Connecting Commerce Mining industry confidence in the digital environment Written by
About the research This article is part of the Connecting Commerce research programme from The Economist Intelligence Unit, commissioned by Telstra. The analysis is based on a survey of 2,620 executives in 45 cities across 11 industries conducted in June and July 2017. C-level respondents account for 42% of the survey sample, with the balance being other senior executives. Based on the survey, The Economist Intelligence Unit created a digital cities barometer for industry to assess and compare confidence in digital transformation environment across industries. Business confidence is a highly subjective measure of a state of affairs, based on attitudes, and is not necessarily an indication of an industry s actual level of digital development. Mining ranks first (out of 11 industries) in the digital industry barometer, which measures the confidence levels of executives in terms of the support their organisation receives for their digital transformation. In The Economist Figure 1: Overall barometer readings mining Overall environment Innovation and entrepreneurship Financial environment Intelligence Unit s survey, far more executives in mining also agree that their organisation has so far met all or most of its digital transformation objectives compared with all industries (73% vs 59%). Score (out of 10) Rank (out of 11) 6.94 7.08 7.20 People and skills Development of new technologies 7.48 7.13 ICT infrastructure 7.20 Digital solutions and innovation are being leveraged across our business to improve safety, enhance processing and production, lower costs, improve ore body modelling, optimise mine plans, and discover new gold, says Scott Lawson, executive vice president and chief technology officer at Newmont, an American mining company. Newmont s approach to evaluating all investments whether they are technology-related or otherwise is grounded in technical and financial discipline to ensure solutions are fit for purpose and improve value and/or reduce risk. Across all industries, respondents cited cost savings as the leading answer (48%) when asked which factors motivate their organisation to pursue digital transformation initiatives. In mining, however, fewer (38%) cited cost savings as the primary motivation. Instead, developing innovative ideas (51%) is considered the leading motivation. At Newmont, this includes the use of semi-autonomous equipment that can be operated remotely in underground mines, automated drill rigs that drill blast patterns more quickly and accurately in surface mines, and autonomous track dozers that help manage pit slopes. The company also uses data analytics to boost fuel efficiency, tyre life and engine performance in truck fleets, among other areas. 2 Telstra Connecting Commerce The Economist Intelligence Unit Limited 2018 3
Overcoming the digital talent challenge through co-operation Digital transformation challenges in mining are similar to those in other industries, says Mr Lawson. They include the costs associated with replacing existing technical infrastructure and applications with new systems and processes. New technologies also need to be adapted to the unique characteristics of mining, including skills development. As with all technology-driven solutions, the key to success is people and successfully implementing the underlying systems and change management programmes, says Mr Lawson. These are essential to sustainable business improvement while building a culture of innovation that enhances safety and health, increases business value and reduces risk. Mining executives were more likely to say that city authorities and academic institutions consult local businesses about required digital skills compared with all industries (66% and 64% respectively, compared with 53% and 51% respectively for all industries). As a result, when asked about the effectiveness of educational institutions in providing the sufficient quantity of people with the right digital skills, mining executives were far more positive than the overall sample in citing very effective (40% vs 20%). The key to success is people and successfully implementing the underlying systems and change management programmes From efficiency to return on investment Newmont is using cutting-edge technology to optimise value. We leverage technologies like virtual reality to improve how we model ore bodies and optimise mine plans and drilling programmes, says Mr Lawson. Most recently, the company completed a digital assessment at its Twin Creeks open pit mine in the US state of Nevada, which produced 453,000 ounces of gold in 2016. Newmont s Nevada operations account for approximately a third of the company s production globally, and the assessment was undertaken to identify additional opportunities, which fell into three broad categories, according to Mr Lawson: First, enablers that improve efficiency and safety including fatigue monitoring systems, radio frequency IDs, and digital field tools that provide real-time operational and production data. Second, solutions that represent minimal disruption and high payback, such as sensors to maximise tyre life and productivity. Third, strategic opportunities such as fleet automation, remotely operated equipment, advanced process control, predictive analytics and centralised operations centres. We believe taking a measured approach supported by a repeatable, scalable process and robust change management is critical to maximising the return on our investment in technology and innovation, says Mr Lawson. 4 Telstra Connecting Commerce The Economist Intelligence Unit Limited 2018 5
Gaining local support Mining is a highly localised industry due to the fact that companies must operate where natural resources are available. As a result, mining companies appear to work closely with local institutions to create win-win situations. Today, digital transformation, combined with the right strategy and governance, is helping Newmont be safer, more profitable and better positioned to manage and mitigate risk, says Mr Lawson. This includes not only operational risk but also enterprise risk that includes areas such as improved water and energy management. For example, when asked to what extent the city authorities consult businesses regarding potential ICT infrastructure investments, more respondents in this industry say it is to a great extent compared with the overall survey sample (34% vs 15%). Similarly, mining executives are far more likely to say that smart city initiatives are considered very important in mining compared with other industries (44% vs 21%). Respondents in mining are also more likely to agree that over the next three years, the role of city support for digital transformation at organisations will increase in importance, compared with respondents across all industries (75% vs 69%). Digital tools and systems are evolving so quickly that a clear strategy and roadmap are needed to focus efforts on areas that reduce risk, drive safer working conditions and deliver greater business value, says Mr Lawson. We expect to increase the use of predictive analytics and automation, along with our advanced exploration technology, to improve safety and health, enhance efficiency, and discover new resources across the globe. Despite the current state of perceived readiness, mining executives are also more likely to say that digital transformation will be very important to their organisation over the next three years (58%) compared with respondents in all industries (47%). Figure 2: Barometer readings by region mining OVERALL ENVIRONMENT ASIA 7.48 INNOVATION AND ENTREPRENEURSHIP EMEA 7.75 FINANCIAL ENVIRONMENT ASIA 7.80 Regional takeaways for the mining industry EMEA 6.90 ASIA 7.26 EMEA 7.52 US 6.58 US 6.94 US 6.94 AUS 6.33 AUS 6.17 AUS 6.00 PEOPLE AND SKILLS DEVELOPMENT OF NEW TECHNOLOGIES ICT INFRASTRUCTURE ASIA 7.80 US 7.66 ASIA 7.75 EMEA 7.67 ASIA 7.66 EMEA 7.44 01 02 03 04 EMEA 7.59 US 6.31 AUS 6.67 AUS 6.58 AUS 6.17 US 6.58 Mining is one out of three industries (the others being financial services, and oil and gas) in which Asian executives rate the overall environment for digital transformation higher than respondents from other regions. US business confidence in the overall digital transformation environment in mining is third (out of four regions), its lowest regional ranking across the 11 industries surveyed. EMEA leads the way in the innovation and entrepreneurship subcategory, highlighting that industry innovation takes place in many geographic regions. Australian executives rate their overall digital transformation environment last of all four regions and the country is also last in four out of five subcategories (the exception being ICT infrastructure, in which the US is at the bottom). 6 Telstra Connecting Commerce The Economist Intelligence Unit Limited 2018 7
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