Now more than ever mining and metals companies need to innovate in light of some key recent developments: new remote work practices, the drive to decarbonize, and the current high commodity prices.
Steven Walsh, Mining & Metals Leader, Deloitte Australia
Roland Labuhn, Partner, Consulting, Deloitte Canada
The topic of innovation is no stranger to Tracking the Trends. It’s long been on mining companies’ agendas, but, for most, integrating the process of innovation with core business functions and operations has proven tricky. Fundamentally, this is because, rather than being structured to embrace change and benefit from it, traditional mining companies and processes are designed for stability.
So, why raise it now? A number of factors have recently converged, driving executives to embrace innovation and align their organizations behind it:
1. COVID-19 forced the world to embrace digital and remote work practices, changing the world of business for good.
2. Mining companies will need to innovate within their core processes if they are to decarbonize in line with their goals.
3. It’s much easier to fund innovation while commodity prices are high and the industry is benefiting from the supercycle.
Digital transformationꟷor the shift from mainly separated physical systems and technologies to integrated virtual, data-driven onesꟷoffers huge opportunities in every instance. It provides a means to leverage data for enhanced decision-making, quickly simulate changes to the value chain, and analyze the impact of new technologies and designs in advance of implementation, among many other benefits. It will also open the doors to a new generation of fresh, diverse talent with the vision and cultural expectations required of more agile mining and metals organizations.
Over the years in Tracking the trends we have spoken about putting in place innovation-capability systems, operating in ecosystems, moving toward integrated operations, and addressing different organizational barriers to innovation. We still believe the time is ripe for change, and this year we focus on some of the areas where we continue to see organizations struggle.
Challenging the status quo
It takes visionary leadership, right from the top, to create an organization that’s able to question industry-standard processes, test different ideas, and implement new ones without fear of failure.
Mining project delivery is one area that could benefit significantly from innovation, yet the status quo remains unchanged, cost overruns on construction projects in the energy and resource sector, including mining, typically exceed 30%.1
Steven WalshꟷMining & Metals Leader, Deloitte Australia, says, “Traditionally, in project delivery, we see designs that were originally created 50 years ago, or more, that have been progressively updated, rather than starting from first principles and innovating. Part of the problem is that, in traditional mining projects, after first ideation and the vision setting phase of a project, almost every process after that is designed to eliminate risk and therefore also eliminates innovation.”
Progressive leadership combined with realistic target setting, use of different models, and better communication between teams offers the opportunity for mining projects to be more efficient and less capital intensive. To achieve this, traditional approval and delivery processes must be challenged and refreshed.
Innovation in action
OZ Minerals’ Think & Act Differently, (TAD) virtual incubator is focused on unlocking opportunities to shape a vision of the mine of the future. Over the last year, they have supported innovators from around the world to propose and pursue short experiments that are providing the industry with some early knowledge, around future trends.
The focus of TAD has been on five themes; clean products, energy and emissions, data and technology, scalable and adaptable mining and waste and water. In 2021, TAD ran crowd challenges against each theme to obtain new and divergent thinking.
OZ Minerals’ General Manager Transformation, Katie Hulmes, explained, ‘what’s clear is that even in areas or subjects we thought we knew a lot aboutꟷwe’re finding many people we were not aware of who are working on potentially breakthrough technologies. They might also have a different way of looking at a problem we have been trying to solve. The team is excited about continuing to work with innovators to complete their challenges and consolidate learnings to understand our gaps and opportunities’.
Learning from other industries
There are other asset-intensive industries, particularly those with complex logistics chains, that can offer learnings and inspiration around innovation for mining. For instance, transport and logistics operators often have lower margins than those seen in mining, and have used this as motivation to adopt new innovations that offer greater efficiencies.
There is also much that could be learned from the agile ways of working employed in the technology and financial services industries. For example, in a financial services organization, the last step in an innovation project will often be to deploy software or a new rule or policy, something that can be done at the touch of a button, whereas in mining, a physical piece of equipment usually needs to be installed.
The innovation emphasis in mining therefore tends to be skewed toward equipment or technologies, and these projects take time. But it’s worth remembering that this is only one piece of the puzzle; efficiencies and opportunities can be achieved more rapidly through innovative processes, policies or systems. Again, this emphasizes the need for a holistic approach to innovation initiatives.
Creating a culture of innovation
In an industry that measures its success through delivering to targets, trying something different that might temporarily lower production can be frowned upon. But planning in an acceptable level of risk is key to testing and deploying new solutions. Companies that are good at innovating will have a wide risk tolerance, and will allow for production fluctuations when testing an idea that could prove valuable.
Much of this relates to culture and how success is measured, not just at the company level but also at the industry level. Unlike in safety, where risk of any kind is unacceptable and, therefore, controls are added and very rarely removed, in mining innovation, there are two types of risk: risk of failure and risk of success, and both are equally valuable.
Because mining companies are more familiar with risk around safety and the industry’s measures of success is geared towards higher production, there is a reticence to remove controls that hinder innovation in case something ‘goes wrong.’
Roland LabuhnꟷPartner, Consulting, Deloitte Canada says: “In some ways, this culture is now holding us back, because we can design and develop new innovations, and model them with technology, but at some point they need to be tested in operations. Companies that can plan for minor interruptions and incentivize their teams to both achieve production targets and successfully innovate, will realize greater opportunities to learn and improve ahead of their peers.”
Problem-solving around things that occur today should be automatic, and planned well in advance. To really move the dial in innovation and become truly agile, companies should be focusing on solving problems that are three months away or more.
Workforce evolution will also serve to accelerate innovation culture in mining. Companies are already seeing workers come through who are frustrated by the willingness of current generations to adopt new ideas. This will only accelerate as zoomers move through the ranks. Greater innovation will, in turn, increase workforce diversity and boost retention through job satisfaction.
Walsh adds: I’m a passionate believer that differences in thinking and background are critical to innovation, and anything we can do to make mining more attractive and inclusive to a broad range of people will result in more innovative ideas. In any conversation about innovation, we should be looking around the room and challenging ourselves on how diverse the thinking really is.”
Making innovation a core part of mining businesses
1. “Between a rock and a hard place: Addressing distress in the mining industry,” Deloitte https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/energy-resources/ca-en-energy-and-resources-between-a-rock-and-a-hard-place.pdf, accessed 2 December 2021.