For nearly two years now we’ve been reading the same news – iron ore prices down from the 2011 price of $180 per ton to only $110, coal and base metal prices down similarly and we won’t even mention what’s happened to gold. At the same time, Australia’s Liquefied Natural Gas investments have started to dry up, with some projects being mothballed and continued rumblings about the Coal Seam Gas industry in Queensland adding to the uncertainty.
Whether you believe the Australian Resources Boom is over or not, we’re clearly working in a different environment to those heady days of 2010/11. The agendas of the miners have quickly turned to cost cutting, productivity improvements and “sweating the assets” (i.e. efficiency). With first gas dates looming for the green-field LNG projects, no doubt the future operational strategies of the companies behind them will likewise move in the same direction.
How then, can digital technologies help Resources companies shift their focus from building capacity to driving efficiency and performance?
A recent study by IBM and the National Institute of Economic and Industrial Research “Reinventing Australian enterprises for the digital economy” https://www-07.ibm.com/au/eraofsmart/ predicts that a new generation of managers will drive a step change in Resource Sector business models, making much more use of digital technology for improving visibility and agility of their operations. IBM has identified the key digital technologies – the new era capabilities for the Digital Economy – and they are just as critical to miners and oil & gas companies as they are to banks and retailers. So, let’s take a quick look at these capabilities:
- Analytics – the ROI of optimised supply chains, optimised planning and predictive analytics is simply too compelling to be ignored. Costs can be removed, efficiency and productivity improved;
- Mobile – whether it’s optimising fleet and equipment via remote operations and maintenance or enabling the workforce through mobile communications and applications, mobile represents a raft of technologies that can be used to improve productivity, efficiency, and safety and cut costs;
- Cloud – public cloud isn’t for everyone, but pragmatic use of hybrid and private clouds at the infrastructure, platform and software levels can not only cut costs but ensure the cost structure is more in line with variable revenues as commodity prices cycle;
- Social – the world of corporate social media heralds the potential solution to the Knowledge Management dilemma – how can companies maintain the knowledge of their workers as they age and retire? Using social media applications can help workers find the knowledge they need before it (and the capital tied up in it) walks out the door.
At first blush, it may seem like the “Digital Economy” and resources companies are unlikely bedfellows – the challenge will be to move mindsets away from the physical to the digital. But the rewards of a potential Digital Boom are there for all. It’s a challenge that IBM is uniquely placed to take on.