2016 In Review – Our Insights

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2016 is most certainly a year of note. Remember, we started the year with a mining index that was at a 12-year low. Since then, the FTSE all-share mining index has doubled in value and is among the best performing sectors in Europe. From the crises management and debt reduction pledges of all the large players, we now have Anglo American and Glencore’s stock prices up 310 per cent and 220 percent, respectively. The near drowning weight of debt at the beginning of the year gave way to companies not having to sell their assets. As a consultancy, we have helped clients navigate through disturbing market conditions and adjust their hopes for portfolio optimization and unrealistic cost reduction targets, to a more stable working environment through scenario planning. Organizations that leverage such exercises tend to be more dynamic and agile, and can pivot to maintain the wind behind their sails.
The year is certainly capped with Glencore’s brilliant US$10.83 billion Rosneft transaction indicating a turn in mood. Glencore will have a marketing arrangement to sell 220,000 barrels per day of Rosneft’s oil production for five years with further upside opportunities.Our experience with the oil and gas market reflected the same tough environment as we experienced in mining. To this point, more than 100 North American exploration and production (E&P) companies have filed for bankruptcy and as of October 2016, those bankruptcies involved almost $70 billion in cumulative debt. With OPEC now having clinched a supply arrangement, there is some hope of moderate prices next year.

While executives showed little appetite for speculation and slack, the landscape has returned to a more disciplined environment. Our work at VCI this year was focused on strategy, innovation and digitalization. Over the course of this year, we gained some new insights we would like to share with you:

  • Strategic planning devolved into survival planning with much talk, but little action about counter cyclical strategic maneuvers. We ask ourselves why the resources eco-system, including major shareholders and bankers, just cannot get themselves to take commodity cycles seriously and leverage it!
  • We define digitalization as the transformation of business practices to simpler, faster and smarter operations and concluded that nothing has a greater impact on asset performance than digitalization – it is that significant.
  • Understanding the convergence between IT and OT(IoT) is important. Digitalization is NOT a systems integration project – perhaps not even an IT project. Digitalization is a fundamental change in your operating model. If that’s not the objective, don’t do it. We have seen several potential clients diverting into what we perceive as a 3 year walk in the woods before they will resurface only to find out that they spent millions of dollars with little to show for it.
  • A digital transformation is essentially about an organization’s business processes, work practices, roles, and culture. And to that end, we at VCI will continue to develop approaches and best practices to successfully enable comprehensive transformations.

To all our clients with whom we’ve had the privilege of working with this year, and in the past, we thank you. We look forward to collaborating with you in 2017, to craft new and improved strategies, and accelerate and advance the digitalization of your operations for greater competitive advantage.

Gideon Malherbe, VCI Founding Partner

Paul Leonardi's Bio

Paul Leonardi is the Duca Family Professor of Technology Management at UC Santa Barbara. He holds appointments in the Technology Management Program (TMP) and the Department of Communication. He is also the Investment Group of Santa Barbara Founding Director of the Master of Technology Management Program.

Dr. Leonardi’s research, teaching, and consulting focus on helping companies to create and share knowledge more effectively. He is interested in how implementing new technologies and harnessing the power of informal social networks can help companies take advantage of their knowledge assets to create innovative products and services.

He has authored dozens of articles that have appeared in top journals across the fields of management, organization studies, communication studies, and information systems research. He is also the author of three books on innovation and organizational change. He has won major awards for his research from the Academy of Management, the American Sociological Association, the Alfred P. Sloan Foundation, the Association for Information Systems, the International Communication Association, the National Communication Association, and the National Science Foundation.

Over the past decade, he has consulted with for-profit and non-profit organizations about how to improve communication between departments, how to use social technologies to improve internal knowledge sharing, how to structure global product development operations, and how to manage the human aspects of new technology implementation.

Before coming to UCSB, Dr. Leonardi worked at Northwestern University on the faculties of the School of Communication, the McCormick School of Engineering, and the Kellogg School of Management. He received his Ph.D. in Management Science and Engineering from the Center for Work, Technology, and Organization at Stanford University.

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Willem Buhrmann's Bio

 

Willem Buhrmann is an experienced mining professional that has extensive African and international experience in project management, strategy implementation and corporate finance. Willem was previously Business Development Manager (Africa) for Rio Tinto Energy and more recently consulted to the wider mining industry including majors and a variety of juniors. He holds degrees in finance (Chartered Accountant) and the legal world (LL.B.)

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