Besides these and among others basic innovations not men- tioned in this paper, there are many other possibilities for piecemeal innovations which could improve the steel industry's productivity and the quality of its outputs. Many firms were or are still trying to follow this way in the steel crisis.
As to the results of the innovation strategy in the last years of the steel crisis, we have a differentiated picture.
Krupp and Mannesmann in the Federal Republic of Germany were
successful and showed the possibilities of such innovation manage- ment even in crisis situations.
On the other hand, some firms had enormous difficulties in realizing innovation strategies. VUEST did not have very good
experience with diversifications of an innovation character (AMI- electronic project, etc.).
The reasons why innovation strategies fail are obvious. The simultaneous management of crisis and innovation is of tremendous complexity and demands a great deal from the management of the firms. The problems of motivations, organization, corporate iden- tity, etc., in crisis situations could have a negative influence on innovative efforts.
A careful study of the factors influencing the successful realization of innovation strategies could give useful orienta- tion to innovation management. Nonetheless, there is a great need for new effective tools which make a better orientation in innovation decisions possible.
9 . THE CONCEPT OF THE INTEGRATED LIFE CYCLE MODEL AS A TOOL IN MAN- AGEMENT OF INNOVATIONS
Among the instruments of the strategic planning and manage- ment, the concept of the Integrated Life Cycle (ILC) seems to have a broader time horizon and therefore some advantages which could be utilized in the planning and realization of innovations in the steel and other industries. Besides the traditional market life cycle, ILC includes also the phases invention, innovation, and --important for senescent industries
--
the reorientation (or liquidation) phase. Figure 3 shows the concept of ILC.20With the help of the ILC concept, the future state of the firm could be simulated earlier than by the methods used now, putting management in a position to meet the coming crisis with sufficient time reserves. This means that the firm could start with the innovation or other strategies earlier; management could act, not only react.
In the ILC concept, the phases of invention, innovation, and reorientation are even more important than the traditional market cycle because of the possibilities of influence from the manage- ment side.
The limitations of the traditional Product/Market Portfolio can be easily overcome. Special software packages for computing the Technology Portfolio are already available.21
One of the greatest advantages of the ILC is the opportunity to structure the demands for information. With the concept of early warning systems, weak signals, and data bases, and with special software, the problem of information can be better managed than in the traditional way.
The IIASA Step1 Data B a s e to~e+,h-r l'ith the Event Fi l e s represent valuable information with which the ILC pattern could be analyzed and reconstructed for the relevant steel technology.
It would be the task of future research to fill the various gaps in data and software and to develop the ILC to an appropriate management tool.
Modern innovation management cannot be effective without the instruments of risk analysis and risk management. An extension of the data base with some software for risk analysis and risk man- agement could improve the results of the efforts. Besides the present files in the data base, an additional risk file could be initiated for the main risk events including product, currency rate, market, foreign country and other risks which had a major influence on the present steel crisis. Klockner already uses some elements of risk management with relatively good results. The in- stallation of a decision support system for risk analysis in
strategic planning could help to implement a functioning risk management in the steel industry.22
10. CONCLUSIONS
An empirical analysis of the published accounting data of firms in the West German steel and other industries and interviews with managers show that the classical risk return hypothesis is in most cases a false assumption. Also the announced innovation pro- jects in general confirm the risk return paradox in the steel industry.
Innovation under the conditions of the risk return paradox presents an additional complexity to management which could en- danger the existence of the firm. New planning tools extending the time horizon and simulating the coming threats and dangers help to avoid the possible negative consequences of the innovation strategy in crisis situations.
The ILC concept which has already been used to overcome the various shortcomings of the traditional product/market portfolio seems to be a suitable planning and management tool for preparing innovation decision in the steel industry. The present IIASA data base
-
completed with further events and data sheets with proper software packages-
could be developed into a type of decision support system in the context of ILC, making it possible to over- come the risk return paradox in the steel industry.REFERENCES
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Pfeiffer, W. and Dogl, R. (1986) "Das Technologie-Port- folio-Konzept zur Beherrechung der Schnittstelle, Technik und Unternehmensstrategie," in Hahn, D. and Taylor, B. ( H r s g . ) , Strategische Unternehmensplanung, Heidelberg, Wien, p. 149- 177.
CTM-PLANOS-SP. (1985) Program description of the firm C T N , Computertechnik Muller GmbH, Konstanz.
Acs, Janos. (1985) " A Comparison of Models for Strategic Planning, Risk Analysis and Risk Management," Theor.1- and Decision, 19, p. 205-248.
Branch : Iron and Steel
Number : 2 0
Space in Time: 1960- 1982
$
Rate of ReturnSignificance: 0.4
#
Rate of Return$
Rate of Returns R
L
0 0
Significance: 0.4 Significance: 0 . 4
Significance: 0.4
r i
!
e ,n:!
Significance:
-
FIGURE 1 : Risk/Return Correlations i n t h e
Steel Industry of t h e GFR
Risk Willing- ness
(=
Choosing the Risky AlternativeSituation of Crisis
the Firm Change
A
I4
I
UNSPCCESSFUL
I
Surmounting the Crisis, Short -run
I
SUCCESSFUL
L - - - *
Technique
"Normality"
1
Returns1
Risk Aversion
(=
Choosing t h eNon- Ris ky Alternative
No Innovation (Esp. No Product
innovation)
Crisis