Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
, Neil Ventura
As we get up every morning, look in the mirror and see the same face looking back at us, it may be surprising for some people to learn that the human body actually renews most of its cells every ten years. While research has shown that some cells in the body are never replaced, the vast majority of our entire physical structure is changed several times within our lives. So although we essentially remain the same person, able to deliver the same functions, our component parts must continue evolving and developing if they are to remain fit for purpose.
Over the last 10 years during which I’ve been running De Beers’ Auction Sales business, I’ve found that this is just as true for a company as it is for an individual.
If a business wishes to remain relevant, successful and fit for purpose, it must constantly think about how it can renew itself to remain as valuable as possible for its customers. While there will be some elements that never change, it’s incumbent on leaders to continuously review which parts of the business can change for the better.
Our philosophy for change
There are many ways in which businesses can assess what changes they should make, but I believe the best way is through regular and meaningful customer engagement. This is the approach we have applied over the last 10 years and it’s certainly helped us deliver greater customer value.
Diamdel – as the business used to be known – had remained an analogue trading operation for more than 40 years since it was formed in Antwerp in 1964, and when I took over in January 2008 it was clear that it was ripe for change. We therefore shaped our future by speaking to customers, listening to their views, and developing products, services and a business model that would meet their needs effectively.
As a result, we began a new chapter in the business’s history by becoming the first in the industry to use online rough diamond auctions. This approach was not only well-suited to the increasingly digitised world in which we live, but also beneficial for our global customer base as it helped support the efficiency of sourcing activities. Meanwhile, it was also a good fit with the realities of the business’s trading dynamics, as we only had a small amount of global supply, but were experiencing growing demand for our products. Clearly, online auctions were the way forward as they presented new opportunities for our customers, while providing a fair and competitive platform for our sales.
But deciding on the overarching sales method was only the start of the story. We also made sure we listened to our customers when considering our auction design. We listened to their views and heard loudly and clearly their concerns with tenders where no bidding information was provided. We therefore developed auctions where our customers would have access to bidding data throughout an auction event, so they didn’t need to worry about the risk of overextending themselves financially to secure a parcel.
And looking back over the last 10 years, I believe we can be very proud of our achievements. What we pioneered in the De Beers Auction Sales business has since acted as a catalyst for widespread industry change in selling practices. Today the vast majority of producers of all sizes, including even producer country governments, have adopted auctions for at least a part of their overall sales mix.
But it’s not just those within the diamond industry who recognised the value of our approach – I’m proud to say we also gained recognition from the wider business world, and in the 2014 European Business Awards we were one of only 100 companies across the continent to win a prestigious Ruban D’Honneur in recognition of our innovation and commercial success.
A rolling stone gathers no moss…
As time has gone on, we’ve also engaged with customers to find other ways in which we can improve our offering. This has led to the development of new product lines that better reflect customer needs, the opening up of new offices in different parts of the globe and an updated and improved auction platform.
And over the years, we have also been able to develop other new ways of selling so as to offer more customer benefits. One thing we heard repeatedly from customers was the desire to be able to secure future supply at our auction events. As such, we launched a forward contract sales programme to enable customers to do exactly this.
But over time we have also evolved this programme, moving it from a floating price system to one with a fixed price approach. We’ve seen a lot of success with this latest format and have recently announced that our pilot programme will now transition to core business status.
Earlier in 2017 we also launched a couple of other interesting pilots. We started selling our own polished diamonds, as well as allowing third parties to sell theirs on our platform, giving customers even more opportunity to use Auction Sales as a ‘one-stop shop’ for their sourcing needs – this again offers benefits in terms of efficiencies and reduced cost.
All of these changes have helped us continue to renew ourselves as a business, while maintaining the core activities on which our customers rely.
But of course renewal and evolution must be continuous processes, so we won’t stop there.
What the future holds
With our most recent customer engagements, we’ve gained some more insight into what our buyers want from us, so we will continue to develop the business in the year ahead, as well as over the longer term. One message that’s come through from our recent customer engagements is a desire for us to develop our supply offering in certain areas so that there is a fuller and broader range of material available for purchase.
Based on this customer feedback, in 2018 we will be testing the potential to grow our core rough diamond sales business through making some purchases from third-party sources. Currently we look to meet our customers’ needs through selling around 10% of De Beers Group’s overall rough diamond availability, but third-party purchases could help offer some interesting growth opportunity for the business.
With this new approach we will purchase and sell limited amounts of rough diamonds from approved third-party sources in accordance with the De Beers Auction Sales Diamond Trading Standard that we launched in 2016. This will allow us to test whether such an approach can help us better support the needs of our large, diverse and growing customer base, so it will be exciting to see how it goes. Any sellers who are keen to explore how they might be able to work with us on this new initiative, will need to register with us on our website or can contact the team at [email protected].
But that’s not the only opportunity we’ll be pursuing.
Just like companies in many industries around the world, our customers are increasingly focused on doing business in the digital world, so we will be looking at our entire approach through a new lens. We will be overhauling our website and building an accompanying mobile app that aims to transform our customers’ experience when doing business with us. We’ll continue to reshape our offering along these lines, and in doing so will be able to open up even more lines of communication with customers so that we can continue to evolve and enhance our ability to meet their needs.
So as we turn the mirror on our Auction Sales business, the changes we make may not be all that obvious on a day to day basis, but when looked at from a distance it’s clear to see just how far we’ve come.
The last 10 years have been a great learning experience and an exciting time during which we’ve launched lots of industry firsts and helped reimagine the way the sector operates.
But time waits for no man, and for no business, so I’m even more excited to think about what the next 10 years hold for Auction Sales, for De Beers Group, and for the entire diamond industry.
Neil Ventura
Executive Vice-President, Auction Sales
Neil Ventura is currently Executive Vice-President, Auction Sales at De Beers Group and will become Executive Vice-President, Strategy and Innovation in February 2018.
