This is article five in a series of six published in Mining Magazine.
In this series of articles, we have explored visions of operations and how companies will organise around them. We have imagined what the future holds for how we will work. In this article we will look more at the business model and how that will change. We call this vision of the future organisation The Fluid Firm.
Today’s mining organisation focuses on managing a hierarchy. Silos delineate teams and span of control. Senior executives cascade high-level decisions down through layers of management, and the results are filtered through these same layers on their way back up.
There is also a clear boundary between the internal and the external. Companies tackle challenges internally, with suppliers kept at arm’s length and secrets carefully guarded. The competitive focus today is mostly on driving operational cost out of the system.
The Fluid Firm
The difference between the present organisation and the Fluid Firm is in communication and transparency. The Fluid Firm is much more transparent, with the CEO and the front-line worker having access to the same information at the same time. Because of this, the communication needs of the hierarchy are dramatically reduced.
This transparency breaks down the traditional siloed hierarchy, as every function has the same set of data to work from. While today, meetings often involve managers preparing presentations to justify or restate reality, in the Fluid Firm the focus is on solving problems and anticipating the future with teams coalescing around problems, not functional silos.
Optimisation will still be important; however, the focus will shift from optimising operational performance to optimising market delivery. Technology, such as autonomous and scalable factory operations, will reduce the variation in operating performance between firms.
Because of this, competitive advantage will not come from minimising operating cost but from maximising value to the customer and the market. The Fluid Firm therefore adjusts continuously to market conditions and customer needs, and so is inherently more flexible than today’s organisation.
Highly specialised technology and the need to constantly innovate to meet market demands will drive another aspect of the Fluid Firm; porosity and collaboration. In order to innovate, companies will require more specialised expertise than they possess internally. After all, no company can hire all possible experts. Because of this, the quality of decisions will become more important than where the decisions come from.
Rather than focus on ownership, successful companies create more fluid barriers with the outside world. They build relationships with customers to better understand where the market is going and to develop insights on how to tailor their offerings for the market. When challenges arise, they bring in experts as needed to solve problems and build relationships with suppliers to help design more specific solutions.
As an added benefit, this increased transparency also improves relationships with external stakeholders, from communities and governments to investors and financiers.
The Fluid Firm today
The oil-and-gas industry provides a glimmer into the Fluid Firm. In oil and gas, one company probably owns the drilling technology while another owns the resource being explored. When there are decisions to be made, a global team of experts may be convened at a moment’s notice, from a variety of companies, to review data and make critical decisions in real time.
This model is increasingly the norm for technology companies, manufacturing companies and oil-and-gas companies. It is also coming to the mining company of the future.
At Stratalis, we see this change happening now. We have worked with mining companies on creating open innovation initiatives that tap ideas from suppliers and experts around the world. We have worked with suppliers around initiatives to work more tightly with their clients, better understand their issues and create more relevant solutions. These miners and suppliers are developing a competitive advantage that will reap benefits today and in the future.
Not all Fluid Firms will be the same, as market differentiation is inherent in the nature of the Fluid Firm. However, all new Fluid Firms, especially within diversified companies, will have elements of:
- Market creation: Companies will focus on becoming market creators and work with customers to create demand and redefine markets and solutions. This deep connection with customers and the market will also position the company to constantly innovate.
- Strategic differentiation: With operating technology minimising traditional advantages, companies will focus on new points of differentiation. These could come from technology development, economies of scale, or other barrier-to-entry type advantages, such as controlling strategic choke points. Other advantages can come from better customer and stakeholder collaboration.
- Asset management: Some companies may outsource all their operations and focus on other sources of value; discovering, understanding, managing and trading in and out of orebodies and resources to create a risk-weighted portfolio that can easily shift over time. Some mining companies are showing potential signs of shifting in this direction.
- Collaboration: In addition to market-facing reasons, operational and project development will require collaboration to improve decision-making and responsiveness. There are other reasons to collaborate, however. The capital cost and risk of developing new projects will increase with so much new and rapidly changing technology. Willingness to partner and collaborate is one way to counter this. This is one aspect of the Fluid Firm that has become more prominent within mining in recent years, across technology and capital projects.
In this series on Strategic Futurecasting, we have explored visions of the future of mining, from operations to organisations to the business model. Some elements of these visions are implementable today and others require further development and innovation. All of them, however, are useful for planning and making decisions today.
Next month, in our final article of this series, we will discuss the implications of these Futurecasts on business today and share lessons that can help inform immediate decisions.