Currently I am reading a book titled Wikinomics. This book is all about how web2.0 have changed the way we do business and how collaborative models are proving to be successful against those of conventional and closed approaches of doing businesses.
Very first chapter of the book starts with an impressive example of Goldcorp a gold mining comapny. It is simply more optimistic piece about the power of mass human collaboration to solve problems. It is interesting not only because it is about Goldcorp, but also because it is about a leader willing to take a big risk and put faith in the collective intelligence of the crowd.
You may get confused that what Linux has to do with Gold mining and why I am writing this blog entry in joyoflinux blog but let me uncover the blanket. The story goes like this:
It’s the year 2000 and the CEO of Goldcorp Inc., a gold producer headquartered in Vancouver, Canada was concerned about an underperforming mine in Ontario. The company’s Red Lake mine was only producing a relatively small 50,000 ounces of gold a year at a high cost of $360 an ounce. The main deposits were deeper underground, but his company’s geologists were not sure of the exact location of the precious metal.
Goldcorp was in trouble. Besieged by strikes, lingering debts, and an exceedingly high cost of production, the company had terminated mining operations. Conditions in the marketplace were hardly favorable. The gold market was contracting, and most analysts assumed that the company’s fifty-year old mine in Red Lake, Ontario, was dying. Without evidence of substantial new gold deposits, Goldcorp was likely to fold.
McEwen wanted new ideas of where to dig and he figured that if his Red Lake employees couldn’t find the gold then someone else would be able to.
McEwen Finds a way too simple but too hard to implement!
McEwen was not a miner, nor did he come from a mining background. Before being bitten by the gold bug he worked in the investment business for Merrill Lynch. And so he did not feel constrained to adopt conventional mining wisdom. Not having grown up with the assumptions of the industry he felt able to question them. Confidentiality and secrecy are industry watchwords and yet here was the CEO apparently giving away the family jewels.
The trigger for solution to his problem was an MIT conference he had attended in 1999. The story of Linus Torvalds came up and how he used the Internet as a collaborative resource to build the Linux software operating system. It fired up his imagination and he headed back to company headquarters full of ideas which culminated with the Goldcorp Challenge.
So he triggered a new gold rush by issuing an extraordinary challenge. He put all his company’s geological data (which went back as far as 1948) into a file and shared it with the whole world. McEwen hoped that outside experts would tell him where to find the next six million ounces of gold. In return he offered $575,000 in prizes to the participants with the best methods.
Unsurprisingly his colleagues were skeptical, particularly as it was such a risky venture. The company was, after all, giving over its proprietary data as well as admitting to the industry that they were unable to find these elusive gold deposits.
The Goldcorp Challenge was launched in March 2000 and 400 megabytes worth of data about the 55,000 acre site was placed on the company’s website. Everything that the company new about the Red Lake mine was a mouse click away. Word spread fast around the Internet and within a few weeks submissions came in from all over the world as more than 1,000 virtual prospectors chewed over the data.
Some were from geologists, but many were from individuals in unrelated sectors. There were mathematicians, military officers, students, and consultants. The top winning entry was a collaborative effort by two groups from Australia. From the opposite end of the Earth and without having ever visited that part of Canada Fractal Graphics, in West Perth, and Taylor Wall & Associates, in Queensland developed a 3-D map of the mine. It included powerful computer graphics that allowed McEwen and his geologists to see the potential in Red Lake.
Goldcorp Challenge was a Goldmine
In all more than 110 sites were identified and 50% of these were previously unknown to the company. Of these new targets, more than 80 per cent yielded significant gold reserves. McEwen believes that this collaborative process cut two, maybe three years off the company’s exploration time. And the worth of this gold has so far exceeded $6 billion in value. The prize money was only a little over half a million dollars, so it was a fantastic value for money investment, and much cheaper than continuing with unproductive exploratory drilling.
By going outside his company’s walls McEwen turned Goldcorp from a struggling enterprise into one of the most profitable in the industry.