What lessons can be drawn as the Smart City concept enters its second decade?
As I open a new chapter in my career, I’ve been reflecting on the last 9 years of my life in smart cities. So far it’s been a fascinating journey and I feel privileged and grateful to have been at the forefront of the movement. At the same time, I wonder what the future might hold.
In my opinion there have been four fundamental phases in the evolution of smart cities that have culminated in the shifts that we see in play today:
In a sense, the smart city market was created on the supply-side, by global IT companies seeking to sell complex, large scale transformations to cities. At this primary stage, many cities simply were neither convinced of the relevance of the solutions being offered to their citizens, nor that they were in any way game changers. It’s never easy being a pioneer trying to change the status quo.
The initial lack of traction moved us into the second phase with technology companies putting some “skin in the game”, committing funds of their own to smart city projects termed “free to fee”. You can see why this would have seemed like a good idea – if the technology companies had enough confidence and self-belief to invest their own cash and resources, perhaps that would de-risk it for cities and inspire them to jump in together. Sadly this approach did not produce the level of buy-in we had all hoped for.
The catch was that cities still weren’t totally convinced these initiatives were actually needed. There remained a nagging doubt that they were being offered technology-driven solutions which were not necessarily a direct response to any citizen or needs-based requirements. Putting it diplomatically, a number of the projects that were implemented at this time have had less than ideal outcomes for either the cities or their suppliers. I remember one deputy mayor telling me that the manufacturers were too top-down in the way they came to market, like a “hammer looking for a nail”.
The global financial collapse in 2008 impacted cities the following year and heralded the third phase of smart city evolution. In reality, this new age of austerity added new momentum to the movement. With money in tight supply, especially capital budgets, cities started to wonder whether all the technology they’d previously been offered could actually help boost efficiencies and ultimately save costs.
Municipalities and their advisers began to talk excitedly about how technology could also be harnessed to deliver better and more efficient services to serve their communities and citizens. But more than that, the need for collaboration between stakeholders began to be recognised and the ecosystem approach was established.
To me, it was at this point that that the smart city really came into its own; striking a balance between supply and demand it started gaining traction and making some sense. This, coupled with citizens demanding that cities should deal with them in similar ways to how they managed their everyday lives, created a pressure which resulted in cities engaging formally and jumping on the smart train.
Today I believe we’ve entered a fourth phase of development as we rise to the challenge of joining up communities of interest, suppliers and projects. This is going to be key if we are to deliver holistic solutions that can scale both vertically and horizontally without leaving anyone behind. This is a complex transformation which cannot be solved by technology alone. It will take cities way outside their comfort zones, as well as creating challenges for suppliers beyond their traditional experience.
If it doesn’t sound easy, it shouldn’t, because it isn’t going to be. It means that companies, cities, countries and citizens all need to find new ways of working together. It will also demand new business models in order to deliver solutions that work for everyone. However, as I’m sure everyone is aware, gaining consensus is easier said than done, and it often means that compromises have to be made.
We are now in the “how to” of smart city adoption; overcoming the barriers that have blocked progress will be critical if we are to move to adoption at scale. Over almost a decade, we have learned from experience what works well. As a result, right now smart city solutions have been put to work to remedy hard-to-solve challenges including traffic, energy, healthcare and waste management.
Let’s not forget that all urban challenges are increasing in scale as urban populations grow; or that no city can compete on a national or global basis unless it gets fundamental infrastructure right, and its resources distributed in a sustainable and equitable fashion. These things are neither “nice to have” nor luxuries, they are absolute necessities without which societies could be tuned upside down, creating a threat to the stability and the prosperity of cities.
Another interesting dynamic leading from the recession is a shift in funding models. Most cities are now short of funds, many have no cash whatsoever. They are trying to make do with reduced budgets with no immediate prospects of a windfall for development. As a result, few cities have the ability to write a big cheque for infrastructure projects. This fact is proving a major challenge to large publicly listed suppliers, with their traditional, inflexible and transactional-based business models.
At the same time, I’ve also observed that this same fact has opened the door to two different types of companies, which you may find surprising. Firstly, there is the big service companies that are already providing many city services – from operating traffic light systems and hospitals to cleaning schools and waste management. With years of municipal experience, these large and well financed companies know how to exist successfully on long term, low margin contracts. They are able to offer design-build-operate as a managed service, they understand how to manage complex programs and they are prepared to accept risk. What’s more, they are now bolting-on technology solutions as a foot in the door to smart city projects.
A major challenge service companies will face is that of acquiring the technological skills and expertise to deliver solutions that work. I suspect that some of the current “big” players in smart cities could therefore end up simply becoming suppliers to these companies. This raises many questions about the roles of manufacturers and service providers in tomorrow’s smart cities, not the least of which is whether there will be either the hunger or budget available for cities to do anything other than procure using a subscription model.
The second type of company I believe is already making great progress is start-ups. Technology-rich solutions coupled with fast, low-cost connectivity has given rise to the Internet of Things. The environment could not be more conducive for clever, technologically-led start-ups to side-step the inflexibility of large incumbents and offer innovative and collaborative ways of working. I think that an ecosystem of niche and specialised companies will lead to the creation of new approaches that cities will find very compelling.
Start-ups are disrupting mainstream businesses everywhere. This is especially evident in the business of cities because they offer simplification and a focused approach to acute problems through creative business models. In fact, start-ups can be structured in a way that overcomes some business arguments that have discouraged other businesses in the past: Cities are cash poor; city business is low margin, it is not a mature market, it takes too long to build an ROI, etc.
As I have said before, if you’re going to be in smart city business you have to talk the talk and walk the walk.
After much soul searching, my conclusion was if I am to continue to feed my passion for smart cities and IoT I could only do that from within either a large service organisation or a small start-up. For those who know me well, there’s no real choice: despite twenty years of corporate life in Fortune 500 companies, I have always been an entrepreneur at heart.
Which is why I recently joined a young and very exciting Finnish start-up called Enevo. It’s a name I promise you’re going to hear a lot more about. A new era and a new chapter of my life!
As I take up my role as part of the Enevo team, delivering smart logistics solutions for waste management and recycling, I’ll continue to reflect and write about the evolving smart city landscape. I look forward to sharing my thoughts with you on the way.