The word ‘boomtown’ was practically invented for the mining industry, which has a history of gold rush euphoria followed by equally intense busts. The pattern has continued through the past decade, with mining companies buffeted by a global pandemic, trade tensions, and geopolitical conflicts (Exhibit 1).

Very few of them have been able to capitalize on the peak periods to prepare for downturns. Instead, as we noted in 2022, the mining sector’s productivity has remained largely stagnant for decades. Volatile commodity prices, deteriorating ore quality at mature sites, rising labor and energy prices, and intensifying sustainability pressures have all made it harder to attract and retain critical talent and substantially improve productivity.

Technological advances, including gen AI, could unleash the mining sector’s productivity potential—if companies can deploy these innovations for lasting impact. As of this writing, few companies in any sector have done that successfully. Recent McKinsey research finds that across industries, only about 5 percent of companies attribute at least 10 percent of their EBIT to gen AI. And the odds of success for digital transformation remain daunting, with earlier research finding that most digital investments generate less than one-third of their anticipated impact.

Yet a few regional and global mining organizations have achieved exceptional results (Exhibit 2). They not only are outperforming their peers but also keep improving their performance over time, resisting complacency and widening the competitive gap. They are using technology to generate lasting value—and for some, their track record has culminated in the award of the Shingo Prize, widely recognized as among the world’s highest honors for operational excellence.

What separates these few outliers from their peers? It isn’t a better location or higher-quality assets. It isn’t an unusual labor pool or greater access to capital. It isn’t even better-quality technology.

It’s a commitment to a culture change: Teams and individuals across the organization learn not only what operating excellence looks like but also how they can keep improving on it, year after year. They do more than simply compete today; they begin to shape the organization for tomorrow.

What operational excellence in mining looks like

When we analyzed how the outperformers turned operational excellence into business value, a distinct, four-stage pattern emerged:

1. Early improvements yield rapid production increases. In the first few years after launching operational-excellence initiatives, output rises—often dramatically. A major tin mine, for example, saw a 40 percent increase in production over the first three years of its transformation: 14 percent in the first year, followed by 12 percent in the two successive years.
2. As time passes, productivity continues to improve. Even as the first wave of production gains starts to level off, productivity nevertheless continues upward on a more gradual trajectory. Two years into its transformation, a copper miner increased production by 3 to 5 percent per year, despite erosion in ore grades.
3. Maturity strengthens resilience. The more mature organizations in the sector have been able to withstand major cost increases, including during the high inflation periods after the COVID-19 pandemic. The outperformers have reduced unit costs by an average compound annual rate of 3 to 6 percent, largely by increasing their productivity.
4. Employees stay engaged. Across all the outperforming mining organizations, internal employee satisfaction surveys show continual improvement of between five and ten percentage points per year. Retention rates in these organizations were unusually high—exceeding 90 percent annually at some recognized sites—and have proved to be a critical advantage given the talent shortfalls the mining industry faces.

Taken together, these four stages paint a picture of what operational excellence means for a business. For example, despite an unusually challenging year, one award-winning mining site managed to exceed its production and profitability targets, while no other unit in the entire enterprise even met performance expectations. At another mining organization, one business unit exceeded its targets to such an extent that the company raised the targets midyear so the unit could subsidize other areas that were lagging behind.

The difference is culture

Another critical difference we noticed among the outperforming companies was how they approached thinking about and managing corporate culture. Specifically, these organizations share five cultural attributes:

• Everyone is clear about the purpose and aspirations of their organization.
• Everyone has a strong desire to contribute and knows how to do so.
• The working environment is such that people feel safe both making decisions and asking for help.
• Mechanisms are in place that enable people to identify opportunities, follow up on initiatives, and capture value.
• Leaders are continuously supportive of their teams’ development.

