Current approach to digital transformation is not enough to enable competitive advantage in mining
London, 23 May 2018
- EY report finds few mining companies are adopting a holistic digital strategy
- Current strategies are disconnected and need to move beyond productivity goals
- A progressive “wave” approach is key to achieving digital transformation
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 according to a new EY report, Digital mining: the next wave of business transformation.
While mining companies have started to make some headway in using digital effectively to improve productivity, the report highlights that focusing on productivity alone is not enough to generate competitive advantage, and companies need to adopt a more cohesive, end-to-end approach to integrate digital initiatives.
The report also identifies around 60 key digital themes and initiatives across the sector, though it finds few examples of a clear, integrated and business-wide approach among mining and metals organizations.
Paul Mitchell, EY Global Mining & Metals Advisory Leader, says:
“Mining and metals continues to lag other sectors in the realm of digital effectiveness. 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 mining companies should adopt a progressive, multiyear strategy that also accounts for business risk and the primary drivers of value.”
The report finds that introducing a series of digital transformation “waves” is the optimal way to transition a business from current to future state, steadily introducing more digital hotspots and interconnections as part of a coherent overarching strategy. This approach is structured around four 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 and move toward manufacturing levels of productivity.
- Wave 2: these activities are broader and span the whole value chain and include initiatives to better manage margin through interactions with customers and suppliers.
- Wave 3: this stage refers to the rise of disruptive factors that may create significant changes in how the sector operates and may require a step change in business strategy.
Mitchell says: “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. And 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 report also highlights that, as the level of automation increases through Waves 1-3, mining companies will need to adopt new ways of working.
Mitchell says: “The introduction of greater levels of automation will likely lead to a shift in workforce demographics and the skillsets required across the sector. This presents an opportunity for mining businesses to retrain employees and restructure their organizations to pivot the focus of work away from manual tasks and toward improved decision-making and efficiency of execution.”
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Notes to Editors
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How EY’s Global Mining & Metals Network can help your business
The sector is returning to growth but mining and metals companies face a transformed competitive and operating landscape. The need to improve shareholder returns will drive bold strategies to accelerate productivity, improve margins and better allocate capital to achieve long-term growth. Digital innovation will be a key enabler but the industry must overcome a poor track record of technology implementations. If mining and metals companies are to survive and thrive in a new energy world, they must embrace digital to optimize productivity from market to mine.
EY takes a whole-of-value-chain approach to enable each client to seize the potential of digital to fast-track productivity, balance portfolios and set a clear road map for their new energy future.
For more information, please visit ey.com/miningmetals.