In a world first, Australian researchers at global management consulting firm VCI have uncovered the direct relationship between innovation strategies and total shareholder return in the mining industry, the results of which have been published in the global report – State of Play: Delivering strategy and innovation.
Through interviews, survey and deep analysis of 399 the world’s largest mining and service companies, including the likes of Rio Tinto, BHP, and Oz Minerals, VCI have developed an indicator to demonstrate the way in which returns correlate with innovation.
Something VCI CEO and report co-founder Dr. Graeme Stanway says has never been done before.
“In the past decade the term ‘innovation’ has been thrown around so much that it has become a fairly vague concept with no way of measuring its value. We wanted to give companies some cold, hard data and targeted knowledge on where they should be focusing their innovation efforts,” he said.
Through collaboration with a team of academics and VCI’s own economists a formula has been tried and tested to identify tangible relationships between returns and how mining companies innovate.
“Rather than just creating and delivering innovation, we can now measure impacts – applicable not just in mining but in any sector.”
So, what were the key take outs from State of Play: Delivering strategy and innovation?
TIMING IS EVERYTHING
A primary focus for companies when it comes to innovation timeframes is 1-3-year and 3-5-year plans. However, these timeframes are linked to poorer shareholder returns in the long run.
Instead, a split approach should be taken that focuses on immediate survival (in the next year) and longer-term repositioning over the 5-10-year time period.
JUNIORS SHOULD BE LEADING THE CHARGE
Interestingly, when junior staff members were the main drivers of innovation, there was the greatest link to high shareholder returns. This was ahead of those led by head of strategy, head of technology or driven by the board.
In fact, when the head of technology was the main driver of the company’s innovation, a negative relationship with shareholder return was evident.
In addition to developing the right skills, the report finds that ultimately culture is the key to innovation success.
ABOUT THE REPORT
The report was based on the largest survey in the global mining industry, surveying over 800 global mining professionals, the majority of which work at an executive level across 399 companies. This report is the first to be released by State of Play in an ongoing 2019 series on innovation and strategy in the global mining industry. The reports are the result of a partnership with Curtin University, METS Ignited, and The University of Western Australia.
State of Play reports are available from: www.stateofplay.org/results