Natural Resources Companies Ignore Data At Their Peril

Anton Kroger

The natural resources sector was born very early in mankind’s existence. Driven by a desire to find hidden treasure, the allure of gold, silver, diamonds – and later coal, oil, and steel – was the stuff that dreams were made of. Indeed, through hard-work and a strong “can-do” attitude, many men (and women) made their fortunes, which attracted others, and soon the industry thrived.

Technology, however, is about to change our course in history, and the impact of the digital revolution cannot be ignored by mining companies. Dr. Michael Rosemann from Queensland University of Technology (QUT) offers interesting insights about revenue resilience and opportunity thinking. Essentially, industries that are seeing their revenue streams disrupted are those heavily focused on adopting digital technologies to survive; i.e., they see digital as an opportunity. Natural resources companies, by contrast, appear to have the highest revenue resilience, meaning they feel that their revenue streams are unlikely to be disrupted. They view technology primarily as a means to reduce costs or risk.

What resources companies fail to understand are the second, third, and fourth order effects of disruptive technology in industries downstream or adjacent to their core business.

I see five ways disruptive technology is changing our everyday lives that will ultimately impact resources companies:

  1. They change how we socialize and what we want to be associated with (e.g., social media)
  1. They change how we learn and explore (hackathons are changing how we connect experts to problems)
  1. They change what we buy and how we buy (trading networks, individual to customer, business to consumer, and business to business)
  1. They change how we do things (e.g., the impact of the smartphone)
  1. They change who and what we trust (studies have shown that people develop an opinion of a company or person by doing research on the Internet before they have met them)

How we socialize and what companies stand for will disrupt the way we recruit talent

In the future, a company’s brand will not only impact how it attracts customers, but also how it attracts employees. Employees will shift their preference to shorter-term contracts that afford them the flexibility to create their own work-life balance, with brands that they perceive as being good to be associated with.

Uber may the most well-known example of a short-term, flexible workforce. It’s almost completely recruited as temporary labor, with most drivers citing flexibility as the reason they chose to work for them. In Europe, the manufacturing industry is beginning to see a shift towards shorter-term contracts, too, especially among the younger millennial/Gen-Y population, affording employees more work time sovereignty or flexibility through the various life stages (see “Re-Imagining work 4.0” by Germany’s Federal Minister of Labour and Social Affairs). The consequence of this trend is that resource companies are going to have to become smarter in how they recruit talent and manage large migratory (or contingent) workforces.

The second point is brand image. We are already beginning to see some second-order effects impacting higher education. Gavin Yeates sums this up quite well in his paper At the Brink, Again!“: 

“Projections for mining engineering graduates (S Hall 2017) show that, for 2019 and 2020, the number of students graduating will fall below demand. First year enrolments at [mining education Australia] universities have declined dramatically since 2012. It is also apparent from anecdotal feedback that the mining industries’ social image is impacting its ability to attract current generation of students (millennials). It is well documented that millennials are more prone to making value-based decisions and are heavily influenced by perception (true or not).”

In essence, this means millennials don’t see the resources industry as particularly interesting and are looking to work elsewhere. Horror stories related to dam collapses, fracking, and river pollution have no doubt played a role. Despite efforts by individual companies, we have not done a fantastic job promoting the industry’s exciting technological achievements.

The bottom line is that natural resources companies need to understand what is attracting employees to other industries. The disruptive digital trends transforming those industries are creating exciting and attractive new opportunities for young employees. Failing to understand these trends and develop a transformation strategy that creates better flexibility and a better brand will mean that the industry risks losing the war on talent.

Data is the new currency

How we learn and explore data will change, and our ability to quickly adapt these insights into our business processes will allow us to capitalize.

With the advent of hyperconnectivity, in-memory computing, and supercomputing, Big Data has now hit the mainstream. Data has been described as the new currency, one that has helped companies like Google and Facebook make lots of hard currency. It’s a little ironic that the resources industry has probably collected more data over time than any other industry, but has failed to turn that data into new revenue streams.

While resources companies were debating whether they should retain all their data or only the data they deemed to be useful to make operational decisions, tech companies discovered that access to more data is the most important thing. They offered a range of free services to obtain more data without necessarily knowing what they would ultimately do with it.

