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4 key considerations for mining companies to improve innovation


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While the mining industry has lagged some process industries such as refining and petrochemicals in terms of operations management, supply chain management and even, the movement towards integrating innovative solutions to the mining operations is clearly happening in many of the best and more progressive mining companies. This paper proposes four key considerations for mining companies in their efforts for improved innovation and value addition.

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4 key considerations for mining companies to improve innovation

  1. 1. 1 Innovation in the Mining Industry Russ Barr, Consulting Director for the Mining Sector at Schneider Electric Bob Cook, Director Industry Consultant for the Mining Industry at Schneider Electric Abstract While the mining industry has lagged some process industries such as refining and petrochemicals in terms of operations management, supply chain management and even, the movement towards integrating innovative solutions to the mining operations is clearly happening in many of the best and more progressive mining companies. This paper proposes four key considerations for mining companies in their efforts for improved innovation and value addition. Introduction The mining industry is generally known as an “extractive” industry that is very physically-oriented with respect to operations and the activities in which workers engage. Large numbers of people performing manual tasks in difficult surroundings produced very variable output. But, times are changing – and so are industry best practices. While the nature of work still consists of activities such as ore extraction, ore movement, ore concentration, refinement and logistics, innovations are starting to change the nature of many of the production steps. The industry has transitioned from requiring more physical activities by workers, to more information management, automated control and collaboration within the operation. Humans are good at situational intervention and non- linear reasoning and do best when empowered with an overall production perspective. Machines and automation are good at repetitive functions, steady state operation, and managing transitions. Thus, a combination of advanced technology solutions, reliable and useful information and full human contribution are necessary to mining operations.
  2. 2. 2 A growing trend in the mining industry focuses on the idea that more value can be leveraged and derived through information management and collaboration. With increased information and intelligence availability to decision-makers, more value can be produced in the operation with business improvement antiicapted. Mining properties have traditionally been seen and operated as a series of separate silos, where the mine was charged with “producing” the ore, the concentrator produced concentrate, the conversion area produced an intermediate product like copper matte, and then the product was readied for transportation. The “silo approach” loses opportunities for value creation through collaboration and coordination. Mining leaders are starting to realize that more value can be driven through the operation by leveraging opportunities to effectively integrate systems across the operation. Effective integration can enable better collaboration opportunities to workers throughout the value chain. Of course, the right tools, processes and information must be readily available to improve decision-making for value addition to be truly sustained. New standards (ISA95) are available to manage information flow and help with coordination and collaboration, especially when sharing information. The ISA95 standard was developed in part to help identify and fill information gaps between plant level and business level systems in domains such as production accounting, quality management and production scheduling. These gaps are typified by needed information flows between different mining production units such as the mine and concentrator, concentrator and pelletizing plants, and on to the port. Current mining operations often feature these units operations as separate “businesses” in the same operation, each operating to maximize its own performance, often in separate silos. These “white space” areas are information gaps or transition points between
  3. 3. 3 process units where silos currently exist. From a solutions perspective, rules tend to be vague, authority is fuzzy, budgets are not defined, and strategy is unclear. However, the value of collaboration is obvious and is starting to become more prevalent in operations. With new technologies available to enable better and more robust information sharing among different sub-organizations, mining operations can drive better decision-making and better performance. The creation of new knowledge is critical for innovation and for competitiveness. Knowledge and information sharing is starting to occur more frequently both horizontally and vertically in mining organizations as well. This requires leveraging technologies that are not new but becoming more prevalent in the industry such as networking and wireless technologies, visualization technologies and other solutions that enable better and faster communication across the mining operation. Innovations such as driverless haul trucks and shovel trucks, wireless technologies, information dissemination technologies, and advances in mine modeling are beginning to change the nature of mining operations as well. Many advanced mining companies have already started to implement these innovations, changing the nature of how workers do their jobs. Workers must transition to be better information managers and must often interpret new information that they did not have access to before. Information used by operations in decision-making need not be solely objective data. Often, subjective information or tacit information can be extremely helpful for people to use in analysis and decision-making. This type of subjective information in the form of intuition and hunches are associated with the “best” worker, and should be used and leveraged in the mining operation. This becomes especially powerful when this tacit knowledge becomes socialized and integrated across
