Tuesday, October 19, 2010

How Disruptive Innovations Can Upset Monopolies

Monopolies give me heartburn, and what warms my heart is the prospect of monopolies being overthrown.

Two Australian examples of the latter were in the news recently.

Monopolist Telstra is feeling the heat from mobile phones. The exodus of customers giving up their fixed lines is turning into a stampede. In a few years, landlines will seem an anachronism. Apparently, there is higher demand for speed and data that is "difficult to monetise". Translation: It's impossible to charge monopoly rents on commodities. Hasta la vista, Telstra.

Australia Post is being squeezed by email. It's amazing that a 4.2 percent fall in postal volume can result in a 65 percent fall in profit. Of course, there were other costs as well, but this is dramatic. With more and more communications going electronic, it's hard to see how Australia Post is going to stay relevant. There'll be electronic media, and there'll be courier services, with nothing left over for the postal monopoly. We live in a post-post world.

A trans-Pacific terror

The takeaway for me is that monopolies may stifle innovation up to a point, but a wave of innovation of a higher order will eventually overthrow them.

My cup of joy runneth over.

1 comment:

sudha said...

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