Very few have been able to capitalize on boom periods to soften recessions. Instead, as observed in 2022, the productivity of the mining sector has remained practically stagnant for decades. Volatile commodity prices, deterioration of mineral quality in mature mines, higher labor and energy costs, and intensified sustainability demands have hindered the attraction and retention of critical talent, as well as substantial productivity improvement.

Technological advancements, including generative AI, can unlock the productive potential of the mining sector if companies manage to implement innovations to capture lasting impact. At the time of writing this article, few companies have been able to do so. A recent study by McKinsey reveals that, across all industries, only 5 percent of companies allocate at least 10 percent of their EBIT to gen AI. And the odds of success in a digital transformation remain discouraging, with studies identifying that most digital investments generate less than a third of the expected impact.

However, some regional and global mining organizations have achieved exceptional results. Not only are they outperforming their peers, but they continue to improve their performance over time, resisting complacency and widening the competitive gap. These companies use technology to generate lasting value – and some have culminated their successful journey with the Shingo Prize, widely recognized as one of the highest accolades for operational excellence globally.

What sets these players apart?

It is not about better-located or higher-quality assets; nor is it about a unique talent pool or greater access to capital. Not even more efficient technology.

What distinguishes them is a commitment to cultural change: teams and individuals throughout the organization not only learn what operational excellence is, but also how to improve it year after year. They are not content to compete today; instead, they shape the organization for the future.

What is Operational Excellence in Mining?

When we analyze how companies with superior performance (the “outperformers”) turned operational excellence into business value, a distinctive pattern emerges with four stages:

1. Rapid improvements generate rapid production increases. In the first years after launching operational excellence initiatives, production grows – often significantly. A major tin mine, for example, experienced a 40 percent increase in production during the first three years of its transformation: 14 percent in the first year, followed by 12 percent in the subsequent two years.
2. Over time, productivity continues to improve. Even after the initial wave of production improvements begins to level off, productivity continues to rise on a more gradual trajectory. Two years into their transformation, a copper miner increased production by 3 to 5 percent annually, despite some erosion of the ore grade.
3. Maturity strengthens resilience. The most mature organizations in the sector have managed to withstand significant cost increases, even in periods of high post-COVID-19 pandemic inflation. The “outperformers” reduced unit costs at an average compounded annual rate of 3 to 6 percent, largely increasing their productivity.
4. Employees remain engaged. In all high-performance mining organizations, employee satisfaction surveys show sustained improvement of between five and ten percentage points per year. Retention rates in these organizations were unusually high (over 90 percent annually in some) and have proven to be a critical advantage given the talent shortage facing the mining industry.

Together, these four stages paint a picture of what operational excellence means for a company. For example, despite an unusually challenging year, an award-winning mine exceeded its production and profitability targets, even though no other unit in the entire company could even reach its goals. In another mining organization, a business unit surpassed its objectives to the point that the company raised them mid-year so the unit could “subsidize” other lagging areas.

The Difference is Culture

Another key differentiator we observed among the most successful companies was how they approached the consideration and management of corporate culture. Specifically, these organizations share five cultural attributes:

• Everyone is clear on the purpose and aspirations of the organization.
• Everyone has a strong desire to contribute and knows how to do so.
• The work environment is such that people feel safe making decisions and also asking for help.
• There are mechanisms that allow for identifying opportunities, tracking initiatives, and capturing value.
• Leaders continuously support the development of their teams.

Additionally, we noted that the cultures built in these companies were not the result of chance, but of a methodology whose systems reinforce the behaviors that drive superior performance. When sustained over time, organization members learn to be proactive rather than reactive, and measure results based on future aspirations rather than past achievements. Conceptually, the path is quite simple. However, walking it requires effort and perseverance. To achieve it, leaders must:

• Define not only a bold aspiration for the business, but also the culture they desire for their organization and the desired behaviors.
• Establish a set of management practices that help people practice those new behaviors daily. For example, workers can learn a key skill, such as root cause problem solving. But unless managers set aside time to practice the new skills and leaders incorporate skill development into performance expectations, the desired behaviors will inevitably fade. The task of leaders is to set expectations that reward new ways of working without creating new forms of bureaucracy.
• Use a variety of systems and tools to support and implement these management practices so that applying them and modeling the right behaviors becomes easier than reverting to old habits. Gradually, the environment evolves and new behaviors become automatic.

