As people gravitate towards the world’s cities and adopt urban, technology-laden lifestyles, rich veins of data can be mined for the common good
The stats are startling. The world’s cities will have to find room for an expected three billion more people by 2050. With many city authorities already struggling to provide health, education, transport and other public services, formidable new challenges lie ahead.
Add to that the disproportionate footprint of cities. Urban centres currently account for 70-80% of all greenhouse gas emissions. They’re responsible for a similar proportion of raw material use, too.
“These are unarguable, fundamental challenges that we face as a society at the moment,” says Rick Robinson, executive architect for IBM’s Smarter Cities programme.
Other, parallel changes are under way too. Communications technologies are exploding. Thanks to the internet and mobile phone devices, the potential to communicate with anyone, any time in more or less any place is a reality for billions of people – as it will be for billions more soon. But we’ve not yet “remotely understood” the consequences of such connectivity, according to Robinson.
Along with connectivity comes data. Take the average smartphone. Packed with GPS capabilities, accelerometers, light sensors, sound recording technologies and so forth, it is an info-stacked repository of our biometric data. The introduction of low-power Bluetooth technology means that such data is increasingly accessible to external data-collecting devices.
Mix in information from sensors on physical infrastructure such as traffic control systems, electricity metres and the like, and we’re awash with facts (what the experts like to call “citizen sensing” or “peripheral” data) about ourselves and our immediate environments.
One of the great white hopes for tomorrow’s cities lies in the ability of emerging technologies to crunch this data and put it to practical use, says Simon Giles, a partner at Accenture who leads the consultancy firm’s smart technology strategy.
“These sensing datasets are going to become absolute gold dust for cities, both in terms of understanding individuals and how they relate to a city … and how they interact with the physical environment in cities,” Giles says.
Business has a clear role to play here, whether through collating and distributing such data, analysing it, or delivering solutions based upon it via new infrastructure – be that “soft” infrastructure (such as web-based or phone-based apps) or “hard” infrastructure (such as smart energy grids, automatic traffic systems, electric charging facilities and so forth).
Sense of urgency
But what are the business models that will bring the private sector to the table? What commercial incentives are there to invest in what remains a high-risk (albeit high-potential) area? Will traditional service-based revenue models suffice, or do smart city advocates need to come up with alternative approaches?
The good news is that the private sector is not alone. Municipalities around the world appreciate the urgency of the problem. Whether it’s to reduce the impacts of environmental pollution and become more climate resilient, or to deliver on their social mandate to provide liveability, inclusivity and social mobility (or all the above), city authorities are looking to get “smart”.
“Around the world, cities are taking the lead on the sustainability agenda. You’re seeing hundreds of examples of cities setting very bold visions for a sustainable future and the transformations they want to see,” says Matthew Lynch, project director for the World Business Council for Sustainable Development’ s Urban Infrastructure Project.
“The challenge that cities often face is how to turn that vision into reality because a lot of these things aren’t about marginal change [but] about major systemic transformations of urban systems,” Lynch adds.
So if the public sector sees that it has a need, and the private sector has potential solutions, step in the market. What could be easier?
Certainly there’s no shortage of bold ideas and innovative technology-led solutions springing up. Cities such as Helsinki, Amsterdam, Barcelona, Glasgow and San Francisco have become magnets for future-orientated urban planning in recent years.
The idea of new ways of providing public sector services that are both more efficient and more economical is doubly attractive to municipalities in this age of constrained government spending, notes Scott Cain, project leader for the Future Cities programme at the UK government-backed Technology Strategy Board.
He cites the example of the Silver Spring Network, which presents city authorities with a “clear cut” business case for installing streetlights with energy-efficient LEDs. Cain notes: “They say, ‘It’ll cover its costs in two years and there are no upfront costs that you need to meet’, so for the city it’s a bit of a no-brainer.”
Wire up the street lamp with internet connectivity and the city has itself a secondary revenue stream in providing public wi-fi. Ronald Hendrikx, a partner at law firm Bird & Bird, argues that this ability for smart cities to build one business “onto the next and onto the next” is one of their chief appeals. Solution providers are forced to come out of their “pigeonholes”, he insists. “They don’t think about solving one problem, but they see the opportunity to do a few things at one go,” Hendrikx says.