As technology has evolved and things like mobile, machine learning, and AI have improved, the “how” to commercialize this data has become apparent. The type of data these tech companies have been collecting – data about individuals – is also quite interesting and perhaps a little different from the data that resources companies have collected.

The companies that play this game well are seeking to uncover innovative ways to learn more about the people who consume their products – to understand exactly how they use them, when they use them, and what compels them to use them. We have seen new technologies enter our homes through things like Nest, Google Home, and behind-the-meter sensing technology. Retailers track everything we buy, which informs how they position new products to us. Natural resources companies will need to get a lot better about gathering more data through their supply chains to get a better idea of how changes in consumer behavior will impact their business.

This may mean that they need to get in on the data-trading game to be able to develop insights beyond their business boundaries and identify opportunities and risks emerging far up and down their supply chains. For example, consumers are starting to seek out brands that demonstrate ethical fashion and electronics. Resources companies will not escape this trend, as consumers will demand that end products are free of conflict minerals.

Blockchain will be one of the technologies that makes all this possible, as Jennifer Scholze explained in a recent article. Similarily, consumers are also seeking to move to “Green Power” with energy retailers finding new ways to sell green power rather than power produced by fossil fuels. These ethical trends are very powerful and can quickly change entire industries, but today’s resource companies have little intimate knowledge of it.

How we explore data is also changing. Traditionally, this has been the dark art of data scientists, analysts, and geoscientists, a closely guarded secret sauce that many resources companies see as a compelling differentiator in exploration and cost reduction. However, with the advent of mainstream hackathons, it’s become clear that the smartest people may not reside within your own organization, and the solution to your problem may be best solved by an individual or group of individuals that know absolutely nothing about what your company does. This is starting to redefine how resources companies need to look at data.

The more innovative companies are finding smart ways to identify what data is sensitive and are finding clever ways to anonymize and expose it to a large community to help solve a problem without giving its secrets away. Companies like Unearthed are helping resource companies use hackathons as a very effective way to solve problems, and connecting them with communities of talent that exist outside their organizations.

While data and insights are certainly a great first step, it’s really about what companies do with that insight that creates real value. In the future, the most successful resources companies won’t differentiate themselves necessarily by the insights they can generate from data, but rather their ability to execute and derive value from that data. The most powerful data platforms of the future will allow companies to quickly pull data together from a range of different data sources, expose that data to different insight-generating channels (both internally and externally), then quickly consume that insight by embedding it into their business systems or adapting their business process.

Perhaps the best example of this within resource companies is the maintenance space. Predictive maintenance has become a major buzzword in the industry, with many service companies offering services to generate insights based on data from machines. While that insight is great, you need to be able to change your maintenance and supply process to take full advantage of the insights at hand. If you can’t fundamentally service maintenance demand with your maintenance, repair, and operations (MRO) supply chain, your ability to derive value is compromised. The consumer and manufacturing industries figured out a long time ago how to optimize their supply chains and production plans based on changes in demand signals.

Roy Hill, an iron ore miner in Western Australia, has taken lessons from the manufacturing industry and defined a new way to better service maintenance demand by deploying manufacturing principals, as Indrasen Naidoo explains in “Reframing Maintenance Repair And Overhaul Supply Chains Within An Industry 4.0 Context.”

Wrapping up

The overall lesson here is that there is a huge opportunity for resources companies to think beyond the boundaries of their own companies. Perhaps one way that resources companies could explore this would be to treat their machines like customers. Those machines generate demand in the same way individual customers do. The demand requirements for those machines need to be met in the same way a manufacturer would approach it, producing maintenance jobs as products. If resources companies could learn to think in this way and apply that thinking beyond their boundaries, I have no doubt they would uncover a range of opportunities.

At SAP we are actively developing new technologies that help natural resource companies manage transient workforces; recruit, train, and retain the best talent; and turn insights into action. Learn more about SAP’s Talent Management solutions.

Anton Kroger

About Anton Kroger

Anton Kroger is an Energy and Natural Resources industry solution specialist for SAP based in Australia. Anton has worked in the resources sector for 16 years and has field operations and management experience, both locally in Australia and internationally. He now works with Energy and Natural resources companies across Australia and New Zealand to help them run better, more innovatively and imagine new ways of doing business. He is an advocate for clean energy and resources and believes that innovation is critical to the future of this industry. Anton believes that despite the disruption taking place in the industry today there is still a lot of opportunity for existing companies in the future.