When we think of innovation, we generally think of high-tech industries. But innovation is just a possible in what we often refer to as “basic” industries. Here is a case in point from the steel mill/ship building example. It comes from a story in the Economist (Steely logic) about the possible take over in Korea of Daewoo Shipbuilding & Marine Engineering (DSME) by the steel company POSCO. POSCO is the world’s fourth-largest steelmaker and DSME is the world’s third-biggest shipbuilder. Part of this is backwards and forwards integration. POSCO is also looking to buy iron and coal mines.
But this is more than one large heavy industry buying upstream manufacturing. It is also premised on taking advantage of the ability to create innovation from the combination. As the story mentions:
“In building a ship, the less you weld the less you spend,” says Lee Ku-taek, POSCO’s chief executive. “If we can tailor our ship plates to a specific ship, then costs can be saved.”
Changing the nature of ship building with customized plates looks like a great innovation to me.