  4. 4. 4 multiple functions. Integrated Operations Centers leverage technologies for collaboration to help facilitate decision-making and collaboration across the functions mentioned above. Innovation is critical to mining companies. The difficult question often arises on where to focus innovation efforts to truly add value to the company. In the end, effective innovation must bring value to the company and its customers. While executives realize the importance of innovation in light of pressures from global competition, rising energy prices, skills shortage and other challenges, companies still fall in to the trap of too narrow a business view. This leaves them vulnerable to just performing to industry standard instead of performing better than competitors with a sustained competitive advantage. Four critical aspects of businesses should be considered as part of an innovation scheme for mining companies. These include alignment to strategy, compatibility with processes and systems, information sharing and networking as well as business innovation across the value chain. Link Innovation to Strategy The best companies link innovation efforts to their strategy. Adding value to the company through innovation and competitive advantage is critical for the long term success and sustaining a competitive advantage. Part of this is ensuring the innovation portfolio is aligned to the direction of the business. In the mining industry, business strategy can relate to actions such as expansion in to certain geographies, addition of other metals or minerals to the portfolio or even vertical expansion to upgrade plants. As part of managing strategic direction, mining companies use
  5. 5. 5 performance measures to measure strategic execution. A popular strategic management system is the Balanced Scorecard Management System (BSCMS). Source data comes from many places within the operation and could be the results of business models or totalized information from the plant While not all companies use the BSCSM, the concepts hold: planning and execution of innovation programs should link to strategic objectives and action plans that are part of the overall direction of the company. Within a portfolio of innovation projects, numerous areas are potentially addressed. While good innovators are consumers of ideas from many different sources, the organizational evaluation process for innovation is based on what’s good for the company in terms of business strategy, alignment and competitive advantage. Processes and Systems Successful innovation often spans both formal and informal organizational boundaries. In addition to traditional technological innovations such as robotics (i.e. driverless haul trucks and unmanned hammers and advanced online analyzers), innovations can come from new and novel ways to execute business processes This means that in order to exploit opportunities in innovation, miners need to better understand the critical business processes that drive value in the operation and how to best measure performance. Mining operations, like other manufacturing operations, have numerous business processes that are leveraged to accomplish critical activities. These include order fulfillment, maintenance, performance monitoring, production accounting, order management and shipping. The existing business processes are often a result of years of practice and “tribal” knowledge, especially in “Brownfield” mining operations or in “Greenfield” projects that are developed and managed by people bringing existing practices as part of the “Greenfield project design.
  6. 6. 6 Many miners are looking at the opportunity to improve their business practices along an integrated value chain. By documenting and reviewing these processes, a better understanding of the value potential can be attained. Review and consideration of best practices can provide a path to improvement. Progressive operations then make improvements and innovations to further improve these processes. These innovated and improved business processes can then be institutionalized through effective integration of these processes, people, and technology. Some progressive mining companies are beginning to focus on using advanced technologies such as work flow technologies to adapt and institutionalize business processes. Innovations require a significant local component in terms of knowledge and participation. Networks Communication is critical to innovation. Mining organizations must rely on management support, open and direct communication channels, and use of managerial and technical expertise to effectively innovate to add value throughout their operations. Part of these innovation efforts must include efforts to share knowledge freely with other stakeholders in their innovation sphere. As part of managing, administering, and conducting other aspects of business, organizations use both formal and informal structures. Formal structures can often be uncovered in organizational charts and show the hierarchy and matrices of information needs and flows. Informal structures develop over time and are also important to the organization. Both formal and informal networks are used to communicate in organizations. In innovation, communication takes many forms and follows many paths. This communication is critical to
  7. 7. 7 affect awareness within the organization regarding other innovation projects in terms of status, composition, barriers, and value potential. One of the key realizations among miners who are strong innovators is that communication both internally and externally is not enough. Having easy and comprehensive information to measure and analyze across the mining operation is critical as well. Because of the advancements in IT, information can be easy shared for even better collaboration as well as eventual scaling of solutions across the operation. Some more progressive miners are engaging with partners to explore innovation opportunities, especially in the areas such as supply chain, autonomous heavy equipment, and automation and information management. Information sharing in these partnerships and mining-related conferences has continued to extend knowledge sharing and innovative thinking and activity. Codelco, for example, regularly holds a mining innovation conference in Chile to specifically share ideas and experiences in mining innovation .In the end, miners should look to obtain ideas and concepts for innovation. The networks leveraged in the innovation process not only helps with areas such as idea generation but also with critical areas relating to roadblock, resources and scalability in the organization, critical to development, implementation and value delivery . Business Innovation One of the key areas for innovation for miners going forward is in an integrated approach to business value generation in the mining value chain. The pit-to-port concept involves the realization that value flows from the mine to the customer through interrelated processes, systems, production steps, assets and other parts of the mining operation. As previously stated Mining operations have traditionally viewed steps in the mining production process on a silo’d basis. That is, pit operations function separate from mineral processing operations which in turn are separate from refining and so on. Functionally, a similar paradigm