Furthermore, we found that the cultures built at these companies were not the product of chance. They resulted from a methodology whose systems reinforce the behaviors that drive outstanding performance. When sustained over time, people throughout the organization learn how to be proactive rather than reactive, measuring performance against future aspirations rather than past achievements. Conceptually, the path is fairly simple. Following it, however, takes effort and constant reinforcement. To that end, leaders should do the following:

• Purposefully define not only a challenging aspiration for the business but also the culture they want in their organization and the ideal behaviors they are looking for.
• Establish a comprehensive set of management practices that help people live those new behaviors consistently—every day. For example, workers can learn a crucial skill like root-cause problem-solving, but unless their managers regularly set aside time to practice the new skills, and leaders update performance expectations to include skill building, the desired behaviors will inevitably fade. The task for leaders is to set expectations that reward new ways of working without creating new forms of wasteful bureaucracy.
• Use a range of systems and tools to support and deploy these management practices so that performing the right practices and demonstrating the right behaviors becomes easier than reverting to old habits. Gradually, the environment evolves so that practicing the behaviors becomes automatic.

Setting cultural aspirations

The first step is for everyone to understand what is possible. Mining companies face particular challenges at this stage because their operations are almost by definition unique, with site-specific complexities ranging from geology to geopolitics. That makes it all too easy to dismiss other companies’ successes as unlikely to apply.

But small leaps of imagination can lead to a major change in perspective. After a visit to a financial-services organization, the leader at one mining company started to recognize how people could work more effectively. Despite the very different context, both industries involved highly trained specialists collaborating to complete complex projects. The financial institution had slashed the time needed to complete major deals by more than 75 percent—at the time, an almost unimaginable figure, and one that caused the mining executive to reconsider just how much improvement might be possible.

The next step is more pragmatic: understanding the operation’s current level of performance, not just by reviewing basic output metrics—what actually happened—but by asking what could have happened if the operation were performing at its full potential. It means questioning every aspect of current processes to uncover bottlenecks and find their root cause, and repeating the process at each level of the organization.

For example, this review of output metrics usually reveals problems that have been known but unsolved for years, or whole areas of the business whose performance had been allowed to stagnate. The logical follow-up question is, why were they not improving? The answer can spur even greater aspirations, as it often reflects serious weaknesses in the company’s management systems, such as performance metrics that are too narrow. And at the root of management-system failures is culture: a tendency to reward good news over bad, or to focus on sheer quantity of output while ignoring how the output numbers are achieved.
The aspiration is to change the culture.

Making culture real on the shop floor

One of the fundamental tasks for operational excellence in any organization is for leaders and managers to “go and see” how work is done—the “gemba walk,” in the classic language of lean management. For most leaders, the gemba walk consists mostly of checking whether the work is done according to a checklist of codified best practices, often with feedback to address technical issues and improve processes.

That’s good, but leaders at Shingo Prize sites do something much better. They recognize that they aren’t likely to know much more than their managers and workers do about production processes, so ticking boxes on a checklist can’t create much value. What leaders can evaluate is whether workers and managers are showing the right behaviors. They do that by guiding the conversation with questions designed to reinforce a value, such as for problem-solving: “What is the target condition? What is the current condition? What is preventing us from reaching the target condition? How can we close the gap?” The purpose is to evaluate not the content of the answer but rather the quality of the discussion.

Ensuring the culture keeps learning

The greatest distinction all the high performers share is how they keep improving, resisting the entropy that has cut the average lifespan of a company on the S&P 500 by at least 60 percent since the 1960s. Like France’s Bourbon monarchy, most corporate giants fall because they have “learned nothing and forgotten nothing.” The outperformers turn that dictum on its head: learning everything while dismissing what no longer generates value.

What constitutes a good performance dialogue, for example, is largely well understood. It includes a set of defined KPIs and targets, visual boards showing performance against the targets, triggering actions to address gaps, and clear accountability for these actions. Performance dialogues at advanced sites are different in crucial ways. Rather than looking only backward at past performance, they also provide a forward-looking view of the targets, using AI models that draw on real-time conditions. Consequently, the actions not only address existing performance gaps but also raise the bar for future performance.

These outperforming organizations also measure how the culture progressed against this ideal and how business results improved with the evolution of the culture. Progress in business results was celebrated, while stagnation or erosion triggered a review of management practices and their supporting systems. In this way, the whole organization continuously improved over time.

The role of technology in achieving real operational excellence

Some mining organizations are strengthening their results further through judicious deployment of technology to boost their management and operating systems. These investments can accelerate and deepen cultural change. While our research confirms that, for example, about three-quarters of companies across sectors have implemented gen AI pilots or local deployments, in general only a minority of companies achieve lasting success in their technology transformations. In those organizations, strong cultures and robust management systems have been critical in bringing technology initiatives to scale enterprise-wide.

