Innovation is about much more than technology, says Rio Tinto chief

Sam Walsh AO, Chief Executive of Rio Tinto, at Asia House

Sam Walsh AO, chief executive of Rio Tinto, speaking at the 'Partnering with Asia for Global Innovation' conference at Asia House. Photo by Miles Willis

Innovation is about much more than technology, says Rio Tinto chief

11/12/14

By Naomi Canton

The chief executive of Rio Tinto says that focusing on innovation in all aspects of its business and working with expertise in Asian companies has helped the mining giant succeed.

In a private interview after the Partnering with Asia for Global Innovation conference held at Asia House in partnership with Rio Tinto, Sam Walsh AO, spoke about how the US$100 billion Anglo-Australian mining giant was ahead of Google and already used driverless trucks in some of its mines – created by Japanese mining truck manufacturer Komatsu.

By not having humans involved, the autonomous vehicles cut down on fuel costs, he added.

Meanwhile advanced copper rock analysis technology, mine visualisation and unmanned drones were being developed and researched at the Rio Tinto Innovation Centre (RTIC) in Pune, India.

“Copper crushing, grinding and milling uses huge amounts of energy,” Walsh said. “So anything we can do to be more efficient is a great and amazing thing.”

“If we can reduce it by even a small percentage that would benefit all countries enormously.”

The comminution of gold and copper ores uses about 0.2 per cent of global electricity consumption.

The centre in Pune is also developing technology for the visualisation of underground mines and unmanned drones that are flown to monitor and track stock piles at Rio Tinto’s  mines. Mines were no longer “the dark satanic mills of the Industrial Revolution”, he said, explaining they were very high-tech  and complex nowadays and technology was the way forward.

Again in Japan the conglomerate Hitachi is helping Rio Tinto with the schedule and control of its rail system.

“Hitachi made a strong presentation to me on how they operate and I said, ‘How do you know all this?’ They said, ‘We control the London Underground.’ You think of them as an electronic products manufacturer but 85 per cent of what they do is systems,” he added.

Japan-based Bridgestone Corporation, the world’s largest manufacturer of tyres and other rubber products, tracks and monitors Rio Tinto’s tyres helping the firm extend the life of the gigantic tyres on its trucks.

“I visited Toyota’s research and development centre near Mount Fuji and they are doing a lot of really innovative work in terms of adding sensors to vehicles to check vehicles are staying within road lines,” he added, sipping black tea in the Asia House Library after his keynote speech.

When pressed as to why he chose Pune for the innovation centre, he said: “We do a lot of work in India. It’s a two-way US$2 billion trade. We are one of the largest MNCs in India.”

Rio Tinto’s Argyle mine in Australia exports at least 85 per cent of its rough diamonds to Surat in Gujarat for cutting and polishing.

Some 300,000 Indians are employed cutting and polishing Argyle diamonds so we have a very strong connection to India. It’s a mixture of the expertise, the economics of doing things in India and the large English-speaking workforce,” he said.

As for Rio Tinto’s two mining projects on hold in India – the Bunder diamond project in Madhya Pradesh and the iron ore project in Odisha – he said: “there was some movement.”

Both projects have to date been stalled with Bunder awaiting approval from India’s Ministry of Environment & Forests and the iron ore mine awaiting permission from the Government of Odisha.

“I met with Narendra Modi during the Australian prime minister Tony Abbott’s state visit to India in August. I am going there again on June 12th as I have been appointed as the co-chair of the Australia – India CEO Forum which is a vehicle for exchange of investment and trade. So I hope that that visit will provide me with another opportunity to speak to Modi and his ministers. The world needs diamond and iron ore and so does India. Currently Rio Tinto is exporting iron ore to India which is like selling coal to Newcastle!” he said.

Rio Tinto first discovered diamonds at Bunder in Chhattarpur district in Madhya Pradesh in 2004.

Walsh said the secret to success of these Asian partnerships was “relationships and a focus on trust.”

“In Japan we have 14 joint ventures with Japanese companies so over the years we have got very close and that’s a great thing. You can’t build relationships on a one or two day visit. Once you have won trust, it’s a two-way leverage,” he added.

He admitted Rio Tinto’s profits had been affected by the recent significant drop in coal and iron ore prices, but said the company still had “healthy profits” as Rio Tinto operated on a very low cost model, unlike most of its competitors.

“It is the companies at the top that have been affected,” he said. “Our strategy on how to deal with this [price drop] is very simple – it is to be the lowest cost quartile of whatever we are doing business in. That’s where we have positioned ourselves.”

He said companies operating at the top of the cost curve were being affected the most by the drop in commodity prices.

“Our prices are being affected but we are still getting healthy margins,” he said. “It’s all about cycles and the volatility of prices.That is how we have succeeded over 140 years. We are in much better shape than many of our competitors.”

In fact, Walsh, who was appointed chief executive of the London-based group in 2013, took the company from a US$3 billion loss to a US$3.7 billion profit in its first year.

When asked how he achieved this remarkable turnaround, he said:  “By drawing on first-class people and empowering them. We want our people to act as owners as there is a huge difference between that and feeling like an employee.

“I have overcommitted and engaged with them so they have as much knowledge as they can. It’s extremely powerful for people to see where we are going and the reasons for it. I have also been focused on discipline and accountability,” he said, “as well as on cost cutting and ensuring everyone spent money as if it was their own. In our business it’s the little items that stack up,” he said.

He added innovation at Rio Tinto was not just about technology but also about innovation in physical equipment, relationships, thinking and culture.

“Who would have thought many years ago that today we would be using Big Data to analyse mines in Mongolia? No one could have visualised that. These innovative developments allow us to be much more efficient,” he said.

“If I look at the number of business cards I received today from people who attended the conference,” he added, showing me a stack of business cards in his hand, “there will be ideas and people that can help us on our journey forward.”

naomi.canton@asiahouse.co.uk

Asia House will hold its next Signature Conference titled ‘Asia’s Digital Transformation’, in partnership with McKinsey, on 28 January, 2015. The regional head of Twitter is one of the confirmed speakers. For more information click here.

To read our coverage of the Partnering with Asia for Global Innovation conference at which Sam Walsh AO and Baroness Neville-Rolfe DBE CMG were keynote speakers, click here.