Every global business worth its name has or is going digital — the mining sector is no different.
But is the mining sector getting it right while it goes about the transformation? Not exactly, claims advisory agency Ernst & Young in a new report.
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In the report titled, “Digital mining: the next wave of business transformation” — not to be confused with the mining of data — it says digital maturity across the mining and metals sectors means that current digital solutions are merely “functional or siloed,” and only address parts of the value chain.
Global mining companies have started to make some headway in using digital technologies to improve productivity. But, as the report says, focusing on productivity alone is not enough to generate competitive advantage. Companies need to adopt “a more cohesive, end-to-end approach to integrate digital initiatives,” the report states.
In this paper, the E&Y team has explored more of the “how” to commence a digital transformation rather than the “why” businesses should embark on the change.
The report has identified around 60 digital themes and initiatives across the sector, though it finds few examples of a clear, integrated and businesswide approach among mining and metals organizations.
The team has proposed a “wave approach,” which seeks to balance risk and return, and the need for rapid action but also thoughtful planning for players in this sector.
“Mining & metals has so far lagged other sectors in the realm of digital effectiveness,” said Anjani Kumar Agrawal, partner and national leader for metals and mining at Ernst & Young. “The value from digital will only be realized when companies change how they work, rather than succumbing to the lure of individual technology programs and pursuing local optimization, which is not necessarily transformational.
“While a revolutionary approach to digital would be too disruptive, we believe companies with mining activities should adopt a progressive, multiyear strategy that also accounts for business risk and the primary drivers of value.”
Paul Mitchell, Ernst & Young’s global mining & metals advisory leader, stressed the importance of adaptability.
“We see the end-state vision for the mining sector as constantly changing and businesses will need to be ready to adapt and change course as required,” Mitchell said. “While we don’t believe the sector will see radical disruption, the opportunity for new entrants to disrupt existing players poses a real threat. Market leadership can be lost quickly if dominant players respond slowly or ineffectively to industry disruption and external changes. However, the pathway through the waves of digital transformation should not be viewed as inflexibly sequential or static.”
The “waves” that are referred to in the E&Y report are a series of digital transformation waves, which the agency feels “is the optimal way to transition a business from current to future state” and steadily introduce more digital hotspots and interconnections, all as part of a coherent overarching strategy.
Focusing on productivity and profitability alone is not enough to generate competitive advantage, say the experts, but focus must be given to innovation, too.
This approach is structured around these key components:
Digital pre-start: building out connectivity to prepare for digital transformation, which typically involves investment in infrastructure, communications and data.
- Wave 1: activities that focus on the productivity or performance improvement agenda, and are typically operated within a single function. At this stage, digital can enable a mining operation to manage inherent variability & move toward manufacturing levels of productivity.
- Wave 2: these activities are broader & span the whole value chain & include initiatives to better manage margin through interactions with customers & suppliers.
- Wave 3: this stage refers to the rise of disruptive factors that may create significant changes in how the sector operates & may require a step change in business strategy.
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This new report comes in the wake of another report, ‘Top 10 business risks facing mining and metals 2017–2018”, in which E&Y identified “digital effectiveness” as the No. 1 risk facing the mining and metals sector.
The full E&Y report, “Digital mining: the next wave of business transformation,” is available here.