These organizations create augmented production systems that harness the full potential of digital technologies in a more sustained manner. One mining organization, for example, has focused on making the algorithms underlying its AI tools as transparent as possible, both to increase frontline employees’ confidence in them and to enable adjustments as ore conditions change. As a result, employees are still using and improving the tools more than two years after their initial deployment.

As this case illustrates, rather than being distracted by the allure of “shiny tech things,” top organizations maintain a laser focus on delivering value. This requires consistency across all organizational levels, with both leaders and frontline operators understanding and fully supporting the use of technology in their daily decision-making processes.

Optimal decision-making throughout the value stream is facilitated by organizational and management systems that, when well designed, keep employees’ focus on company-wide goals. Too often, leadership allows managers to set targets that show off their own team’s work but contribute little to the performance of the company. Leaders in the outperforming organizations take the time and effort needed to ensure that incentives throughout the company align with the enterprise-level purpose and strategy.

How leaders change

At the most advanced mining organizations, leaders help their people stretch their capabilities so that operations are continually improving—and, more important for the long term, the organization’s capacity for improvement keeps expanding as well.

A critical challenge for mining organizations is rising internal complexity, mirroring rising external complexity as leaders grapple with macroeconomic challenges, sustainability targets, new technologies, and customer demands. Coordinating all of the required expertise—without slowing the organization down—means redefining how parts of the organization communicate and make decisions. The standard option, creating a new committee or mandating a new approval step, is a recipe for recreating the siloed bureaucracies that have long sapped productivity.

Smashing silos

Top-performing organizations recognize the role of leadership in fighting bureaucratic bloat. Senior leaders connect all members of the organization by translating a shared purpose into tangible goals and expectations—including for the efficient use of resources, whether physical, financial, or human. As a senior executive at one leading mining company put it, “My main objective as a leader is to prevent silos from forming, and that means creating structures that encourage collaboration, not additional choke points. It’s changed how I think about my role.”

For this leader, a good metaphor is that of a university: It’s no longer enough to specialize in one subject. Instead, each senior leader now needs a “major” in the business or functional unit they lead, and also one or more “minors” covering other units and supporting their respective leaders. The result is that all leaders develop a more end-to-end perspective of the company’s operations.

That helped avert major problems during the mining company’s implementation of AI tools. Because the leaders of upstream process steps understood downstream processing capacity, they agreed to limit their production increases so that no process stage ended up overwhelmed—and the company achieved its main objective, which was a double-digit increase in finished-product output. Common purpose, a clear objective, and a culture of cooperation meant leaders set aside their units’ short-term benefits in favor of longer-term performance.

Reinforcing improvement

Even a strong culture can wither if it isn’t properly monitored and managed. A constant task for leaders is to bring their organization’s purpose to life, making daily work more engaging for frontline teams. They can achieve this by:

• sharing stories that connect daily tasks to the broader purpose—such as at the mine whose main product contributes directly to the energy transition
• establishing routines that promote continuous improvement, such as regular team observations, feedback, and coaching
• cultivating a trusting environment where everyone feels responsible for adding value, encouraging open sharing of successes and failures
• empowering teams through training and education, with a focus on skill development and capability building

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

Middle and frontline managers have critical roles to play here, too. They put teeth into the systems and mechanisms that senior leadership has established to reinforce behaviors. They are charged with ensuring the management practices build people’s capabilities—so that each operator understands not only what to do and how to do it, but, more important, how it could be done better. By learning how to recognize deviations from expected outcomes and how to find opportunities to improve results, operators can gradually improve standards across the organization.

Under this approach, leaders now serve their teams, providing the context and capabilities needed so decisions can be made with the right level of expertise and as close to the actual work as possible. Those doing the work can then solve most operational problems themselves, on every topic from improving safety to deploying the latest AI—with a deep understanding of how their work contributes to the overall business and a real knowledge that they own their results.

The mining industry’s productivity imperative has only become more urgent. A few companies at the vanguard show how leaders can change their culture, adopt technology, and meet the challenges of a carbon-constrained world. What it takes is commitment. Is your organization ready?

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