Smart City Scenarios – spanning the frame of urban future (Part 1)

In order to be prepared for future challenges it is important to get an idea of how future can look like. Based on this idea appropriate strategies can be developed. In order to set up these strategies it is essential to identify future options that are comprised of past experience and future expectations. These future options, the various pictures of the future, are called scenarios.

Limiting the development of urban future into one direction only is not only dangerous but also mistaking the global socio-economic dependencies. The system city consists of various subsystems. The interaction of only a few determinants within a subsystem in the context of urban creation shows the impossibility of a linear, one-dimensional future projection in a complex urban and global setting.

Looking at energy for example: Will energy be generated in a central or decentralized manner? Will it be regenerative, fossil or nuclear? What forms of climate-political regulations will dominate? Will energy consumption be reduced or will it continue to grow? What arrangements in the urban context will e.g. European cities agree on? What is the role of digitalization and connectivity in the context of energy generation, -storage and –consumption? What is the impact on business models – we have seen first hypes die with the subvention of solar energy. In times of low investment rates on savings energy cooperatives seem to develop quite popular. How will the role of traditional stakeholders change? What is the future of traditional energy suppliers? Many cities hold shares in local energy supply. Will they take back over or completely leave the energy supply to third party? What is the role of the citizen? Will so called prosumers – people who not only consume energy, but also produce for their own use and sale – establish extensively? What is the role of IT driven companies like Google. Nest produces thermostats that learn the temperature preferences of its users. The company was bought out by Google in January 2013 for US$3.2 billion as a strategic move to gain access to the growing connected home market. [Forbes 2014/01/13]. Accessing the energy segment as a domain outside the core competency can also be seen with the growing market of e-mobility. On IAA 2013, the world’s leading automotive trade show, BMW launched their new ‘iSeries’. The electric-vehicle can be used as energy-buffer when integrated into the building’s smart grid. This way BMW has an interface to the energy network of an individual household and could diversify into the energy management of private homes or – thinking of fleet management – businesses.

Various stakeholders, e.g. governments, municipalities, technology providers and citizens will take various perspectives when responding to these questions. A similar variety applies for other subsystems or city segments, e.g. mobility or security and even excellerates with the interdependency of these subsystems.

Is the living-lab Europe too self-confident?

Based on some insights from the “2013 Shanghai Intelligent Building Expo” urbanisation really takes up pace in China. Over the next 20 yeras urban population is predicted to increase by 350mio. There are plans to newly build 50,000 skyscrapers and 170 underground transportation systems.
Energy efficiency is the most critical factor in the chinese urbanisation process as the building sector stands for approx 40% of the total energy consumption.

It will be interesting to observe what solutions will be tested and rolled out for the intelligence of a building e.g. automation, HVAC, lighting, elevation as well as its substance e.g. construction, isolation, energy supply.
Will solutions be developed in China and exported to Europ and North America? Will chinese companies buy into the european market e.g. with M&A or sponsored pilot projects (like Toshiba in France) or will it be the other way round?
So far, listening to stakeholders in Europe, there is the manifest belief, that Europe is the living lab for the golbal future.

Learning about the ambitious chinese plans the self-consciousness of “established” multi-nationals might be a bit too self-confident.

New kids on the block

Software developers seem to discover “City” as a customer. Having developed software for business processes like accounting, controlling, sales, purchase, production, logistics, personnel it is only a small step from handling this business data to also manage the respective assets. As soon as a city gains transparency on their asset conditions and cost (e.g. infrastructure, lighting, busses, energy….) the software developer could climb up the value chain and start to actively manage the assets as a new business field.
So far the asset management is an own domain or part of the asset-/product-suppliers territory.

As a reaction to protect the assets proprietary systems are an option. However in times of increasing connectivity the customer city can insist that interfaces are open and data is shared.

Focus on short term revenue excepts engagement in city projects.

(Smart) City engagement needs innovation. Innovation is mostly defined as technological innovation. Technological innovation incorporates risks. Focussing on revenue entails to avoid or at least minimize risk.

Does engagement in (smart) city projects consequently have to be avoided?

No, because innovation in the urban context is rather about new business models and combination of existing technology.

Traditional incentive systems slow the pace for smart city development

City as a customer offers the chance to initiate solutions across segments. But most multi-nationals are structured in a segmented way, organized in business units with sales targets set up within.

When talking to multi-nationals and even to regional energy suppliers the segmented structure is seen as an organisational problem to address holistic projects. If you look at energy companies most of them are structured in e.g. production (subsegmented in e.g. gas and power) and distribution /grid. Same applies for conglomerates (=Mischkonzerne) on industry side with e.g. divisions Energy, Grid, Energyefficient Buildings, Mobility, Security, Water.

Although corporate strategy defined an approach cross segments KPI for incentives is broken down on business units, cascaded down even on product group level. No wonder that the sales force focusses on turnover in their own specific area.

Conclusion: Cross segmented targets for sales are the prerequisit for holistic solutions within SC projects. And the strategy to approach city as a customer needs a reflection in KPI, sales targets and organisational structures.

Successfactor “City Management”

The high youth unemployment in southern Europe on the one hand and the demand for young professionals in northern Europe on the other shows, that the existing silo mentality lead to a dead end road. The traditional, segment focussed way led to the situation as we see it today – that applies for the supranational level as well as cascading down on national, regional and municipal level.

The self-concept of german towns is expressed in the termination applied. Authorities “administer” rather than “manage” or “create” city (“Stadt’verwaltung’” instead of “Stadt’gestaltung’” or “Stadt’management’”).
Asian cities are more streamlined and top down organized, e.g. Singapore.
New York has an office for “long-term planning” this is institutionalisation of sustainability.
However there is an indicator that this “business logic” is changing as cities in Germany and Austria start setting up own companies to handle sustainable projects.

It is time to open the minds for new ways forward as we see where the silo mentality has led.