You know you do not have a sales problem when you are a monopoly, selling an indispensable product and you still make losses. You also do not have a sales problem when you go into business for which you lack the systems, structures and worse, culture for.
This is what I learnt from the Business Daily when it reported that, “Kenya Power #ticker:KPLC will commercialise its garage and lease out idle land in an attempt to shore up its revenues in the wake of dimming profitability,” Bernard Ngugi, Managing Director, Kenya Power.
“The diversification strategy comes at a time Kenya Power’s net profit for six months to December 2019 fell 71.8 per cent to Sh693 million, marking third straight year of dimming performance. This was on the back of a 92 per cent plunge in net profit to Sh262 million in the financial year ended June 2019, with rising non-fuel costs being the key reason for the performance. ‘
I was reminded of Postal Corporation of Kenya, (Posta) which four years ago said they would diversify into public transport with PostBus.
This is how the then CEO Enock Kinara put it: "We are starting a Postliner Bus Service that will help improve our mail circulation quality and, in addition, we shall be able to (sic) get funded to do that by the passenger."
Sounds similar to Kenya Power quest to diversify ? At least Posta could blame its financial woes on disruption with its alternatives (email, social media, texting), and increasing stiff competition (from private courier services, for instances).
What can Kenya Power, a monopoly selling indispensable services, possibly blame their losses on? Non-fuel costs? Maybe. Certainly not sales. Three years ago, I wrote here that PostBus is a bad idea. “Venturing into public transport is not as simple as acquiring a bus or two. If it was, then the graveyard of ‘bus transport companies’ in Kenya, whose core business public transport is, wouldn't be thriving. And, no, it's not just another step from offering courier services. In fact, unchecked, diversification can kill the core business. Diversifying in this manner means taking time to create supporting systems, structures and culture. It means exposing struggling Posta to the vagaries (chaos?) of public transport in Kenya. Posta will be a fish out of water. Posta should evolve, not diversify” Mercifully, Posta did not pursue the idea. Diversification is risky. The typical lethargy of a parastatal compounds that risk. This applies to Posta much as it does, Kenya Power.
WILL DIVERSIFICATION SOLVE KENYA POWER’S FINANCIAL WOES? Personally, I think not. It doesn’t help either that as the article continues to say the plan is scant of expected potential. The plans to outsource its garage and lease out idle land were given by Mr Ngugi “without giving their estimated monetary potential.’
I don’t think Kenya Power has a sales problem. They just need a competitor. What do you think?