 45. Not bad! But things get better. Once we reach 100 phone owners, the number of possible connections explodes to 4,950. With 1,500 owners, the number of possible connections already exceeds 1 Million.
Here’s a table providing a more detailed and structured overview on the numbers:
|No. of Users||Possible Connections|
If you want to do the math on your own here’s the formula:
N*(N-1) / 2 (whre N is number of users)
But why am I telling you all this and how is it connected to eFueling?
After my recent posts about eFueling (digital fueling process), many discussions with people from airlines all over the globe evolved.
In case you’ve missed them and quickly want to catch up with topic here are the three most essential posts to read:
- Why I’m so pumped about eFueling and push airlines to go all-in.
- Why a digital fueling process saves your airline real money (and how)
- eFueling — 4 Success Story your airline can achieve immediately
Many talks revolved around technical aspects, how to implement a digital fueling process or IT requirements. On the other side and quite often, we also discussed the related benefits for an airline.
eFueling isn’t an “internal” but a network topic
It was exactly in those discussions when I realized that many airlines consider the topic still as an “airline-internal topic.”
What does that mean?
Primarily, the airlines discussed and thought about how to implement a digital fueling process at their main hub(s). Based on that, they made up their mind, which benefits they can achieve by doing so.
Don’t get me wrong. Of course, airlines achieve the most significant effects at their main hub.
But! Coming back to my initial phone example: Although having the possibility to give one person a call brings a benefit (especially if that is an important person to you) — the benefit grows with the number of connected persons.
Let’s make it tangible and translate it to our eFueling solution
Together with seven clients, we’ve already connected 45 airports to our eFueling solution. In fact, that didn’t happen overnight and was only possible due to our fantastic clients.
Accordingly, that means if an additional airline starts with eFueling and connects its main base (in case it isn’t eFueling ready), the airline can also directly use eFueling at 45 other airports. On the other hand, all of the existing clients can now use eFueling at one more station.
So, with one new airline (resp. connected airport) the number of potential connections grew by 53! (45 existing for the new airline + the new connected airport for the new airline and the seven existing airlines = 45 + 1 +7 = 53)
Indeed, due to the supply/demand setup, the network effect is slightly different and less significant compared to the phone example.
Nevertheless, due to the high amount of already connected airports, additional airlines already enter a considerable network. On the other side, one additional connected airport brings enormous value to many existing, already connected airlines. And this “double-sided” effect significantly grows with every new airline and subsequently connected airport.
The network effect provides value to existing and new eFueling airlines
From my point-of-view, the existing network of eFueling-ready airports provides an enormous, additional potential to airlines that are currently considering to implement a digital fueling process.
Compared to the direct benefits, which can be realized at their main hub, this network effect is most often grossly underrated. Therefore, airlines should definitely take into account this massive additional benefit.