Hard times – a catalyst for innovation?

Falling iron ore and other commodity prices have made life difficult for Australian resource producers - but challenges and hard times can also be the catalyst for game-changing innovation, writes Jonathan Law.

Directors comment from resourceful: Issue 7, June 2015

Jonathan Law, Director of CSIRO Mineral Resources

The iron ore price is squeezing margins for Australian producers and industry has responded by reducing costs through removing inefficiencies throughout the value chain.

While having a lower profile in the media, most other commodities are affected by the reduced global demand and falling prices.

Many commentators have pointed out that, although low relative to the recent boom years, commodity prices remain higher than their long term averages - and yet margins are still being squeezed.

But challenges and hard times can also be the catalyst for gamechanging innovation and most companies are taking a fresh look at how innovation can impact on their cost base, productivity and longer term competitiveness.

There is considerable overlap in the views, of various companies and research & technology providers, about what the big challenges are. However, the question of ‘how to get there’, is now getting more attention.

What are some of the key factors in this shift in focus and some of the barriers in the way?

Firstly, many new innovations being sought by industry involve fundamental changes to the way the value chain operates and impact on things as diverse as equipment design, new sensing and data technologies and changing cost drivers. These innovations are largely beyond the ability of most companies to deliver on their own.

Secondly, the rapid growth in innovation options being delivered by large and small METS companies provides a plethora of solutions for point problems but the integrated solutions required by industry are lagging. Innovations that do not integrate seamlessly are not valued, as they require cost and effort to implement and can result in complexity and unintended consequences further downstream.

Thirdly, the delivery of step change innovation into a somewhat fragmented market is often difficult. Not only do the multiplicity of commodities each have different requirements but individual mining and/or processing operations have been individually designed to tackle orebodies which, as the products of nature, display unique characteristics. So, although there can be a lot of commonality between operations, each tends to think of itself as different. Innovation is a risk investment. Larger investments for more rapid or more impactful developments are enabled when it is possible for the market to behave in a more integrated manner.

Together these issues underpin an urgent need to change how we tackle major innovation changes in a capital intensive industry like mining.

The mining community is taking a lead in this thinking.

At the World Mining Conference in Montreal the Anglo CEO framed an important proposition for innovation in the mining industry:

“….. although there are many areas of excellence in our individual companies, we could do so much more if we were able to make a step-change by cooperating in mining technology. And if that sounds a bit fanciful, take the example of the process-control industry, where we benefited from collaboration with the chemical and petrochemical industries. In the early days of process control you had to buy a single-source solution from instruments all the way through to controllers. Now you select the best instruments from the best suppliers and connect them to the best control solution appropriate to your specific need, through common interfaces. Even more importantly perhaps, we need to co-operate within our sector because in a number of important areas we have effectively ceded control of the mining technology space to our OEM suppliers. An ideal outcome is a progressive, competitive ecosystem where players compete on adding value to the mining process – and not by developing closed, insular, proprietary components.”

These remarks were made in 2013 but there is a growing view in the industry that collaboration and more open innovation are poised to change how we innovate to address the big challenges facing the mining industry.

At CSIRO, we invest around $80 million in innovation across the mineral resources value chain each year. This reflects a mix of industry and Australian government funds and is an important resource for the mining community to tackle these challenges.

A shared research vision and commitment to the major challenges, raises the opportunity to change the pace and scale of innovation in the mining industry, the METS sector and R&D providers.

How we collaborate on the major challenges may be the single biggest game changer for innovation in the mining industry.

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