Business Research = Groupthink

I don’t really know what groupthink means – it sounds Orwellian. If it is then it means what it sounds like (or the opposite). Anyway, I define ‘Groupthink’ as a pervasive and gradual development of a highly constrained and conforming view of the world, that is grounded in the hope that crowds do have wisdom. Of course, recent events pretty much demonstrate that crowds are dumb.

I recently read a so called research paper in which a particular and currently popular view of the world was stated, the supported by interviews with a large number of ‘executives’ who were asked what they thought would be their biggest challenges in the next couple of years. These kinds of studies are very common in the IT world, and in the business literature as well. The survey responses are then collated, run through the statistics program and presented in graphs. Then the author provides a few helpful ideas, backed up by case studies, on how we might all plan for the new world order.

There are many reasons why this is wrong. As a scientist I am often confronted by people asserting stuff without a shred of evidence (from my view anyway). In this instance, in order to demonstrate the truth of an hypothesis, a survey was taken of many people’s opinions. This is anecdotal evidence, and valuable for helping a researcher to design an experiment to test it. But it is not data. A common aphorism in science is ‘the plural of anecdote is NOT data.’ It doesn’t matter that you measure it with a scale that gives you numbers that you can manipulate in MS Excel. It doesn’t matter that you can print out pie graphs that say ‘ 30% of executives think that x will happen in the next 2 years.’ It is still just what people reckon will happen.

But worse than this, providing helpful ideas backed up by case studies to address situations that might or might not happen is dangerous. Businesses are very complex entities and just because Dow corning were able to achieve a particular result with a particular approach doesn’t mean it will work here. Where are the case studies of where the approach did not work?

For me the problem is not that the surveys are done, or reported or anything like that. It is that the way the information is presented lends it a level of ‘scientific’ credibility that it is not due.

So the end result is that many readers of business magazines read about surveys of what CEOs worry about – they then start to worry about those same things, and hey presto – it all comes to pass.

I started into this to get something off my chest – and I sort of have – but for those interested in a more thoughtful critique, get hold of a book, Hard Facts by Pfeffer and Sutton.
Here is a video of them talking about their book.

I want to say one word to you. Just one word. “Plastics”

This was how it was in the movie “The Graduate”. Now the word is “Cloud”.
There I was listening to a presentation by CSC researcher Doug Neal on the cloud when it struck me. This, and all the other new, disruptive technology advances that are happening and being reported in blogs like this are overtaking even those of us who are looking out for it. The pace just keeps accelerating.
When I was in primary school I was told I had to finish grade 10 to get a good job. There were still people then leaving school at 13! So when I got to Grade 10 you had to finish year 12. Then you needed a degree. So I did all those things – then thought I’d try to overtake the trend and so I got a PhD. Too Late! Everybody worth their salt has one of them. Don’t know about business – better get an MBA – did that too. This is how it is with technology too, you will never be able to catch up!
So why is the cloud important to the mining industry? Right now because it can help you to take some cost out of the business – so it is absolutely worth a look. Later, because having made the investment there are benefits to all sorts of other things that might arise. The cloud can help you reduce your carbon footprint – better use of capacity by cloud providers = less energy. Later, the ability to ramp up and ramp down fast will mean you can cover peak usage times without having a whole lot of infrastructure that gets used once a month for a few hours.

Sustainable operations in 2020 and 2050.

