In 2012 the Kellogg Innovation Network’s KIN Catalyst group, led by Peter Bryant, pulled together 45 innovative thinkers in Brazil from within and outside of mining to stimulate new thinking to address the challenges in the global resources sector. Mark Cutifani, then AngloGold Ashanti CEO, was there and spoke about the need for innovation. It’s a theme that he is following up today.
Now as Anglo American global CEO Cutifani has recently called on the mining sector to speed up innovation. “Our industry is damned by the fact that our spending on innovation, research and development is one-10th that of the petroleum industry,” Mr Cutifani was quoted recently in the Financial Times.
On the same topic of innovation, I recently heard the head of innovation for another major mining company quoted as saying “If you can buy it from a supplier in the mining industry, it’s not genuine innovation.”
Hang on a second!
I would argue that innovation is happening with suppliers to the industry, and at a rapid rate, but not as fast in the mining companies themselves, as Cutifani rightly points out. Why?
One of the issues is that mining companies (until recently) have had a string of record profits driven by the resource boom. Why innovate when extracting minerals with traditional methods has yielded enormous margins? Governments also used the resulting “super profits” as a reason to not innovate in the tax system. That didn’t work so well. Innovation is change, and change is hard. In mining, innovation can also be risky, but not innovating can be fatal.
By contrast the Mining Equipment, Technology and Services Industry or “METS”, as it is known, is a hotbed of innovation. Smaller companies, often who just don’t know how it “has always been done”, are creating new innovative ways of doing things. And its working.
More than 80% of these businesses employ less than 500 employees. This is where a huge amount of innovation is happening.
The problem is that mining supply chains are designed around traditional equipment manufacturer centric business models. This can stifle access by the mining companies to these smaller innovative METS companies and their innovative products and services. It also makes it difficult for small companies to access change agents within the mining companies, often C-level executives.
So the METS sector should do what it does well, and innovate once again. This time in how it engages with the sector about the tremendous innovation that is happening, so that mining companies can address the major challenges they face. My congratulations to Austmine for taking a huge first step with this survey to establish just what that is worth. .
– Paul Higgins, DINGO CEO