Mining Innovation: Does Size Matter?

Kate: One of the potential challenges to maintaining Australia’s capacity for mining innovation is predicted to be the increasing dominance of large, conglomerated, multinational organisations.

Historically, the mining industry had a number of medium sized organisations that could drive rapid and diverse innovation, however the rationalisation in the industry means that the policies and objectives of the large players may increasingly narrow the focus on future mining innovation. Head of Innovation and Technology at Rio Tinto John McGagh, recently spoke about Rio Tinto’s Innovation Strategy being implemented through a closed innovation model, whereby research and development is done by Rio Tinto and selected partners with innovations retained exclusively. This Closed Innovation Model is very different to the traditionally more open innovation models in the sector where typically university research projects are funded by a large number of mining industry sponsors through an intermediary such as AMIRA. This Open Innovation Model allowed any innovative mining solutions to be taken up fairly rapidly across the sector. The early adopters have an advantage of several years but any significant advantage is usually short lived.  With closed innovation, companies can lower their mining cost curve (a competitive advantage) preferentially over their competitors until the competitors obtain the innovative solution themselves. One potential downside of such a strategy is the risk associated with the typically high staff turnover within the mining industry. Time will tell. An overview of the implications of closed and open innovation models for industry more broadly is provided by the Australian Institute for Commercialisation here.

Another challenge arising from the global reach of multinational mining companies is the ability for Australia to maintain flows of benefits from innovation to Australian companies and institutions. Any successful innovation produced in Australia will be quickly transferred to the other global operations of a given international company. In this environment niche technology innovation (such as the technology developed by GroundProbe) may be important, as long as first mover advantages are significant. Agility may be the key for smaller companies operating within a market dominated by large players. In the worlds of Rupert Murdoch, in a rapidly changing world “Big will not beat small anymore. It will be the fast beating the slow.” (IBM Global CEO Study 2006)

Small innovative companies and research groups are going to have to develop evolving strategies to deal with the challenges of operating in an industry dominated by large multinational players. It will be the role of the Australian mining industry, universities, research centres and government to develop coherent policies to maximise the potential of competitive advantage from innovation in Australia.




Comments

  1. Interesting, especially the the role of small to medium enterprises in innovation.
     
    Certainly the Universities and Government seem to gravitate towards the big companies – headline stuff.  However, innovation seems to come from smaller entities.
     
    The major companies seems to focus on using their large balance sheets to develop large (and hopefully) low cost operations.  This is not a criticism – this is their strength.
     
    The Australian technology/innovation successes seem to be small service providers.

    Is this a shift for the mining industry? If so, It would have implications for future research and technology funding.

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