The populations of the world are beginning to demand that all business operates more sustainably. Everybody, but particularly policy makers can see that we need to do things differently if we expect to have a long term future on the planet. Here we present two views of the mine of the future, seen in terms of their ability to operate with as low a carbon footprint as possible. We picked those two dates because in 2020, many of the current operations will still be going, so the 2020 story is one of how we change the current mines to use less carbon. In 2050 we have the opportunity to consider what can be done with enough time to design in sustainability, and we have upwards of 35 years of technology advances to show a really different type of operation.
Most of our carbon footprint in mines of today comes from how we construct our operations, what we use for fuel, how we operate the business, and how we actually mine and deliver our products. That’s not everything, but it is the lion’s share, and how we respond to these issues will determine what our mines look like in the future.
Sustainability in Mining in 2020.
Today we will visit an open cut copper mine that has been operating since the late 1990’s. New technology developments mean that this mine still has many years of life left, so there is opportunity to make longer term investments in the operation that leave plenty of runway to recoup the investment.
When it was built, this mine was designed with large vehicle transport as the main basis for the layout. It used traditional building methods, heavily reliant on concrete slabs for buildings and metal and concrete workshops and warehouses. An extensive system of haul roads and access roads serves most of the mine areas. This means that the mines operation is heavily dependent on haul trucks, water trucks and light utility vehicles, as well as all manner of mobile mining and drilling equipment, shovels, graders etc.
As we drive into the mine, we need to stop at the security entrance and log ourselves in. Before we came we enrolled in the biometric access system, and completed the visitors safety induction on line. To one side of the gate there is an oil bunker, full of locally produced biodiesel that it used to power the entire fleet of mobile equipment, and much of the fixed plant as well, specifically the generators which are turbines fuels with bio-diesel.
We travel over to the workers accommodation town where the 250 workers are housed while they are at the site. The workers each have a small unit with its own composting toilet, solar/electric hot water, but without air-conditioning. Even though the temperature here can be very hot in the summer, and very cold in the winter, the units have been designed to stay within a comfortable temperature range year round. They use orientation to the sun, deep eaves, ‘green’ concrete slabs which incorporate fly ash and which provide a heat sink to help warm the unit in the winter. All of the water used by the showers and toilets is recycled for use in the mining operation if possible, or for maintaining the gardens.
Our tour of the sustainable aspects of the site includes a visit to the operations room of the mine. The operations room has two walls lined with video monitors. These low power monitors use look just like paper, and can be folded up and moved around. Some are displaying real time videos of some of the key operational areas – one shows the ore conveyor, another shows the shovel loading the haul trucks. Different scenes are cycling through and if any operation begins to operate outside of parameters an alarm sounds and the ops system immediately allocates some monitor space to viewing that process. One whole wall depicts a similar room in the capital – some 500 kms away where mine planners, maintenance planners, and managers are helping the on-site workers to deal with issues, contribute to planning and provide advice on optimizing the operation. That group is helping a number of different mines at the same time.
Out on the site, haul trucks are moving ore to the crushers and from there it goes to the leach heaps. Like today, sulfuric acid is added to the heaps, but a series of sensors spread throughout the heap controls the flow of acid to maximise the process efficiency.
All of the technologies that power these ideas are available and in use today – some in mining operations, some in other industries. They need to be because if the mining industry wants to implement these things by 2020, they need to be starting in the next few years. To look for some really different ways of operating, we’ll look out to 2050.
Mining in 2050
Operating mines in 2050 might not be in their planning stages until 2045. That allows us to contemplate technologies that will have the benefit of 35 years of development. Futurists will tell you that predicting 35 years of technology development is really difficult – but we’ll do it anyway because it is also really fun.
A mine in 2050 will look very different that 2020. For a start, there will be very few people because almost all of the machinery will be automated. The entire area of the open cut will be highly secure, to prevent people entering areas where large machinery is operating at very high speeds. The site will look more like an airport than a mine, with service areas located at the edge of the secure area. The only people on site will be a small security group to ensure that unauthorized people don’t enter the site, and a small group of maintenance engineers that operate the vehicle maintenance facility. Because there are so few people, there is no need for the vast infrastructure that currently supports the on-site workforces.
Within the mine we see large numbers of small vehicles operating at speed, and without human drivers. Technology originally designed by NASA to guide the Mars Rover, and newer planetary probes on the moons of Jupiter is now being used by these vehicles. The vehicles are multi-purpose and directly access the mine plan (updated daily by planning software and mine engineers working in the capital city) and using collaborative machine to machine protocols determine the most efficient way to deliver against the days mining targets. The vehicles self-configure as micro-haulers, drill and blast vehicles, or road maintenance vehicles in the morning, and can change configuration throughout the day as the mine operating plan changes dynamically in response to the days events.
All of these vehicles are electric, powered by onboard hydrogen fuel cells. A big part of the mines operation is the generation of Hydrogen for fuels cells, and this is achieved using a combination of renewable sources, solar power, wind power and hot rock geothermal power which is used to produce hydrogen from water. Hydrogen is stockpiled so that it is available for use at all hours of the day and night. This allows the entire mine to be worked with zero emissions, and all water is recycled. In this mine, saline ground waters are desalinated using waste heat from the hydrogen plant so that water lost to the environment through evaporation and water vapour from the hydrogen cells is replaced. (A further consequence of this is that groundwater salinity problems of the last century are being clawed back, and the landscape is regenerating.)
Finally, this mine uses nanotechnology to extract the copper from the ore. The large chemical leach heaps have been replaced by hybrid bio-mechanical nano-extraction techniques where bacteria sized cyber-organisms are bred in large ponds, migrate into the heaps, directly harvest the copper metal from the ore using biochemical reactions. They incorporate the copper into their bodies and then move to an extraction pond where they die, and decompose leaving elemental copper that can be easily recovered from the pond.
All of these technologies are being researched or developed now. If anything, this vision of 2050 will prove to be outrageously conservative. If, for instance, nanotechnology, materials science and renewable energy technologies develop along the same kind of timeline as we are used to seeing now then it is arguable whether the economy will need mining at all.

