Jonathan Price, Chief Transformation Officer - IMARC 2019 - Wednesday, 30 October
It is a pleasure to be here in Melbourne. Before I begin, I’d first like to acknowledge the Traditional Owners of the land on which we are meeting. I pay my respects to their Elders, past and present, and the Aboriginal Elders of other communities who may be here today.
I am the Chief Transformation Officer at BHP and a member of the Executive Leadership Team. After starting my career as a process improvement engineer in a nickel refinery, I have been with BHP for more than 13 years working across a variety of roles in Western Australia, London and now Singapore.
When I first contemplated the Chief Transformation Officer role I must admit that, like many of you, I asked myself “what’s the job?”. In my view, BHP had already been in various stages of change throughout its existence.
As I defined the opportunity for BHP, it was not about changing the strategy, restructuring the company or rolling out a major new IT system. Instead, the opportunity was to begin transforming the way we transform, and that is what I will talk about today.
Although Transformation is not a new term in our industry or with public companies more broadly, I believe BHP’s approach has a number of unique characteristics. These will not only change the way we operate; rather they compel us to change how we change.
Of course transformation has its challenges, but we know we can turn these in to opportunities.
The result will be a new type of resources company, to the benefit of all our stakeholders.
Before I get in to the way in which we are responding to these challenges, I want to step back and firstly talk about the way our industry has evolved.
In the two decades since I first set foot on a mine site, many things have changed.
- Global warming has gone from being a fringe scientific concept to a daily headline;
- Centres of demand and global growth have shifted from the west to the east;
- A drone is no longer a term used to describe a boring person, but a game-changing technology widely available on the high street;
- And, we now have more computing power in our pockets, than was used to power the entire Apollo space mission.
Yet the core processes, equipment and organisational models that allow a resources company like BHP to run, have remained strikingly similar.
Simply put: the way we operate has served our shareholders, our communities and our people well. We have weathered cycles, shifting from periods of rapid growth to swiftly reducing costs… all the while leveraging our experience of having seen it all before.
Over time, as a company driven by scientists and engineers we have created a culture that is rational, methodical and results-orientated. As a trained process engineer, I can attest that we take great comfort in robust processes.
Given our focus on safety, we were also predominantly risk averse.
Controlling the controllables
This approach has created a lot of shared value.
However, over the last decade in particular, BHP has transformed as the China boom tailed off.
For starters, we have had a laser-like focus on what we call ‘controlling the controllables’.
This has been the essence of our productivity drive that began in earnest more than 5 years ago. To boil it down, it was about doing more with less. It is where our rationality and methodical thinking has literally paid dividends.
We simplified our portfolio with the South32 demerger and created a global operating model, leaving us with a small number of large, high-quality assets and a highly connected workforce.
Central to this is our enterprise-wide business operations system. It ensures transparency of vital data, whether you are in the Bowen Basin or the Gulf of Mexico. And our YAMMER platform helps connect all our people so they can ask for help, link-up with subject matter experts or celebrate their successes.
This has made it easier to reduce unit costs, by more than 20 per cent across the portfolio, because we were able to benchmark and share best practice over fewer, similar businesses.
We were also able to grow through highly capital efficient projects.
This wave of productivity was great for us and great for our shareholders, delivering billions of dollars of benefits to our bottom line.
Further gains are now harder won, and new technology and new ways of working from other industries are influencing the sector. Automation has become more common and different skillsets such as software engineers, and data analysts have started to enter the industry. These new skills will augment, not displace, our core skills in science, engineering, commerce, human resources and finance.
The realisation has struck that the next wave of productivity will come in an entirely different form. As such, we can’t expect that what has worked in the past, will lead to success in the future.
And so, to realise the full potential of our amazing orebodies, we must transform the way we have typically transformed.
A different type of change
It is not new to anyone in this room that the imperative to change, and to change quickly is stronger than it has ever been.