  8. 8. 8 exists with operations, maintenance, and others, such as financial accounting operating on a largely independent basis. Miners are realizing that an integrated view of the mining operation can help them to uncover areas for innovation in a way that uncovers significant value for the company. This includes opportunities to improve coordination and collaboration between the entities across the value chain. The next big steps where innovation is applied in the mining industry A mining organization is no different from other organizations in that adopting and implementing new trends in technology can dramatically improve business execution and performance across regional or global interests. Platform design and implementation will probably focus on health and safety, and new technology to address business issues. The health and safety issue will probably focus on creating a safe work place (new devices to avoid common injuries like abrasion and pinching of extremities.) Technological changes will start at the sensor level, with smart device technology (related to the Internet of Things-IoT), Cloud Computing for detecting trends (Operational, Business, etc.), and visualization tools for process analytics. For those in the Mining industry who grew up before DCS systems were commonplace the revival of wall sized” Mimic Panels” with touch screen displays and mobile device interfaces may become common place. These displays may integrate simulation models for “what if scenarios”, operator training, 3d virtualization and, situational awareness displays. Mining is not perceived as a “sexy” industry so mining engineers and technologists are potentially scarce. They become even scarcer when the mine itself is located in a remote harsh or generally undesirable environment (a mining reality). As a result expect to see a significant
  9. 9. 9 growth in the development of Remote Operations Centers. These may be as simple as Centers of Excellence where metallurgists or other technologist are able to study mining results in a centralized big city environment. It may extend to actual remote operations centers or to areas where process optimization and/or supply chain optimization are practiced. Conclusion The Mining industry is making significant changes. Integrated companies fighting the vagaries of ore bodies and in remote locations are turning to applying technology to business issues and utilizing educated workforces to extract the most value from their investments. Novel situations coupled with innovative solutions will break down the barriers to improve safety, the environment and drive value in this important industry
  10. 10. 10 Cash, J.I. Jr., Earl, M.J. and Morison, R. (2008) Teaming Up to Crack Innovation Enterprise Integration, Harvard Business Review, pgs. 90-100. Integration is making multiple units, functions, and sites of large organizations work together to increase capacity, improve performance, lower cost structure, and discover new opportunities for improvement that don’t appear until you look across functions. Together innovation and integration allow an enterprise to engage more customers and bring more goods and services to market. Successful innovation often depends on the ability to coordinate efforts across organizational boundaries because innovations reach sufficient scale and impact only when integrated into the larger operations of the corporation. Corporations rely on IT as a catalyst/enabler and component of new products, services, channels, processes, and business models as well as a way to encourage collaborators to innovate and share. CIOs and IT organizations are being asked to take a bigger role to provide tools for collaboration, participating in innovation, building an integrated platform of business processes, information, systems, and technology. Thus, the role of IT and technology is changing. However, in big companies, innovation can be difficult due to status quo mentality/inertial forces. Need people that are keeping informed of new technologies that support innovation like dissemination technologies, integration of common databases, with idea of how technologies can be leveraged for new products, etc., rolling out technologies across the organization. Sawhney, M., Wolcott, R.C., and Arroniz, I. (2006) The 12 Different Ways for Companies to Innovate, MIT Sloan Management Review, 47/3, pgs. 75-81. Faced with slow growth, commoditization, and global competition, many CEOs view innovation as critical to corporate success. Some executives see R&D too narrowly as R&D only. This results in erosion of competitive advantage and just best practice sharing over time. Firms look and perform similarly, using undifferentiated processes and capabilities. In the process industries like chemical, oil, and gas industries, the emphasis is on process innovations.
  11. 11. 11 Viewing innovation too narrowly can blind companies to opportunities and leaves them vulnerable to competition with broader perspectives. Business Innovation (their definition) – to avoid innovation myopia, the authors suggest a holistic view of innovation and that it should include all aspects of the business with which they can create value for their customers and the firm across one or more dimensions of the business. Business Innovation is about new value not new things. Customers decide if an innovation ultimately creates value with their wallets. Business Innovation can take place in any dimension of the business: supply chain, process, etc. or even a combination. Business Innovation is systemic in that a great innovation without value to the customer or a great product without distribution is not an innovation that has been considered in a holistic way. What dimensions of the business are innovations expected to be related to? Offerings: products and services Platform: a set of systems, components, etc. that serve as building blocks for portfolio of products and services. This could be automation, practices, processes, etc. Customers Customer Experience Value Capture Processes Organization Supply Chain Networking Brand When a company is able to identify and pursue neglected innovation dimensions, it can change the basis of competition, leaving other firms at a distinct disadvantage. .
  12. 12. 12  (2008), The Incrementalist (or, What’s the Small Idea), MIT Sloan Management Review, pgs. 15- 20, 49/4.