Cities will need to adopt new business models and technology to transform themselves and continuously improve. A new trend emerging in the business of running cities, with technology as an important component, is the innovative business models that are disrupting the way urban services are delivered.
How urban infrastructure and services are being managed has attracted increased private-sector and entrepreneurial interest. Cities are constrained by both budgets and capacity to offer services over digital channels.
The private sector is enabling cities to adapt faster, using its innovation and agility through the following models:
Digital “integrated city” services
In several cities developed over decades, the physical integration of infrastructural components is difficult; however, digital integration is possible. Digitally integrated infrastructure components, such as water, storm water, sewage, power, waste management and roads, not only bring economies of scale, but also enhance service delivery for citizens, who now get a one-stop shop to meet all their needs.
Example: Barcelona’s mWallet programme intends to develop a new information technology (IT) application and smart services for virtual payments through smart phones, or “mSmart City”, aiming to integrate urban services through a single-channel technology interface.
Example: Kalundborg, Denmark, has integrated waste recycling into the local industrial system. The city integrates energy management across power, water, heating, transport and building systems through an open, intelligent platform. Any generator or aggregator can use the platform to offer demand response capacity to grid operators looking to manage fluctuations in power supply or reduce the need for network reinforcement. Similarly, Aarhus, Denmark, has transformed a wastewater plant into a combined heat and power plant, converting the conventionally energy-consuming facility into an energy-generating facility.
“CityOps” (city operations) as a service
The digital solutions driving improvements in physical efficiency are increasingly available “as a service”, thus transferring upfront capital investment into operational expenses. This enables city administrators to take more risks and implement solutions rapidly.
Example: Norfolk County Council (UK) was facing budgetary constraints, with its IT budget consumed by existing service. It used a cloud-based model to transform municipal service delivery and achieve an overall saving of $10 million. The solution introduced technologies, such as big data and the cloud, to transform how internal departments collaborate.
Public asset revitalization
Cities are converting “dead assets” that consume resources, such as light poles, into assets that can attract substantial revenue through value-added services, such as sensing ambient conditions for air quality, weather and parking spots. Such services, coupled with digital advertising platforms, are enabling cities to capitalize on unused capacity while adopting more economically and environmentally sustainable means of providing the original functions.
Example: The Array of Things is an urban sensing project in Chicago (USA) where a network of interactive, modular sensor boxes will be installed on streetlights to collect real-time data on the city’s environment and infrastructure (parking spaces). The switch to LED technology provides an opportunity to turn streetlights from a “dead asset” into a “live” one.
The circular and sharing economy
Traditional consumption patterns follow the “take-make-dispose” economic model, which leads to intensive use of materials and energy.7 Moving towards a circular economy will help to reduce the use of resources and cut emissions. Many city residents are reducing wasted capacity when commuting by using websites to carpool, or even giving up car ownership altogether in favour of web-facilitated car-sharing clubs. Opportunities exist to expand the sharing principle to providing physical, social and recreational infrastructure.
Example: Peerby, a service started in the Netherlands, lets users share seldom-used goods and tools through a neighbourhood peer-to-peer borrowing service. Zipcar, another case, allows commuters to rent a car for hours or days on the go through a web and app-enabled booking service.
Example: In South Korea, Seoul’s metropolitan government has announced a new initiative, Sharing City Seoul. The government sees “sharing city” as a new alternative for social reform that can simultaneously resolve many of the city’s economic, social and environmental issues. It would create new business opportunities, recover trust-based relationships and minimize wastage of resources. Sharing allows the community to gain more benefits with fewer resources, since it enhances their usefulness.|
Innovative public services outsourcing
Cities already have the economic rationale and technological ability to outsource management processes, enabled through the Internet of Things (IoT), data analytics and visualization technologies. This is similar to the private sector’s leveraging of information, communications technology (ICT) and skilled labour over the last decades. Cities are moving operations and functions to places where work can be done more efficiently. Outsourcing is further backed by outcome-based contracts and servicelevel agreements rather than by traditional methods of procuring goods and services. As a result, the private sector has become an equal partner in achieving the necessary social and economic outcomes.
Example: In the United Kingdom, London’s leading bus operator, Arriva London, has a long-term outsourcing contract for management of core bus operations such as crew scheduling, operational staffing, on-bus revenue accounting, performance monitoring and mileage planning.
Pricing structures for peak load distribution
Designed to meet peak demand, urban infrastructure often remains idle when demand is off peak. Congestion charging, and dynamic pricing based on demand and consumption patterns, can average out the peaks, thereby reducing the need to develop additional infrastructure while the average demand grows. Cities are looking increasingly to optimize their existing resources and use the excess capacities while they battle with budgetary constraints to fund capital projects.
Example: In Israel, the fast lane project in Tel Aviv uses dynamic tolling (where the charges are determined in real time); as lane usage increases, toll prices increase as well. Carpooling is encouraged by waving the toll for vehicles with three or more passengers, and part of the revenue from the collected toll finances a free commuter bus.
Some cities are better than others at, for example, urban planning, mobility planning and programme management. Some may want to emulate how others have tackled a particular issue. Cities typically are willing to share their best practices, and, while most are already freely sharing ideas with others, some are starting to sell their best practices to other local governments.
Example: Local Government Denmark has been active in projects across Asia, Africa and Latin America, offering services such as decentralization strategies, local government finance, support to local government associations, intermunicipal cooperation and public participation.
The “business of running cities” is complex, covering a wide range of domains such as mobility, infrastructure (buildings, energy, water, waste management), social services (health, safety, security, welfare), the environment (ecological preservation, resource management), knowledge and skills (education, skill development), and culture (culture and leisure facilities, public spaces, tourism). It also involves a large number of stakeholders in the planning and administrative process, including national, regional and local governments, and a number of beneficiaries and partners, such as citizens, the private sector and NGOs. City planning and administration have changed significantly in the last decade with the rise of technology; disruptive business models and technological solutions can enable the sharing of data across domains and help cities build situational awareness.
*) This is an extraction of the World Economic Forum report: Harnessing Public-Private Cooperation to Deliver the New Urban Agenda and was written by Alice Charles, Cities & Urban Development Expert, Urban Development Lead, World Economic Forum & External Board Member, NAMA