The third industrial revolution brought with it digitisation and automation. The fourth industrial revolution, with greater emphasis on connectivity through data, will build on this and have significant implications for the way we live, the way we work, and the way companies like BHP operate.
Our workforce will expect more from us with opportunities to rapidly develop new skills and work more flexibly, in service of an inspiring purpose.
Our reliance on new technology will increase vastly.
And societal expectations will rightly continue to demand more from a public company than just profits.
Transforming the resources sector therefore becomes critical for our long-term sustainability.
Change will be a constant, so we need to be set-up to think about it differently, and respond to it in a new way.
After all, the electric light did not come from the continuous improvement of candles, but a radical approach to solving an age-old problem.
So let’s look more specifically at BHP’s transformation.
At BHP our strategy is to have the best assets, in the best commodities with the best capabilities. And our transformation is working in service of this strategy.
Given our combination of long-life assets in attractive commodities, this is not about inventing new products for new markets. We are, and will remain, a resources company.
To illustrate the difference: Amazon went from being an online book store, to also owning bricks and mortar grocery stores, to also providing cloud computing services. This shift in focus has served them well. But BHP already has world-class products. Products that are valued by our customers and needed by the world. And that won’t change drastically, any time soon.
Therefore, we focus on maximising the performance of our existing business; what many refer to as transforming the core.
We do this by redefining and excelling at the capabilities needed to run this core business, and run it better than anyone else could. Our Transformation will ensure we develop the best capabilities, now and for the future.
The outcome of this will be a different BHP and a new type of resources company altogether. We will be an exciting place to work, where bright minds come together to provide the resources the world needs.
Beyond this vision, the benefit will be stable and predictable operations that are both safer and more productive, an organisation with flexibility to rapidly adapt and capture opportunities, and the potential to unlock new resources that are not currently viable based upon conventional operating approaches.
If we do it right, there is potential for some significant outcomes including reducing safety incidents by 80 per cent globally, and unlocking value worth tens of billions of dollars from our business.
So what do we need to do to achieve that?
Creating conditions for success
After nearly two years leading transformation programs at BHP I want to give you an insight in to what I’ve seen and what I’ve learnt.
I will start by reiterating the well-worn statistic that 70 per cent of transformations fail. There are no ways to game the system… no ‘seven steps to transformation nirvana’, no secret sauce. There is no miracle cure, so I’m not going to stand here and offer one.
Similarly, I won’t state the obvious, like the necessity of board and leadership support – which, for the record, we have well covered.
Instead I will share with you three specific challenges that relate to our transformation. I believe these are unique. If we tackle them right, we will create a sustainable competitive advantage for BHP.
- Our 130-year legacy as a resources business;
- The absence of a burning platform and a business that’s in great shape;
- And scepticism from those that have seen this all before.
Disrupting a legacy
The first challenge we have is addressing the 130-year legacy that has been established by a very successful business. Our ways of working, behaviours and culture have played a huge part in that success.
What do we keep and what do we leave behind to become a new type of company?
How do we help our people build on our strengths while not allowing these to limit our potential?
And how do we adopt new ways of working while continuing to keep people safe and deliver results?
The answer is to make sure people remain our number one priority.
People are at the heart of our transformation. That is because people are at the heart of our business.
We need to give them the space to improve and innovate. Of course we provide the appropriate training and tools. But the game changer here is inverting the typical leadership model: allowing our leaders to become coaches and empowering our front line employees to take decisions and drive change.
Starting from strength
The second challenge we have faced is driving change when there is no burning platform.
Many companies are forced to transform because of financial duress or an existential threat. Fortunately neither applies to BHP.
We start from a position of strength, not stress.
As enviable as that sounds, it does make it harder to lift the activation energy of an organisation.
While we don’t have a burning platform, we do have a burning ambition… to be even better than we are today and develop our sector leading capabilities.
Our strength allows us to invest. We will invest in technology, innovation and – most importantly – our people, to build a safer, simpler and more productive company.
