In search of better social and economic opportunities, people are moving to cities in droves, and the worldwide urban population is expected to grow by 2.5 billion by 2050. However, rapid growth can create a wide range of issues for cities, including environmental degradation, insufficient infrastructure, and inadequate social services. Economic development and environmental management have become the most common priorities for cities worldwide, but progress in these areas is often stalled by budgetary limitations and investment slowdowns.
According to a report by the World Economic Forum (WEF), a holistic approach is necessary to address key challenges, from urban planning in Asia to water management in Sub-Saharan Africa. For cities in developed economies, some of the top challenges are sustainability and talent acquisition in a global environment.
The WEF asserts that emerging technologies and business models are capable of driving economic development and improving social services, as long as they are coupled with government and private sector action. The following information details how these “triggers” (emerging technologies and business models) and “enablers” (government and private sector action) can drive urban transformation:
New Business Models
As cities look to evolve, innovative business models will play an important role in the delivery of urban services. The WEF explains that new business models in the private sector are helping cities boost their efficiency and adaptability.
One such model involves digital innovation to improve city services, such as waste management and water delivery. In Barcelona, for example, a new city application will use a streamlined technology interface that enables online payments to combine urban services. Cities can also use digital solutions that drive efficiency, such as cloud technology, to improve operations and cut costs. With a cloud-based model, Norfolk County in the UK was able to modify its municipal service delivery and save around $10 million.
Under another new business model, cities can move away from the traditional “take-make-dispose” economic model, a consumption system that results in excessive energy and resource use. Instead, a circular and sharing economy minimizes resource consumption by allowing city residents to share recreational, social, and physical infrastructure. For example, residents can reduce the number of cars on the road by using carpooling websites or online car-sharing clubs, resulting in financial and environmental benefits.
The WEF reports that technology is one of the primary catalysts of transformation, meaning that cities are increasingly utilizing emerging technologies to address urban challenges. On an urban level, some of the most impactful technologies and innovations revolve around sensor technology, for better situational awareness, and data gathering technology, for improved decision-making.
In its report, the WEF highlights a number of technology-based urban solutions developed in Boston, including the Citizens Connect mobile application. With the app, residents can use smartphones to directly notify city hall about public issues and enter an issue into the city’s work-order system. The mobile-based sensing application has been successful in solving urban challenges, and other cities around the US have adopted the platform as well.
Another app developed in Boston, called Street Bump, helped the city improve street conditions by identifying short-term issues and gathering information to guide long-term investments. Residents who use the location and condition sensing application while they drive are able to collect real-time road condition data, which becomes a resource for the city.
Along with sensory technology, big data and data analytics technology are driving urban transformation worldwide. Data analytics have been particularly useful in the utilities sector, allowing companies to implement differential rates according to consumption patterns, consumer analysis, and network efficiency levels. Based on consumption data, distributors can also adjust charges to normalize peak loads, and consumers can avoid utility use during peak rate times.
While there are a wide range of government actions that can enable citywide improvement, the WEF has identified regulatory reform as one of the key tools. Regulatory reform should first focus on fundamentals, such as a competitive and efficient tax policy, to establish an environment conducive for innovation.
According to the WEF, city regulation should protect all segments of the population and promote the city’s value on a global scale, which will help attract investment and talent. Smart regulation also incorporates stakeholder feedback, facilitates information sharing, and focuses on sustainable outcomes.
To further empower transformation, city governments can develop institutional capacity by investing in internal processes and people. For instance, the public sector can acquire talent using competitive incentives and career development opportunities.
City leaders also play a key role in determining a city’s trajectory. In general, successful city leaders are business-friendly and pragmatic, and they make evidence-based decisions and improve city services.
Private Sector Collaboration
Through a global survey on urban services, the WEF found that the private sector is often better equipped to power urban transformation than government agencies, and as such, public-private collaboration is vital to the urban value chain. The WEF adds that public-private partnership (PPP) not only increases profits for the private sector, but it also benefits residents and the environment.
One of the most noteworthy examples of public-private cooperation is King Abdullah Economic City in Saudi Arabia, which features a private municipality. Within this structure, the city uses a private and financially independent Special Purpose Vehicle to deliver city services, such as utilities, waste management, and safety services. The SVP model enables the city to maximize operational efficiencies, employ service providers with technical expertise, and power economies of scale.
As seen in King Abdullah Economic City, the private delivery of public services can be an effective urban transformation model capable of maximizing value for residents.