Defining Cultural Aspirations

The first step is for everyone to understand what is possible. Mining companies face particular challenges at this stage, as their operations are by definition unique, with specific complexities of each mine, from geology to geopolitics. This often leads to underestimating the successes of other companies due to their low probability of application.

But small efforts of imagination can lead to a significant shift in perspective. After a visit to a financial services organization, the leader of a mining company noticed that people could work more effectively. Despite a very different context, both industries had highly skilled specialists collaborating to complete complex projects. The financial institution had reduced the time required to complete complex transactions by over 75 percent – at that time, an almost unimaginable figure, which made the mining executive reconsider how much improvement could be achieved.

The next step is more pragmatic: understanding the current level of operation performance, not only by reviewing basic outcome metrics – what has already happened – but by asking what could happen if operations were executed at their full potential. This involves questioning every aspect of processes to identify bottlenecks and find their root cause, and repeating it at every level of the organization.

For example, reviewing outcome metrics generally reveals known but unresolved problems for years, or entire areas of the business whose performance has stagnated due to lack of attention. The question that follows is: why weren’t they improving? The answer can lead to even higher aspirations, as it often reflects serious weaknesses in the company’s management systems, such as very limited performance metrics. And the root of failures in management systems is culture: a tendency to reward good news over bad, or focus on production volume without considering how those results were achieved. The aspiration is to change the culture.

Embedding Culture in the Production Area

One of the fundamental requirements for operational excellence in any organization is for leaders and managers to “go and see” how the work is done – the “Gemba Walk,” in classic Lean philosophy language. For many leaders, the Gemba walk consists of verifying whether the work is being carried out in accordance with a list of codified best practices, often combined with feedback to address technical issues and improve processes.

That is good, but the leaders of Shingo Prize-winning mines do something much better: Since they probably do not know the production processes better than their managers and workers, they know that checking boxes on a list will not create much value. What they can assess is whether workers and managers are exhibiting the desired behaviors, guiding the conversation with questions designed to reinforce a value, for example, problem-solving: “What is the future state? What is the current state? What is preventing us from reaching the goal? How to close the gap?” The purpose is not to evaluate the content of the response but the quality of the discussion.

Ensuring that Culture Continues to Evolve

The most important feature shared by the best companies is that they continue to improve, resisting the confusion that has reduced the average life of a company in the S&P 500 index by at least 60 percent since the 1960s. Like the Bourbon monarchy of France, corporate giants succumb because they have “learned nothing and forgotten nothing.” The outperformers turn that maxim on its head: they learn everything and discard what no longer generates value.

What constitutes a good performance dialogue, for example, is often well known: defined KPIs and objectives, visual boards showing performance in relation to objectives, actions to address gaps, and accountability for those actions. Performance dialogues in the most advanced sites are fundamentally different. Instead of just looking back at performance, they also provide a future view of objectives using AI models based on actual conditions. As a result, actions not only address existing gaps but also raise the bar for the future.

These high-performance organizations also measure the progress of culture against the ideal, and how business results have evolved in line with culture. Achievements are celebrated, while stagnation or erosion trigger a review of management practices and their support systems. This way, the entire organization improves continuously.

The Role of Technology in Achieving True Operational Excellence

Some mining organizations are further strengthening their results through efficient deployment of technology to improve their operational and management systems. These investments can accelerate and deepen cultural change. While our research confirms that, for example, nearly three-quarters of companies (across all sectors) have implemented pilots or local deployments of gen AI, only a minority of them achieve lasting success with their technological transformations. In these organizations, strong cultures and robust management systems have been critical to scaling technological initiatives across the entire company.

Companies create augmented production systems that harness the full potential of digital technologies in a sustained manner. A mining organization, for example, seeks to make the algorithms of its AI tools as transparent as possible to increase employee trust and simplify adjustments in response to changes in ore conditions. As a result, employees continue to use and improve the tools more than two years after their initial implementation.

As illustrated by this case, instead of being distracted by the “charm” of new technologies, the most efficient organizations maintain a precise focus on delivering value. This requires consistency at all organizational levels, with leaders and frontline operators understanding and supporting the use of technology in their daily decisions.

Well-designed organizational and management systems that keep employees focused on company objectives facilitate optimal decision-making throughout the value chain. Conversely, leadership often allows managers to set goals that highlight their teams’ work but contribute little to overall performance. The leaders of outperformers dedicate the time and effort necessary to ensure that incentives across the company are aligned with the business purpose and strategy.

