Why mining companies need a Digital Transformation plan?

(Australian Resources & Investment, Volume 14, Number 1, 2020, Pages 34-37)

Edson Antonio, MBA, AI Global Manager, Vale

Rebecca Barros, Ph.D., Digital Transformation & Analytics Senior Manager, Accenture

Euler Faria, MSc, Sr. Data Scientist, Vale

Ali Soofastaei, Ph.D., PMP, AI Projects Leader, Vale

Modern technology is growing very fast, and companies need to adapt themselves to the new changes. Digital transformation plays a critical role in helping entities for this industrial revolution. Improving digital technology such as automation, sensors, advanced analytics, intelligent systems, etc. has forced the companies to think about more productivity and efficiency by using new technologies. The mining industry, as one of the leading industries in many countries, is facing a significant challenge to use the digital transformation when the maturity of people, technology, data, and management systems is not good enough to open the doors of the digital world in front of this old industry. To tackle this challenge, not only the mining companies should work hard to pass this bottleneck, but also the universities need to change their curriculums in the mining departments to have better learning and research programs for future mine engineers. 

The fourth industrial revolution is happening today when the world is facing with the digital decade. The new digital economy is transforming the business environment. Mining companies have been affected by this disruptive movement, caused mainly by a tide of pressure coming from clients and final consumers.

In mining, a massive amount of data is collected from the sites that is much more than ever before. These data can potentially make excellent opportunities for mining innovation to find new solutions for business problems through digital transformation in this industry. The main goal of digital transformation programs in mining has come to define how companies adapt to digital changes. Moreover, there is not the same definition of digital mining transformation. Figure 1 demonstrates a technology-driven process consists of three main components of digital transformation; data, connectivity, and decision making.

Figure 1: Digital transformation components 

The pressure on mining companies is on both sides: supply and demand. Although, in general, it starts on the side of the consumers, a few examples of this are explained as follows.

Influential factors on-demand:

·        Consumers more connected and more significant decision power.

The digital economy produced a cultural transformation that has set a higher level of expectation and user experiences from consumers. This change redirected the decision forces from the mining companies to the final consumers.

·        Consumers are more focused on user experience than with the possession of the property itself.

New business models developed by the digital economy lead a transformation in the consumers’ preferences mainly among the young generation, migrating more and more the focus from owning to using.

·        Liquid expectations.

The more developed a digital economy is, the more consumers extrapolate the consuming experience of a determined category of mining product to other markets, thus significantly amplifying what the market traditionally defines as “competitor,” and currently, the competitors are not necessarily inside the mining industry.

·        Faster adoption cycles of new ideas and technologies have made markets quickly disappear.

The classic curve of mining innovation diffusion is facing a significant change. The process of transmission that once slowly flowed between the social system participants nowadays quickly converges between the winner solutions. 

Influential factors on supply:

·        Unbundling phenomena by the startups.

The entire process of a productive chain, which before was executed for a big mining company, currently can be achieved by hundreds of small companies that perform each one of the small steps of the whole process in a more efficient way.

 ·        Exponential cost reduction of the technological process.

This pattern, which has been observed since the end of the 50 decades, has become economically feasible in a series of projects that previously didn’t leave the drawing board.

·        New competitors being created every day.

It is essential to plan a digital transformation plan to predict the effect of market conditions on the mine value chain. The companies that don’t review their operational models and especially their business models will not have space in this dynamic competitive environment. This digital transformation plan can be reached through three strategical drivers:

 o  Digital Business Transformation

Attending the new demands of business models. The primary investment area to implement this strategical approach is a junction of the technological parks with the relevant set of new and existing data to foster the use of Big Data and Artificial Intelligence (AI). This approach can help to identify new trends and market demands.

 o  Digital Clients Transformation

Revision of the client experience; B2C or B2B. The integration of different platforms to guarantee clients information unification, jointly with the digital transformation of the marketing function are the necessary condition to implement this strategical driver. The application of AI unitedly with mobile technologies and social media are essential to customizing the offerings to guarantee higher client engagement.

 o  Digital Company Transformation

Operational excellence of production process and technological park. Each productive process automation is required to implement this part of the strategy, which ranges from the operation itself to the decision-making process. The usage of the Internet of Things (IoT), Robotics, and AI are some of the elements that enable automation and opportunities identification for efficiency improvements.

To maximize the return of investment in digital is required to focus on some leveraged strategies; on the contrary, the train of digital transformation takes the risk of stopping at prof of concepts and first results never turning out to be sustainable.

·        Agile leadership; Strategic view and fast-paced in the decision-making process.

·        Workforce focused on innovation; Digital mindset infused in the workforce

·        Network; Keeping the mindset of ecosystem collaborating inside the value chain (e.g., suppliers, logistics, clients) and outside (e.g., startups, universities).

·        Access, management, and usage of data; The capacity for creating knowledge to improve the decision-making process.

·        Appropriate technological infrastructure; Guaranteeing processing capacities, data and business security, and interoperability among systems.

In the past, the mining companies could choose to be later/early adopters regarding the new technologies. However, this is no longer the reality nowadays, consider what is highlighted above, and the journey on a digital transformation becomes an essential plan for all companies working in the mining industry.

A successful digital transformation plan can increase the digital capabilities and develop the sociotechnical capacity in a mining company. Digital transformation can also alter all aspects of the business to change the mining operation and maintenance. However, mining companies are struggling to start the digital transformation plans.

In overall, there are four highlighted summaries for digital transformation in the mining industry as follows:

1-     Mining companies should start digital transformation program as an essential revolution in this industry;

2-     There are three foundational components of the digital mining transformation process. These components are data, connectivity and decision making;

3-     Digital transformation provides a discussion on how it will be an essential part of the success of mining companies into the next decade; and

4-     Digital transformation identifies strategic areas in which institutions of higher education can provide the required resources to support the mining industry.

As a summary, there are some suggestions to have successful progress in the digital transformation journey in the mining industry. Firstly, it is essential to define a clear responsibility for digital investments. Secondly, companies should invest in use cases, not just in technologies. Thirdly, it is necessary to use the result-based actions according to the theoretical designed approach. Fourthly, take full advantage of the low hanging fruits, i.e., low cost and fast, successful opportunities which will help the company to create a digital culture. Fifthly, take risks in assessments that identify common problems of several company sectors. Thus, it will be easier to scale and reuse the lessons learned. Sixthly and finally, the suggestion to have a successful digital transformation plan in mining is thinking about a multidisciplinary concept, and this approach needs innovative discoveries in all company sectors.