Creating Value Through the Adoption of Technology Innovation in the Resources Sector

Technology Series Report June 2014

‘Creating value through the adoption of technology innovation in the resources sector’

Innovation is the key component of Israel’s economic success and underpins the “Start-Up Nation” culture. In setting the scene for the AICC(WA) Technology Series presentation on Thursday 26 June 2014, the driving force of Israeli business innovation was showcased. Global investment into Israel’s hi-tech industry has led to invention and productivity solutions over the past decade that have revolutionised markets. The unique ability of Israel to transform its research and development into commercialised entities through a process of technology transfer, patent, and acquisitions was particularly highlighted. Attributes contributing to the success of Israeli innovation were presented as follows:

· Creating a business culture that accepts the failure of Start-Up ventures, classifying failures as a learning experience and as a springboard to encourage further business development;

· Bringing together diverse groups of people, and noting the multi-ethnic nature of Israeli society as a product of immigration;

· Drawing on the Jewish tradition of learning, critical enquiry, challenging convention, questioning, arguing and exhibiting “chutzpah” when examining ideas and concepts; and

· Transferring the experience of national military conscription into the market of Technology development, inclusive of leadership traits, the ability to make decisions under pressure, and technical skills relating to security, hi-tech, engineering, aeronautics, and related fields that are acquired through military service.

Application of the Israeli business model to Australian industry may not be directly transferred in the form of culture, however the experience and outcomes associated with hi-tech innovation are of relevance to the innovation investment that is promulgated by major Australian resources companies. The AICC(WA) Technology Series Presentation presented two case studies of note, demonstrating the importance of innovation as a key lever to maintain the competitive strength of Australia’s resource industry base.

Larry Lopez, Partner of Australian Venture Consultants and Vice-President of the AICC(WA) facilitated the presentation and discussion, posing that recognition of Australian investment in innovation was undervalued, and that whilst there is great innovation within Australia, the process of adopting, implementing and activating innovation within the market required greater attention.

From L to R: Mr Larry Lopez, Vice President, Australia-Israel Chamber of Commerce (WA) and Partner, Australian Venture Consultants, Mr Alan Cransberg, Chairman & Managing Director, Alcoa of Australia, Mr Richard Cohen, Acting Managing Director Projects & Development, Rio Tinto Iron Ore

Rio Tinto Iron Ore

Presentation by Richard Cohen, Acting Managing Director, Projects and Development

Rio Tinto was formed 140 years ago and from its inception the company has needed to adapt to changes in markets and technologies. When iron ore operations commenced in northern Western Australia in the 1960’s, both mining and supporting infrastructure was required. The company built new homes, towns, and mines, progressively introducing new systems and technology platforms. Today the operation spans 15 mines, 4 ports, 3 power stations, and a vast array of civil works. Recognition of the pioneering systems and step change technology deliver context to the Rio Tinto Iron Ore expansion. The region is abundant with natural resources, but the remote locations and difficulties associated with access drive the innovation that has been developed.

Richard Cohen quantified the scale of production efficiency led by technology innovation. The operation is moving from 220 million tonnes per annum (“mpta”), to currently 290mtpa and will reach 360mpta by 2017, an approximate 40% growth in capacity. Associated with rail and port growth, the Rio Tinto innovation incorporates new approaches to business, new business structures, new partnerships and new technologies. Richard highlighted the Airborne Gravity Gradiometer for mapping and detection as a significant example.

The ability to merge 20 remote control centres into the real time Perth based consolidated Perth Operations Centre has been the biggest innovation success story for the company to date. The on-ground visualisation facilities are complemented by 50 driverless trucks that have delivered savings, and removed occupational health and safety risks. These driverless trucks have moved more than 200 million tonnes of earth, and almost 4 million kilometres of transport has been directed, incident free. Ultimately, the success of the Rio Tinto progress was attributed by Richard not to the technology innovation alone, but to the human systems engineering that led to its development.

