Industry Q&A: Innovation, Organisation Design and Strategy Overhauls
Earlier this year, VCI released their new CEO Insights Mining Report, with the tagline of “Innovation State of Play”. Following the revealing of this exciting view into the minds of CEOs and board members from 15 of the top mining companies around the world, Austmine decided to catch up with Graeme Stanway, CEO of VCI to get his thoughts on the state of play and how critical innovation is in the current market.
Based on your experience working with clients to implement new strategic programs, where do many of the mining & METS companies that need assistance initially go wrong? How do strategic management solutions counteract these issues?
The biggest issue with implementing new programs is establishing a clear link between your business strategy and the program, especially in relation to innovation and technology. We see many attempted program implementations falter without this. The other most critical factor is board and senior management alignment. There are several reasons for this being so important, including allowing your senior management the space to do the work, providing them with necessary funding and allowing them to take risks without fear.
The third factor that impacts on new program implementation is having a clear vision and roadmap. Having a clear pathway for how to undertake the work will help ensure people don’t get paralysed or overwhelmed. Fourth is assigning task forces to do the work. Many companies choose to run the programs through the hierarchy rather than having cross-functional task forces, which can lead to failure.
Finally, in our sector there’s a fallacy of “fast follower innovation”, where people rush to be second. However, the mistake regularly made by these followers is their decision to copy innovation is knee jerk, meaning they rush into it without necessarily making sure all of the groundwork is in place.
If you’re determined to lead in relation to innovation, you generally make sure that you lay all the required foundations. Here at VCI we found in the survey a couple of years ago that there was a direct correlation between the successful implementation of innovation and the propensity of an organisation to take a leadership role in the sector. The people or companies who were prepared to take the risk inherent in innovating first, also had a higher success rate because they took the time to implement the critical elements first. In the mining sector, we have seen that with automation programs and with companies operating in what are perceived to be higher risk countries, as two examples.
How have organisational design requirements altered in the current mining industry downturn? How can these changes most effectively be managed?
This is an interesting question, as organisational design requirements have changed in some respects, but not in others. During the upturn, a huge amount of inefficient practices became embedded in many organisations, leading them to be arguably more dysfunctional than they’ve ever been, impacting severely on productivity. As an industry, we’re now undergoing the process of unpicking a lot of that. In hindsight, we didn’t build enough agility into our organisations, looking all the way back to the 90s and the focus on lean businesses. We focused too much on lean, rather than developing agile businesses that would have thrived through expansion without locking inefficiencies into the core structure. The challenge is the mining cycles occur over a very long period of time; by the time the next one comes around, we’ll have forgotten a lot of these lessons from this current cycle once again. The good companies will find a way to overcome this.
The biggest issue of the downturn in my opinion isn’t the reduction of people; it’s the fear that’s instilled into companies due to the reductions. During times of fear for job security, employees are less likely to look outside of their exact job role and take on new things, due to fear for their jobs. In lean organisations if people aren’t fearful, they can do a great job, whilst also being creative and looking for innovative solutions. When you’re stretched, or challenged in your role and empowered by your employers, great things can happen; if you’re stretched and fearful, bad things can happen.
If you look at the big cycles, last time we had a low growth period was before 2003 and technology was nowhere near as prevalent as it is now. This slow growth period we are entering is fundamentally different, due to digitisation, automation etc. We should be looking to how these trend impact change in our organisations.
VCI aims to create a ‘Sustainable Environment of Innovation’ for their clients. What are some of the barriers faced in attempting to create a company-wide innovation platform? How can its sustainability be ensured?
As came out in our recent CEO Insights Mining Report: Innovation State of Play and was alluded to by several of the CEOs, the biggest barrier to innovation is that it is not yet seen consistently as a competitive advantage, nor as being central to business strategy.
Most of the CEOs felt innovation would eventually be built into company strategy, but until that occurs, this will always cause roadblocks for the innovation effort. A competitive advantage can only be derived once innovation is considered a central tenet, like safety or environmental now are. I think we’re beginning to see signs of that now, through the calls we’re getting and the technology that’s being developed.
The other major barrier is connecting strategy and innovation to one another. They are typically seen as separate functions in the organisation, with the techies or full time innovation team focusing on that and the strategists focusing on their job. Innovation needs to shift to be seen as a key lever for strategy. This has been the case in other sectors such as telecoms, pharmaceutical or big agriculture, all of which have seen innovation and disruptive technology as a key aligning function with strategy. This is not yet full the case in mining.
