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Digital technology: Hype or ripe?

Mining companies aren’t exactly known for being bold innovators. But in the face of falling productivity and continuing cost pressure, actively pursuing innovation can provide a competitive edge. Digital technologies—many of them now commonly applied in other industries—present abundant opportunities for miners to address the challenges facing them. As traditional productivity programs run their course, companies that leverage these technologies stand the best chance of achieving the next level in enterprise performance.
Digital technology: Hype or ripe? Digital technology: Hype or ripe? Digital technology: Hype or ripe? Digital technology: Hype or ripe? Digital technology: Hype or ripe?

Like other asset-heavy companies, miners make large capital investments that may not pay off until many years later—if at all. After all, the investment case for a new mining project is heavily influenced by the quality of the resource base, the soundness of a company's long-term planning, and its project and operational management effectiveness. Traditional technology innovation has typically consisted of bold, risky, and expensive moves - such as autonomous truck haulage or remote operations centres.

Against this backdrop, it's no surprise that miners might be reluctant to experiment with early-stage innovation, given its high failure rates. The sector has thus developed a conservative innovation culture, requiring that new technology be rigorously tested and guard-railed. This is partly because they view the cost of failure as high, they lack "sandboxes" to experiment in, and "failure" is stigmatised, regardless of what companies might learn from it. 

However, many digital solutions present low-risk, low-capital-intensity opportunities to materially promote productivity, reduce costs, and enhance safety. For miners ready to truly adopt it, digitalisation can significantly improve their agility, help them manage complexity, and collaborate in ways that spark fresh ideas about how to do business. Digital is not just about doing things better, it can also be about doing them very differently from the past.

Digital opportunities along the mining value chain

Digital technologies are now affordable and robust enough to enable miners to address daunting challenges such as productivity losses, cost control, and cash leakage. Below, we provide a few quick examples (see figure 1 below).

1) Operations: Digital mine planning. Miners can integrate data from multiple sources (such as geological conditions, weather forecasts, and equipment availability) to develop mine plans, incorporating insights from dynamic simulation modelling and other techniques to identify those that will generate the most value for a given environment. Combined with a deeper, data-based understanding of the end-to-end value chain, this process helps miners develop more informed and value-optimal plans than before.

2) Operations: Predictive maintenance. Some miners are already using predictive maintenance technologies. For example, truck fleets equipped with sensors transmit data on their operational status and performance. Systems using smart algorithms then analyse the data, sometimes in cooperation with equipment suppliers, to optimise maintenance schedules. Results include significant improvements in equipment productivity and reduced maintenance costs. To manage all this, miners must bring together technology, business process improvements, and cultural change - no easy feat.

3) Operations: Inventory management. Many mines keep ‘squirrel stores' that contain extra stock for maintenance, repair, and overhaul (MRO). Many of these parts end up lost or are thrown away because they become obsolete before they are actually used. By deploying digital technologies like an inventory management platform, companies can ensure that requisite levels of inventory are kept in stock (using advanced analytics) and that unused inventory is sold off in time. Digital inventory exchange platforms can settle these transactions without the need for miners to go back to the original equipment manufacturers. All this helps reduce inventory costs and working capital requirements.

4) Processing: Digital plant. Mine and plant general managers face complex product-flow optimisation problems that digital technologies can help them surmount. Take refining plants. Advanced algorithms can be used to conduct flow simulation and optimisation using varying inputs (such as grade, hardness, and mineral type). The goal is to define product flows that deliver maximum value by optimising concentrate grade, recovery rate, or throughput. Such algorithms can even learn over time and adapt their optimisation outputs accordingly rather than relying on manual interventions and adjustments. Analytics that go beyond traditional optimisation lead to significant yield improvements. 

5) Supply chain: Integrated planning. Digital technologies can help miners achieve unprecedented efficiency in their supply chains. Cloud-based logistics and load-sharing platforms (applied live in container shipping today) are cases in point. Miners can also use digital tools to manage and execute on sales contracts; for instance, to quickly and accurately determine pricing, as well as manage product flows and inventories in ways that reduce transportation costs and lower working capital. Transaction and asset tracking tools—using existing technologies such as RFID tagging—can boost benefits even further.

A case in point: Creating a digital platform to manage MRO inventory

Miners can extract the most value from digital technologies by integrating them across value chain steps or using them to reimagine multiple processes as a digital platform. MRO inventory management is an apt example. We imagine a time in the not-too-distant future when progressive miners will integrate a predictive maintenance system for their equipment with their suppliers' MRO inventory restocking platforms. 

Picture this: In a pit, an autonomous truck automatically signals required maintenance to the company's inventory system, specifying the spare parts and consumables it will need. The inventory system analyses MRO stock availability, screens for options to restock, and automatically orders the parts and manages the corresponding payment transactions. No manual input is required.  

Taking the right steps

Miners seeking to capture digital innovation opportunities can start the journey with an 'innovation sprint' that uncovers digital use cases across their business. To do so, they should keep a few simple rules in mind: 

1. Don't take a set of digital solutions and find problems you can solve with them. Instead, identify business opportunities that digital can help solve.

2. Identify the pain points and unmet needs of your workers, suppliers, and customers. Enlist an interdisciplinary team in prioritising the most significant chokepoints along your value chain, taking a human-centric perspective.

3. For issues you've prioritised, evaluate digital solution concepts and pitch them as use cases to leadership before prototyping or piloting.

4. Don't aim for the perfect solution. Failing quickly is better than taking too long in search of perfection.

5. Appreciate the importance of organisational culture. Digital innovation requires the right mindset, visible leadership, and conscious change management to enable people throughout your company to challenge existing paradigms. To build such a culture, select the right interdisciplinary team to drive the work, use the innovation process to stir up excitement, and showcase ‘lighthouse' examples that symbolise a shift in your company's operating model and culture.

6. Stay focused on value. Digital innovation is not about ‘shiny objects' or specific technologies; it's about producing business value by successfully combining real needs, potential technology solutions, optimisation of business processes, and the cultural change needed to ensure real impact.

Forward-thinking miners follow up an effective start by ensuring that digital innovation thrives as part of a continuous-improvement effort across the business. Our earlier article, "Small innovation steps matter too", in Mining Journal, outlined how to embrace this imperative. 

Clearly, digital technology is transforming how companies win in dispersed, asset-intensive industries like mining. Companies can now connect, control, and measure all parts of their operations far more easily and affordably than ever. Using digital tools and real-time information improves decision-making and enables miners to reimagine processes and results as more stable and predictable outcomes. Companies that actively explore these opportunities before rivals do will unlock the next level of performance and productivity, sharpening their competitive edge and improving shareholder returns.

*Jan Philipp Bender (Bender.Jan.Philipp@bcg.com) is a principal and Thomas Vogt (Vogt.Thomas@bcg.com) an associate director at The Boston Consulting Group