Wishing in the wind

There is a new hesitancy and resistance to change hanging in the air within mining, says George Hemingway
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If a mining CEO found a magic lamp, complete with a mining genie - what would they wish for?

It is recognisable in the reshuffling of management structures, layoffs and slowdowns in innovation programmes across all commodities. As I discussed last month, the catalyst is economic uncertainty and lacklustre results from initiatives.

Uncertainty, however is not the root cause. The fault lies in Value.

Let's say a mining CEO finds a magic lamp, complete with a mining genie. They rub the lamp and a genie pops out and asks them to choose from one of three magical gifts: they can have a whole fleet of automated disc cutting machines for their mines, a magical sensor that doubles their exploration accuracy or a special wand that makes all their employees ‘digitally savvy'. Which do they choose?

One of these things is more valuable to the company than the others and drives better profits and longer-term advantage. The problem is, it's not the same for everyone. If you knew which one was most valuable, you would choose it; but if you didn't - you'd just have to guess.

That's what's going on right now. At several mining companies, innovation programmes are being slowed down because there is no clear business case and, therefore, no clear focus and prioritisation.

The organisational layoffs and restructurings in digital teams or operating structures can also be explained by a lack of a shared view of Value between the CEO and operating leadership. Digital transformation is difficult if you don't understand (or can't explain) how your work drives returns or what vision it supports. On the operating side, if you don't really know how your organisational design drives Value, you might as well switch from a centralised to a regional structure at the whim of the executive. History shows that you'll just switch it back in five years, anyway.

We see it in strategy as well. This week, I read a paper on how mining companies could outsource traditionally ‘core' capabilities, and how others might do a better job. In 2013, I proposed this structure for the mining company of the future. Called ‘The Fluid Firm', I suggested that the business model of mining could, like oil & gas before it, change to include outsourcing and partnering, with only new capabilities kept proprietary to the company.

This future can only happen if companies understand where they will derive Value from. You likely don't want to outsource a mission-critical source of competitive advantage. As an example, a CEO of an industrial (non-mining) company has determined that Value in the future will be driven by data and human capabilities, not the efficiency of operations, a view contrary to his peers. Imagine if a mining company saw Value the same way. What choice might it make (or not)?

Today, we sit at a possible inflection point, with both recession and expansion a possibility. The companies that will prosper in the next cycle will be those that have defined from where they will derive Value and what this implies for the prioritisation of technology, capabilities, talent and portfolio. CEOs who cannot clearly answer this question may wish to pause, analyse and prioritise so that they can make the hard choices in harder times.

After all ...you never know when a magic lamp might show up.

George Hemingway is a partner and head of the innovation practice for Stratalis, a growth strategy and innovation consultancy focused on helping leading organisations to think through the future and outperform in uncertain markets. Contact him at george.hemingway@stratalisgroup.com or Twitter: @GeorgeStratalis