Eskom the shrinking monopoly business’ – THINK ABOUT SIMILAR CASE STUDY OUTCOMES

Headlines this week show that local South African businesses are fed up with ESKOM.

We economist saw what happens in such scenarios twice before. To me as now an older guy, it first occurred when the PENN Central Railroad and 6 other USA eastern railways were declared to be so poorly performing as to be ruled unreorganizable under then prevalent bankruptcy laws… …and before the struggling freight rail could be reborn — truck market share zoomed from under 50% to more than 80% in many market lanes.

The WOW AFFECT was that rail lost all sense of former assumed monopoly position to the trucks and never really recovered in the high value business segments.

A current (2015) Bookings Report confirms that while rail is still important on long distance urban area to urban area fright moves… — the truck is really KING.

Rail freight is NOT COMPETITIVE in many urban to urban US markets and lanes anymore.

Where rail freight was reborn, it was structurally and service wise extremely different and much smaller. Literally, millions of rail jobs disappeared and hundreds of thousands of kilometers track were abandoned.

Although today profitable in North America, it is nowhere near the former market share leader in freight.

The second WOW case is the global example of how many of the incompetent telephone monopolies in the space of about one generation were displaced by the cellular phone business. Once the King Rex of phone conversations, the land wired phone utilities became the dying dinosaur.  The rapidly innovating highly service delivery new entrant mobile phone companies came in and within a decade or two killed off much of the land line dinosar’s market share.

Now come electric utilities like ESKOM.  The former electricity Kings of the Hill in marketing terms because the politicians said so with the monopoly law… … Now across South Africa being replaced as fast as possible by the customers who can pay for any solution in the present crisis.

Some customers are adapting via a non regulated “switching” to solar and or to alternate diesel or natural gas generators. Here the scenario is that the base load clients give up hope by voting with their wallets for an alternate supplier… They do so because they can afford to.

In fact, many are so commercially desperate that “they must switch”.

This electricity resourcing change in ways pretty much looks like the rail versus truck and land line versus cell phone case history all over again. If true, the ESKOM story could quickly become a classic Harvard Business School curriculum course.

We can argue that if ESKOM takes another four to five years to find a working rescue plan, they may see by that time a loss of highly prized base load business customers. If they lose a core of the customers most able to buy power to enable repayment of future ESKOM debt, how will that play out politically?

What might it mean for coal to central power station mines and railway links as perhaps a fifth to nearly a third of the former coal core energy sales disappear?

Thinking out of the box like this brings up WOW changes that could ripple though the nation’s economy. It is not inevitable.  But it is possible.

For more on how business leaders are thinking, log onto: http://www.timeslive.co.za/thetimes/2015/06/18/Eskom-strangling-business

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