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Open Innovation: Goldcorp Challenge
Rob McEwen is the Founder and former Chairman and CEO of Goldcorp. He stunned the gold mining industry by sharing his company’s proprietary geological data so that people all over the world could do the gold prospecting for him.
Fractal Graphics, and Taylor Wall & Associates, Australia
Rob McEwen was sitting on a fortune; the trouble was he didn’t know exactly where it was located.
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.
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.
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.
Questioning Industry Assumptions
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 his open innovation policy 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.
The Goldcorp Challenge
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.
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