But strength today doesn’t guarantee success tomorrow and history teaches us about the dangers of complacency – just ask Kodak and Blockbuster.
The global backdrop against which we operate is increasingly volatile. And we already see constant change in the forces affecting our industry.
Growing ESG pressures;
- Heightened geopolitical uncertainty and trade disputes;
- Transitioning to a low-carbon economy;
- And attracting the right talent to the industry…
…are just a few challenges that will only grow in the future.
However, with our portfolio of Tier One Petroleum and Minerals assets, we are uniquely placed to navigate these challenges. The Petroleum industry has built a track record of innovation throughout the last decade. Now, it is our Minerals business that must take up the baton of innovation and sustainably deliver the products needed to support the transition to a low carbon world.
When we are successful we will deliver more value through Transformation than through either exploration or acquisition. The prize is tens of billions of dollars of value, as we not only confront these challenges, but capitalise to create shared value.
Just because we are currently in a strong and stable position, doesn’t mean it will last.
We need to be more agile to face an uncertain future.
There is no time to waste, and at BHP we feel a sense of urgency.
Creating sticky change
The third point I’d like to make, is that past programs have been and gone, and some of our people have seen this many times. So they question ‘what’s different this time around?’
The difference is that we will transform – meaning that we will create a new organisation and way of working from which there is no going back.
We do this by building our future state into the fabric of BHP - our systems, structures, processes and routines – and supporting our people to build the skills and capabilities they need to be successful.
This requires a holistic and coordinated effort coupling smart design with a relentless focus on implementation. Doing this well, drawing on a team of 72,000 people and the support of our partners and communities, we will make our changes stick.
So there are three pretty unique challenges that we have responded to.
But what does this look like on the ground?
Let me share with you my vision using an example relating to some of the unsung heroes of our organisation – the maintenance function.
Let’s call our protagonist ‘Sally the Supervisor’. Sally works in our iron ore business in Western Australia. She helps keep the equipment running that is vital in pumping out close to 290 million tonnes of high-quality iron ore every year.
Prior to Transformation, Sally’s day was really focused on just getting the job done. Unfortunately, this involved a lot of unplanned reactive work.
‘Fire, ready, aim’ seemed to be the situation to which the team had become accustomed.
As more conditions for success are put in place, things change for Sally. She feels empowered, trusted and valued.
BHP has invested to allow Sally to develop new skills, with a particular focus on improvement. Putting these to the test at work gives her a feeling of accomplishment. She feels more connected to BHP’s purpose, and is excited about her future prospects.
She is supported by her leader, who coaches and encourages her to pursue all of her improvement ideas. If they don’t work, she is encouraged to learn, and try again.
Systems have always been a necessary evil for Sally, but BHP has invested in new systems and tools that make life simpler, and a lot more interesting. Led by the Maintenance and Engineering Centre of Excellence, the data and analytics power of the function is truly impressive.
With a predictive approach, and data at her fingertips, Sally can now take decisions with a lot more certainty.
This is not just a story about Sally. The results show improved business outcomes.
Overall equipment uptime has increased by more than 5%. In a 24/7 operation this means higher volumes and lower costs. Her people are also far safer because they have the time, the processes and the freedom to plan their work.
This is just one view of what the future of BHP may look like for crews across all of our operations. We have already seen countless examples of this success across BHP. Seeing this – and creating more – is what drives myself and my team.
I will now wrap-up.
At BHP we have embarked on a different type of Transformation. Not only are we changing how we operate, we are changing the way we go about dealing with change.
We are transforming the way we transform.
If it was easy, then everyone would do it, and the ASX would be full of outperforming companies.
What we have learnt, is that we need our people on side before we can do anything. If we handle the challenges properly, then the opportunity for safer, stable and more predictable operations is well within reach. And beyond that, the opportunity is limitless.
We have already made progress and I see a lot of positive action around the globe. I look forward to seeing stories like Sally’s coming to life as BHP transforms in to a new type of company, for the benefit of all our stakeholders.