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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.

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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

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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

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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

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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.

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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

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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

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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

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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

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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.

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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.

.

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(2008), The Incrementalist (or, What’s the Small Idea), MIT Sloan Management Review, pgs. 15-

20, 49/4.