Transport management is an area where obvious wins abound. IBM, for example, is working with data analytics firm Streetline in the jewellery district of Birmingham on a breakthrough parking system. The model revolves around the location of high-tech sensors in on-street parking areas. The sensors flag up when spaces are free, and the information is then transferred to drivers via an app on their smartphone. Advanced versions of the system allow drivers to book the space ahead of time, as well as conveying information to traffic wardens about parking offences.
“A system like this can reduce the cost of enforcement, increase your returns from parking fines … and the fact that people have better information about where to park reduces traffic,” says IBM’s Robinson.
Power distribution (notably through the so-called “smart grid”) and healthcare provision represent other boom sectors where the mixture of data, analytics, connectivity and infrastructure are combining to dramatically reduce costs and improve delivery efficiencies.
Not always so smart
But the smart city space is not without its challenges. For starters, city authorities are hesitant about backing any one solution. Why? Because the prospect of entering a “closed ecosystem” presents the very real prospect of becoming locked in.
Cain of the Technology Strategy Board points the finger at the big technology firms and their “zealous” attempts to sell neat, integrated and – all importantly – proprietary solutions to cities. “Essentially they’ve had some big hammers, and they’ve been trying to find cities with a big nail that they can hit with their big hammers,” he says.
In addition, there exists a latent suspicion among city authorities that data alone cannot solve the “very gritty, day to day realities” such as youth unemployment and elderly care that they are obliged to address.
The traditional model of government contracting out service delivery to private sector providers generates another problem. Simply put: companies arrive too late at the table. “When you come in at that stage at the end of the lifecycle, the opportunity for driving systemic transformation is very, very limited,” insists WBCSD’s Lynch. Businesses need to be involved much earlier in the game.
A third fundamental issue centres on the current model of savings-driven solutions. As with conventional environmental management systems, these savings are not infinite. After the quick wins dry up, governments often face solutions that require heavy capital investment – something many are reluctant to embark upon.
The classic alternative business model – ie of selling products and services – has legs, but again these are not as long as commercial viability would ideally like. If a smart solution can enable governments to be more effective (although not less expensive) in their delivery of services, then there are grounds for spending taxpayers’ money.
That said, the spectre of straitened budgets is never far away. “The savings do eventually come, but one needs a longer time horizon,” notes Harald Thaler, industry director at research firm Frost & Sullivan. The public sector (and the private sector for that matter) currently “thinks more short term”.
Of course, some smart solution might be so useful and attractive to everyday consumers that they are prepared to pay for the privilege of using them. The market for smartphone apps is the most obvious in this respect.
App developer Withings, for example, has developed products for measuring sleep quality, blood pressure and a host of other health issues using biometric sensory data. Sports-related apps such as running and cycling trackers tap into a similar market. But these tend to be niche products, says Accenture’s Giles, delivered by “single service providers and through single apps”. The opportunity for scale, and systems change, is therefore limited.
The result at present is a lot of talk of technological innovations and a panoply of pilots, yet a dearth of large-scale roll-outs, a lack of major systems change and an absence of convincing return-on-investment arguments that will persuade private investors to take a punt on the smart city sector.
The responses to these challenges are not, in principle, difficult to identify. Future solutions must be based on open architectures, not closed platforms. They need to be collaborative and integrated in nature (a requirement for joined-up solutions), while striking the balance between privacy (necessary for public approval of data sharing) and competition (a basic for market innovation).
And finally they need to be structured in such a way that someone – either in the private or public sector – will stump up the cash when the returns are either risky or long term or both.
No one is there yet. That much is certain. But the bones of possible frameworks are beginning to emerge. In the UK, for example, the Green Investment Bank, the Low Carbon Network Fund and various incubator programmes are all generating interest.