Shut the Gate - the horse has bolted!

They say a week is a long time in politics. In the mining industry, some weeks are like that. This time last year, the commodities super cycle was promising good times and fat profits for the next 10 to 15 years. Hardly anybody was predicting that the normal cyclicity of the mining game might come into play again so soon. Even as late as October 2008, the CEOs of the big mining companies were suggesting that the 'Global Financial Crisis' (GFC) would have a minimal impact on the industry, that if anybody suffered it would be small, debt heavy players who would be swallowed up by the big, cash rich players.
Clearly the industry is in a very different place now than last year. But is it really that different? To understand better, we need to know what was driving the boom conditions. If the underlying causes have not changed much, then maybe that says something about the current low cycle.
The boom was driven by many factors, chiefly the rise and modernisation of the economies of China and India, and the high growth rates in Russia, Brazil and others driving up the demand for raw materials. At the same time, a constricted market for energy had driven oil prices through the roof. Both of these factors allowed mining and petroleum companies to capitalise on high prices for their products. If these factors have changed markedly for the worse, then a bust cycle is likely, but if they remain largely unchanged then maybe the current poor conditions are also only temporary.
Very few commentators are suggesting that the demand drop in China is anything other than temporary. There are still more than a billion people in China, and there is still a clear intent by the central government to modernise. The recent moves by Chinese companies to inject capital into Australian mining companies strongly indicates that they are taking advantage of the current situation to secure lower cost long-term access to raw materials. We should expect to see more of this. The next round of price negotiations may see China trading off price for long term access - then we can be very sure that the boom will soon resume, albeit at a moderated pace.
India's march towards modernisation also looks like a short term slow-down, with Indian capital also flowing into the West. All in all, the underlying drivers of the recent boom remain extant, if dormant for now, and this ‘bust’ cycle will be a very short one.
So what does this mean for mining companies? Let’s look at the financial, political, physical and personnel issues and some ways IT can help.
Good money is hard to find. For many mining companies, the biggest short term issue is managing their debt load. Some companies are selling off non-performing assets in order to pay down high debt levels, and doing so at the bottom of the cycle is clearly not a great outcome. So while cash is available, the real issue is the lack of trust in the lending market.
Investment from Soveriegn wealth funds may have long term business concerns. The main source of significant lending now are the only players with a lot of cash - the sovereign wealth funds. These funds are injecting capital into cash-poor mining companies with the long term hope of getting access to cheaper raw materials. Longer term, these players may put a brake on price increases when the market recovers, an outcome the other shareholders may not welcome.
Cost reductions lag behind price reductions. In the mad rush to produce more and more product, mining companies were not keeping a check on rising costs. In that environment the fact that suppliers take the opportunity to share in the benefit for the commodity boom by increasing their prices should not be surprising. We note that companies that enter into long term supply deals such as CSC, are constrained from hiking prices in these circumstances. Companies need to address high cost structures and should also think about how to structure their supplier arrangements so that costs can be better controlled at every level of the cycle. Long term agreements like those that CSC negotiate can help to achieve a more stable cycle. Mining companies should not be surprised that suppliers will feel they deserve a share of the benefits in the boom times. An arguement can be made that a more collaborative approach to risk and reward across the whole cycle might produce better long term outcomes for suppliers and mining companies.
Fuel costs are still very high. Even though fuel costs have fallen recently, fluctuations are volatile. With an expectation of a long term average price of about $65.00US a barrel, the cost of fueling an operation is significant, and prediction of the price volatility is not a trivial exercise.
Sustainability won't go away. The need for business response to the growing and evolving public expectations for better sustainability outcomes are at risk of being pushed into the background. Even so the need for business to address them will not go away and business will need to respond soon. The only other outcome is more regulation.