Another critical barrier is the reality of the mining cycles – when the prices are up, harvesting is going on and when the prices are down, we’re trying to survive or cut costs. Only about 30 - 50% of the total cycle is a goldilocks period for innovation, which is not a lot of the time! Plus, you have large capital investment and high risk in this sector, resting on market prices and so on. We need to think about ways to reduce this risk when innovating, such as through virtualisation of mine design, like the airbus, which was built in a computer and tested.
Certainly an inhibitor is being able to get clarity between structured platforms of innovation and what’s emerging into the market. Getting those confused is an issue sometimes. Organisations can try and force too much structure into the emerging platforms, or up the other end of the spectrum, they’re not structured enough. Different forms of innovation need different management. This tension was recognised by all CEOs in our recent survey and management of those was a big issue.
As a sector we are not as good at adopting the obvious innovations from SME METS as we should be; I see a lot of missed opportunity from that. There are certainly reasons for this, such as how we buy technologies or solutions. Effectively relating to smaller METS companies is a big issue.
Culture is the final barrier I would like to mention. Some mining cultures encourage a fear of failure, as failure can be punitively treated, which causes us to be reluctant in taking some risks. Some of the most commercially successful companies are much more accepting of innovation and risk. It’s about achieving a balance between aggressive risk taking and commercial protectiveness.
With the emergence of digital technologies and increased emphasis on data analytics, how have the skills required by mining industry professionals changed? What do you think will be the most critical attributes of mining & METS individuals in the next couple of decades?
I see some big shifts in the skills requirements in our industry. Firstly, the industrial sector has become far more gaming orientated. Once you have full visibility of the mining chain in an organisation, you inherently have more people across the company engaged in resolving issues pre-emptively. We’ve seen examples of clients who have moved aggressively in their drive for digitisation and visibility. Many of the process control steps they thought they would be required, turned out not to be as important as this gaming approach came to the fore to help people more naturally solve issues.
The biggest challenge within this is existing senior leaders control our operations and can take a very hierarchical approach. This sort of team and gaming orientation, trusting computers to assist in making decisions, can be an issue for senior leadership as it removes perceived control. What we underestimate is how adaptive the next generation of workers coming through is. I think we may be somewhat over-estimating the challenge of a lack of technical skills in relation to them; where the issue will arise will be senior leaders allowing that skill and responsibility shift to occur.
Most hard technology skills will come in through METS companies anyway who are progressing rapidly. Mining companies will have to be much better at partnership formation and working with their suppliers. That’s already a challenge now, where we have tension between miners and METS in several cases. This is more of an issue in mining than in some industries.
What are some of the activities and workshops that can unlock the innovation potential of your clients? How do they go about doing this? Are there any standout examples of successes in this area?
Our workshops tend to be focused on 3 key areas: seeing, moving and implementing for success.
Seeing and moving – a challenge with management teams is that they can tend to see situations or processes in theory. These days, everyone has read lots of management or theory books and we all have access to vast quantities of information through the internet and social media. One of the biggest successes we’ve had with clients is using viscerall exposure, where we encourage them to go and see other industries and real examples of equipment or technology that could be using in mining in the future. Most potential innovations are already here in one form or another in a different industry or environment. When people actually see that, it’s very hard to go back and they want to move towards it. One of the most powerful examples of that was done a decade ago, with Rio Tinto iron ore, where they did a lot of work with senior executives in looking at other industries such as agriculture, aircraft manufacture for example, industries which were more advanced than our own. Thie provided the impetus to drive ahead.
Implementing – many executives can see the challenge with no problem, but get frozen when it comes down to knowing how to tackle it. They have intent to move, but are uncertain on the how. There are two ways to deal with this and both are focused on visioning, where you have a clear vision that draws people towards it. One option is having a structured roadmap, where the key challenges and methodologies for addressing those challenges are laid out. This was utilised by AngloGold Ashanti not too long ago in their deep underground consortia
The other approach to help people move forward is visioning agile change. This is more of a program set up around agile change, with a focus on projects that move the business towards that vision; it’s less structured than a roadmap approach. Both are effective in different situations and provide the impetus to move teams or companies forward. We’ve seen the latter be particularly successful with the oil and gas industry in regards to remote operations centres and innovations around cost improvements.
At VCI we help people to see and identify intent to move. If the intent is there at the right level, that’s the most important thing. It all comes back to that critical alignment between board and senior management.