How Leaders Change

The most advanced mining organizations train their staff to continuously optimize operations and, more importantly in the long term, the organization’s improvement capacity.

A key challenge for mining organizations is the increasing internal complexity, reflecting the rising external complexity due to macroeconomic challenges, sustainability goals, new technologies, and customer demands. Coordinating all the required expertise without slowing down the organization involves redefining how its different parts communicate and make decisions. The standard option – creating a new committee or requiring a new approval step – is a recipe that recreates the bureaucracies and silos that have long undermined productivity.

Breaking Down Silos

High-performance organizations recognize the role of leadership in combating bureaucracy. Leaders connect all organization members by translating a common purpose into tangible goals and expectations, including efficient use of physical, financial, and human resources. A senior executive of a leading mining company expressed: “My main goal as a leader is to prevent silos from forming, which means creating structures that encourage collaboration, not new bottlenecks. This has changed my thinking about my role.”

For this leader, this is akin to university studies: it is no longer sufficient to specialize in a single subject. Instead, every leader now needs a general education in the business or functional unit they oversee, and also one or more “specializations” in other units to support their respective leaders. Thus, all leaders develop a more comprehensive perspective of the company’s operations.

This helped prevent serious issues during the implementation of AI tools by the mining company. Thanks to the responsible parties for the previous steps of the process knowing the processing capacity, they agreed to limit production increases to avoid saturating any stage of the process, and the company achieved its main goal, which was a double-digit increase in finished product volume. A common purpose, a clear objective, and a culture of cooperation made leaders set aside immediate benefits for their units in favor of better overall long-term performance.

Reinforcing Improvements

Even a strong culture can fade if not monitored and managed properly. A constant task for leaders is to make their organization’s purpose a reality, making daily work more motivating for frontline teams. And they can achieve this with some of these practices:

• Share stories that connect daily tasks with a broader purpose (e.g., how the main product of the mine directly contributes to the energy transition).
• Establish routines that promote continuous improvement, such as regular team observations, feedback, and coaching.
• Cultivate a trusting environment where everyone feels responsible for adding value and encourages open sharing of successes and failures.
• Empower teams through training and education, emphasizing the development of new skills and capabilities.

Senior leaders model the desired behaviors, motivating everyone to embrace the culture and pursue the organization’s purpose. They also prioritize problem-solving at all levels, ensuring that each team member understands their role, the expected outcomes, and how to identify and seize improvement opportunities.

Mid-level and frontline management also play a critical role here, overseeing the systems and mechanisms that senior leadership has established to reinforce behaviors. They must ensure that management practices help build people’s capabilities so that every operator understands what they need to do and how to do it, and most importantly, how it could be done better. By learning to recognize deviations from expected results and find opportunities to optimize them, operators can gradually raise standards throughout the organization.

With this approach, leaders provide their teams with the context and competencies needed for decisions to be made with the appropriate level of expertise and as close as possible to operations. Those doing the work can solve most operational problems themselves, from improving safety to implementing the latest AI advancements, with a full understanding of how their work contributes to the business and impacts results.

Conclusion

The imperative of productivity in the mining industry requires a strategic and data-driven approach to achieve operational excellence. By focusing on cultural change, technological innovation, and organizational alignment, mining companies can navigate the challenges of reduced carbon emissions and drive sustainable growth. It is essential for organizations to commit explicitly to these initiatives if they are to succeed in the evolving landscape of the mining sector.

FAQ

Q: What are the key factors driving operational excellence in the mining industry?

A: The key factors driving operational excellence in the mining industry include a commitment to cultural change, technological advancements, and strong leadership that fosters continuous improvement and innovation.

Q: How can mining companies ensure lasting success with technological transformations?

A: Mining companies can ensure lasting success with technological transformations by aligning technology initiatives with cultural change, building robust management systems, and ensuring that incentives across the organization are aligned with business objectives.

Q: What role do leaders play in fostering a culture of operational excellence in mining organizations?

A: Leaders play a crucial role in fostering a culture of operational excellence in mining organizations by modeling desired behaviors, motivating teams to embrace change, and prioritizing problem-solving at all levels of the organization.

Q: How can mining companies reinforce improvements in their operations?

A: Mining companies can reinforce improvements in their operations by sharing stories that connect daily tasks with a broader purpose, establishing routines that promote continuous improvement, cultivating a trusting environment, and empowering teams through training and education.