Mr Richard Cohen, Acting Managing Director Projects & Development, Rio Tinto Iron Ore

Alcoa

Presentation by Alan Cransberg – Chairman and Managing Director of Alcoa Australia

With the grace of good humour and the passion of a footballer, Alan Cransberg shared the 125 year journey that has positioned Alcoa as a company with a presence in 200 locations, across 30 countries, with 60,000 employees and a $23 billion annual sales ledger.

Some 90% of all aluminium aerospace alloys have been developed by Alcoa. Within Western Australia 9 million tonnes per annum of alumina is refined by Alcoa in Wagerup, Kwinana and Pinjarra. At industry level, 13% of the world’s alumina supply is shipped out of the Bunbury port.

Developed technology and innovation continues to drive Alcoa developments in markets such as the automotive industry, engineering services and consumables.

Reflecting on the Alcoa local spend of $2.2 billion, Alan noted that the application of technology had increased production and efficiency. The flow on effect of this is the negation of a need for further capital investment into new plant development. Rather, the company has been able to optimise the current value of its existing assets. Within Alcoa’s market, and embedded into its culture, is the critical rehabilitation, sustainability, and preservation of the natural habitat. “It is critical that we can mine responsibly and rehabilitate as the market demands it”.

Innovation for the sake of science alone was insufficient for Alcoa. Alan challenged that science has to create value, and that a business purpose has to sit at both the back end and front end of development. There must be an ongoing use for the science over time, and as such, Alan commented that if there was no business case, he was unable to consider proposals for innovation. He further posed that Australia has an insufficient record of converting science into money. To support this position he evidenced that per capita, Australia is second placed in world academia at producing publications, but rated 96th when it comes to innovation efficiency.

Alan concluded that Australia needs to improve its commercialisation and transfer of technology, and a strong industrial Research and Development sector (currently missing from the Australian market) is required in order to achieve this. Citing the example of Israeli industry, Alan conceded Australia has the ability to be a lot smarter, and that the solution rests with an ecosystem of major companies who can work collaboratively with Small to Medium Enterprise and the public sector to commercialise R&D.

Mr Alan Cransberg, Chairman & Managing Director, Alcoa of Australia

Technology Innovation

Open discussion, facilitated by Larry Lopez, explored where the next opportunities sit for Western Australia. In the presence of CSIRO CEO, Dr Megan Clark, the business environment within which a culture of innovation can best be fostered was the main focus of debate. It was reiterated that technology projects can be exciting and sexy, but it was not about the technology, rather the people who sit behind it, that is the catalyst for true innovation. Engaging people who have been integrally involved in the business, who conduct their Research and Development on site, and who are not blindsided by being too internally focussed were all mentioned as attributes for success. The role of Academia, through collaboration, alignment, and commercial focus was also a core consideration for enhancing the capacity of the Australian market.

The respectful ability and challenge of business to protect their Intellectual Property also needs to be measured by applying a broader lense, consolidating practical experience at an industry level and making broader problems, for example ecological issues, more transparent. Protecting innovation for commercial advantage by locking it up has a shelf life; if commercialisation is not pursued, it is likely that concurrent R&D will emerge elsewhere and overtake an insular approach to technology development. If industry is to diversify in the broader interest of economic growth then innovation needs to be sold and commercialised beyond the point of invention but at an early stage of the production cycle.

The discussion concluded by recognising that successful innovation also balances delivery demand with capability. It evolves by matching problems with solutions, and even moreso, emerging problems with emerging solutions.

Sponsor acknowledgement: Mr John King, Principal, Wrays

The AICC(WA) Technology Series has proudly stimulated debate within the Western Australian business community about future investment into innovation. Using the example and success of Israel, a country renowned for its ability to share its innovation with the developing world and to take its invention to international markets, Australia has evident potential and inestimable capacity to follow suit.

Dr Megan Clark, Chief Executive, CSIRO