Disruptive Innovation

Continuous Casting Investments at USX Corporation is a case involving a large, established mining and steelmaking company that after almost 80 years of existence is deciding whether to go forward with a $600 million dollar investment to upgrade its Mon Valley steel facility. From its founding in 1901 through the 1970’s the company dominated the steel industry. In the 1980’s USX was hit hard by poor economic conditions and higher manufacturing costs. In addition, “minimills” which had previously not been a competitive factor for USX, obtained cost advantages and began competing heavily with integrated mills such as USX. USX responded by closing or selling eight of inefficient facilities and restructuring its remaining manufacturing facilities to focus on hot-and-cold rolled sheet, strip and tin products rather than a larger range of products which it had done in the past. Additionally, USX invested over $2 billion to improve its processes to become one of the, if not the, most efficient steel manufacturer in the world by improving labor efficiency from 11 man hours per ton (mhpt) to just 3 mhpt. As described above, in the 1980’s USX made many large investments to improve its efficiency and remain competitive in the market and a market leader, primarily as a low cost producer of high quality sheet and strip steel. For example, it invested $800 million and $200 million at two facilities, respectively, in the early 1980’s to launch continuous slab caster and hot-rolling mills. Nonetheless, the Company was in a mature market and competition was increasing. Although USX was an unquestionable market leader for 80 years, like so many well established companies, by the 1980’s and early 1990’s would need to further increase innovation if it was to be in the 10% of companies that would continue to grow consistently over the next 10 years. USX would soon find itself in a position to

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potentially adopt a new technology (rather than the traditional continuous