Particular excitement is currently focused on the £24m Future Cities Demonstrator programme in Glasgow. Designed as a showcase to test new, smart solutions in preparation for the 2014 Commonwealth Games, the initiative is structured through a special purpose entity. The goal is to attract ideas from across the private sector and to speed up the financing of high-potential projects. While the details of its “competition and collaboration” model still await clarification, the prohibition of patented solutions holds from the off.
Talk of public-private participation via cooperative or mutual models is also generating interest. This model takes the profit motive out of the equation, by channelling smart innovations through citizen-oriented entities that put the interests of themselves and their fellow citizens first. This gets around the problem of whom cities trust with their data: a bank or telecoms company, say, or – ideally – themselves?
What’s the role of city authorities in all of this? Not as bank-roller, for sure. Rather their energies and resources would arguably be better spent in creating the market for urban information services. Accenture’s Giles envisions a system where a city holds in trust its “assets” – ie its data systems and infrastructure – and issues a concession to private sector service providers to develop, manage and transfer these assets over time.
Just as cities provide the road, rail and other infrastructure for traditional industry to prosper, so should they create the bedrock on which city-based digital solutions can thrive.
Giles cites the example of a taxi reservation system in cities subject to monsoon rains. Such an approach would require GPS data from the taxi firm (which could well be held under licence), meteorological data (that will probably be public) and information on the location and density of people at any one moment (which would typically be held by telecom firms and would be private). Revenue could be generated through the taxi firms in exchange for greater fleet utilisation or from consumers in the hope of a more efficient service.
As well as coordinating the necessary interactions between the various players, city governments would have a role in “priming the pump” – either by procuring services in the initial stages from the resultant solution provider or through the provision of public datasets.
“Cities should make that [digital information] market,” Giles says. “It’s an area that … could deliver a model that is more sustainable and could create a completely new economic segment for cities.”
Breaking out of pilot mode
The challenges facing cities are only too clear. The technology is getting there fast, but the appetite for proprietary solutions and the budgets for large capital expenditure projects present challenges.
If smart cities are to become a widespread global phenomenon, rather than their piecemeal reality at present, it will require new governance systems, new financing structures and new business models.
Under the prevalent system, it remains “very difficult” even to consider, let alone deploy, the complex and integrated solutions that smart urban development demands, observes WBCSD’s Lynch. “It is increasingly understood that this is not about working in sectors and simple, old product lines … We need to see business models devolve and adapt [so that they] use technology to deliver rather different outcomes than those we formally measure today.”
China’s urban growth
China faces one of the fastest urban explosions in the world. Since 1978, when the process of economic reforms and opening to the outside world began, the percentage of the urban population has risen two-and-half times, from 20% to almost 50%. This figure is expected to reach 70% by 2030, a reversal of the predominantly rural character of the country throughout its history.
The number of cities in China has multiplied: those with a population of half a million or more has risen from 51 in 1980 to 236 in 2010, and is expected to reach 343 in 2025.
Source: London School of Economics
Predictive modelling in Portland
The US city of Portland is experimenting with a computer predictive modelling simulation that allows local authorities and planners to see how the city’s systems work together.
Built in cooperation with IBM, the model is designed to support the development of metrics for the Portland Plan, the city's strategy for the next 25 years. The interactive solution uses the government’s existing systems and data in areas as diverse as housing and education through to public safety and utilities.
Urban Infrastructure Initiative
Led by the World Business Council on Sustainable Development, the cross-sector Urban Infrastructure Initiative (UII) was established in 2010 to develop “realistic, practical and cost-effective” sustainability plans.
The scheme operates in 10 cities – including Guadalajara in Mexico, Philadelphia in the US and Yixing in China – and comprises 14 companies from key sectors such as energy (EDF and Acciona, for example), transport (Nissan, Honda and Toyota) and equipment (Philips and Siemens), among others.
“UII was established to demonstrate the value of early strategic engagement between cities and business at a systemic level,” says Matthew Lynch, project director for the UII.
UII was explicitly set up not to have companies push solutions onto cities, but to test different models for their effectiveness and viability, Lynch says. Each city will have different relationships and needs, which leads against prescriptive technological solutions or business models.
A report highlighting the findings and recommendations from UII’s early pilot projects is due to be published later in 2013.
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