The news story: Last March, US Steel announced that it was planning to construct a $230 million electric arc furnace (minimill technology) at its steelmaking facility in Birmingham, Ala.
Nine months later, US Steel announced that it had postponed these plans “due to continued challenging market conditions in both the oil and gas and steel industries.”
Clay’s thoughts on the news:
A little background for those wondering why this professor is so interested in the steel industry: One of the first case studies in Clay’s course Building and Sustaining a Successful Enterprise at the Harvard Business School is about the decision an executive at US Steel in 1990 faces on whether to incorporate minimill technology into its steelmaking process. Spoiler alert: the executive passes on the opportunity and instead invests $600 million to upgrade an integrated mill facility.
This dilemma is also used to teach disruption theory in Clay’s first book published in 1997, The Innovator’s Dilemma. It has since become a classic example of low-end disruption, often cited to describe the phenomena.
Questions for you: So what do you think? How would you advise US Steel? What metrics or theories do you use to guide your decisions to invest in building new capabilities? Have you ever made a decision that allowed you to take the proverbial leap into minimill technology — one that this company with a $1B+ market cap cannot?
— written by Tracy Kim Horn, Community Manager, Forum for Growth & Innovation