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.

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Successfactor “Masterplan”

Cities are keen on attracting and maintaining tax payers. Therefore “marketing” the smartness of a town becomes increasingly important. However like in every good marketing campaign there needs to be a set goal and strategy how to achieve it. Therefore Smart Urbanism starts with a masterplan for Smart City.

Having defined the goal “sustainability”, some cities did that already 10 years ago, is not enough, the roadmap towards it is key. Like in a good marketing campaign any action has to contribute to the overall goal in an integrated way. The many initiatives on municipal side and bottom up approaches from citizens (and industry) hardly follow the rule “the whole is more than the sum of its components”. Examples where such initiatives lack visibility in a big picture happen e.g. in Stuttgart, Mannheim. Approaches need to be integrated and coordinated by e.g. defined KPI for sustainable development. A good example of that marketing analogy is the Smart City of Amsterdam. Tokio has a 10 point masterplan for disasterous prevention and boost economic growth, having de-regulations and tax benefits.

Having a masterplan and milestones could also help industry to cope with the fragmented structure on city side and help find more easily ways to scale solutions.

Testing the water – “pain points” on the way from learning model to business model

When I went to events on “Smart Citiy” in 2011 there was a lot of talk about the challenges that derive from growing population, rapid urbanisation and scarcity of resources. Speakers often took the meta perspective and described a quite scary scenario without having a solution for energy- and mobility concepts by hand, which were mainly in focus . Cause not – these were the early days.
To put it in a picture: It is like a little duck seeing this huge pond for the very first time!

In the meantime, I think, the box to “convince audience for necessity” is ticked. There are a lot of insights on pain points of cities that need to be addressed for a sustainable urban future. Having said that – there is an obvious desire of cities as well as industry to transfer cities into “smart cities”.
In 2012 – and so far also 2013 – we seem to be in the next phase. To stay with the image mentioned previously: The little duck managed to get its poise back and is encouraged to “test the water” – especially as there are some strange noises from behind that might require some action forward. The meta-level talk is over – more and more stakeholders present their technical solutions implemented in cities in order to lable them “smart”.
However, when will the brave one finally be “ready for a swim”? How many more pilots are needed, before we transfer from learning model to business model?

Having had a couple of interviews with cities and technology providers to find out why it seems to be so difficult to create a sustainable business case, I’d like to share some insights…..

Taking the city’s perspective
• Industry doesn’t understand the mechanisms of a city
• The multi nationals that engage in smart city projects are focussed on mega cities
• Technology providers try to strip down “solutions” designed for big projects and squeeze any town size in it.
• Especially ICT providers come with a solution and expect the problem to fit instead of the other way round
• Cities see a change of paradigm in their role from normative instance to an enabeling project partner. Municipality can initiate projects, bring together various stakeholders and help develop solutions by “adjusting” the framework
• Cities realize that the traditional segmented set up does hardly allow innovative projects, slows down execution, scatters synergies and makes it difficult to collaborate with other stakeholders
• Cities rather focus on the well-being of citizens and taxpayers than revenue.
• Timing for projects is longterm – 15-20 years

Taking the industry’s perspective
• Industry sees the organisational set up of municipalities as a fragmented given. Working in big projects often implies to deal with various independent offices involved
• Scale of economy seems most interesting with projects in mega cities. Even if the project is economically not viable the reputation and learnings gained are worth the investment.
• It seems easier to scale-down than -up. Especially IT-platforms that consist of various modules, interfaces and allow various standards should be easier to strip down for “smaller” requirement.
• Industry is used to cities as being the awarding authority or direct customer that sets the regulatory framework and defines a spec-sheet hardly allowing any alternatives or solution development in a collaborative way.
• Industry realizes that the traditional segmented set up makes holistic solution approached difficult.
• Industry focuses rather on revenue than social responsibility
• Timing for projects is immediate – Return on investment should happen within 2-3 years
• Sales strategy focussed on product sales and “immediate” revenue
• KPI based on procurement
• The technology providers core competence is to innovate technology and provide products and services. This can be influenced, measured and sold. SC however is not about technology and products only, but about people and collaboration. These are blurry aspects, difficult to control.
• Co-creation doesn’t fit with traditional procurement processes that have been established, brought to perfection and worked successfully over time.