There seem to be two conflicting arguments here. On the one hand, people are saying that the industry is too fragmented, with no single organisation able to coordinate things properly. On the other hand, people are saying that a big problem is that the DfT controls and micromanages everything. If so, that would imply that the DfT is the 'single controlling mind'.
Both problems can't simultaneously be true, can they?
The issue is that the Department for Transport is confused about its role.
It is, or should be, the Department for Transport
not the Department for Railways. Its job is to look at the strategic, demographic and business needs of the country and influence the creation of a transport system which serves those needs.
Thus, it should be looking at the strategy for shipping, harbours and surface access to these harbours; it should be looking at a strategy for internal and international air traffic; it should be looking at the trunk road system and also the shape and structure of the railway network so both road and rail meet present and foreseeable future demands. It can also target transport infrastructure spending as a tool to support wider social and economic development of the regions..
So - what it should be doing is supporting programmes such as East - West Rail and similar proposals insofar as they make sense in the wider scheme of things.
What it should
not be doing is getting involved with operational details such as the Thameslink timetable, specifying the Thameslink and IEP trains or getting into detail about the number of seats to be offered between A and B.
How the railways are organised in the layer beneath the DfT does not really matter. Left to themselves the TOCs and Network Rail - or its successor organisation(s) - have the knowledge and experience to interpret and implement the DfT's general guidance. Left to themselves people will organise themselves to achieve the results required.
(Added in Edit...)
As seen from the point of view of the DfT, it has very little influence in areas such as harbour developments and air routes as these are almost entirely within the private sector or operate according to international regulations. Apart from Heathrow's third runway not much else is happening in the airport business - and anyway they are mostly in private hands which limits the DfT's involvement. There is little significant activity in the road trunk routes sector as all the main motorway routes have been built - most of the work is in widening existing roads which is important but not cutting edge stuff in the great scheme of things.
So, considering that one of the main concerns of any organisation is its own survival what can the DfT do? These other activities will not employ a large number of people, but everybody knows how to run a railway...
The issue with the DfT now is that, as a result of taking over the Office for Rail Passenger Franchising (OPRAF) and its successor, the Strategic Rail Authority (SRA) franchising functions it now does things which are fundamentally unsuited for a Government department. It has been incompetent in managing the franchises - it has managed to financially weaken (Stagecoach, First and Virgin) or drive out (National Express) the remaining UK-based TOCs leaving only the foreign railways in play. A considerable achievement. It's subsidiary, Network Rail, at least since September 2014, has been plagued with cost and schedule overruns which to large extent can be traced back to poor project definition and governance on the part of DfT.
Grayling's greatest memorial would be that he gets the DfT out of any operational involvement with the railways and returns it to strategic level transport considerations. 'Strategy' is what one expects Governments to be good at...
The DfT would certain shrink in size - but some of its functions would be taken over by a son-of-OPRAF - but it would concentrate on the wider transport issues and get away from being a Ministry of Roads and Rails.