Country Risk. In some juristictions, responses to the global financial crisis are quite protectionist. If this happens, trade will suffer and consequently, so will international business. As free-trade is often credited with reducing conflict, any protectionist trend will increase conflict levels – a vicious cycle that is to be avoided. The largest economies are careful to avoid the impression or reality of trade protectionism, but there is a risk that smaller economies won't, and that some may even take the opportunity to nationalise key industries.
Compliance. Given the depth of the crisis, and the demonisation of so called 'capitalism gone mad' there can be no doubt that government regulation of markets will increase, and there wil be great pressure on companies to behave very differently than before. Predicting what that will mean in particular is difficult, but there will be more cost involved in the conduct of business.
People Constraints. For the last few years, skilled people have been hard to get, and in the supply constricted market, wages have escalated and people have moved around a lot. Now companies need to take measures to keep their best staff as they reduce their workforce. People who flocked towards the mining industry in the past will now be looking to industries that offer more attractive jobs in better locations, at competitive salaries. The mining industry can no longer expect the pick of the bunch.
While before the industry was concerned at losing a lot of knowledge in the 'great crew change' with baby boomers retiring, that worry may now be receding as aging workers stay in the workforce because retirement investments have taken such a pounding.
Infrastructure underinvestment is still a problem. Even though the industry has been contributing enormously to government tax revenues for years, government owned infrastructure like ports and railways have not attracted enough investment to match their capacity to the demand. Decreasing demand will now reduce the load on facilities, but they still need to be modernised and expanded for when the cycle picks up again. Major infrastructure projects are not so easy to turn off and then on again. The opportunity is for government and mining companies to jointly invest in infrastructure to help boost the economy as well as position for future growth.
How IT can help.
IT has always been a lever to use for the reduction of costs within a business. Mining companies should be considering how they can increase their IT spend to invest in long-term cost-reduction initiatives that identify and deliver supply chain efficiencies and improve their ability to make better business decisions with more information, managed better. Further, automation of business processes and equipment can reduce the cost of unplanned process variation.
The ability of IT to help a company deal with regulatory compliance is also centred on systems that can collect, collate, and present complicated information. Business intelligence and competitive intelligence systems can help executives know what is happening and hence make better decisions.
There are many ways that IT can help with people issues. Firstly, understanding who is on the books, where they are and how much to pay them are core capabilities of IT systems, and have been for many years. More recently, and into the future, IT will enable mine staff to work remotely from the minesite, say in the city, and scarce technical staff will be able to apply their knowledge across many different sites. Mining companies should be looking at how IT can help them to make better use of their staff, and allow them to have a better work/life balance.
IT has a role to play in helping mining companies to better use existing infrastructure and also to help in locating new mineral deposits. Capacity constraints at ports, railways, and roads can all be ameliorated with better and smarter scheduling systems. [C T1] . In terms of mineral exploration, IT has had a central role to play in the introduction of remote sensing and geographic information systems.
Conclusion
IT has always had a role to play in helping businesses to be more efficient. Indeed, it has no other function but to help businesses be more efficient, whether that means to operate more efficiently, compete more efficiently, or market more efficiently. Out of the efficiency, comes effectiveness, where more information delivered in a timely manner to the right people leads to better decisions, faster, hence able to react to opportunities and threats more appropriately. In the current environment, businesses need to be more attuned to how IT can help, and also how it can help to prevent backsliding once the economic conditions improve.
Alice in Wonderland quote
`A slow sort of country!' said the Queen. `Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!'