6 !{ArticleDetails-ReadTime} 13 May 2019
Young woman using tablet

How cities can influence their own digital transformation

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Krzysztof Łapiński

EY EMEIA Advisory Center for IoT Strategy Leader

Technology and usability enthusiast. Loves cracking through problems to reveal reasoning and values. Inspiring attitude and encouraging team player. Appreciates quality, aesthetics and simplicity.

6 !{ArticleDetails-ReadTime} 13 May 2019

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Cooperation, co-investment and mutual benefit form the foundation for success.

The Internet of Things (IoT) has changed the expectations we have of our surroundings. We want traffic to be predicted and bypassed, parking paid remotely, and groceries waiting at a drop-off point. We want public transport timetables to be replaced with guided routing, and instead of buying paper tickets we want to swipe our debit or credit card on the train, tram or bus. We want to be securely, digitally recognized in public locations such as museums or entertainment complexes, and have experiences optimized according to our profiles. Because we live digitally, we want our cities to be the same.

The challenge for cities, their infrastructure and assets, is to become responsive, accessible and agile in addressing new residents’ demands, and of the businesses that follow them.

The definition of a city infrastructure is also evolving, expanding beyond roads, utilities, facilities or transportation systems. The term “city infrastructure” is being replaced by “city ecosystem” to emphasize the interoperability or interconnectivity of infrastructural components. The term “ecosystem” allows for the inclusion of services, systems, solutions, machines or devices being part of a digital landscape of a city.

The challenge for cities is that all of this happens simultaneously. The traditional city infrastructure is aging, requires replacement or renovation and needs to be expanded to accommodate a growing population. Roads have been modernized for years to accommodate the growing number of cars, but reducing congestion has been less successful. Now, when the sharing economy proposes a solution to reducing the environmental footprint with car-sharing and electric cars and scooters, roads and parking areas need to expand once more for all the dedicated chargers or eco-lanes. 

Solving such issues is already a challenge. Any infrastructure investment takes years and requires significant funds. At the same time, a new digital layer of city infrastructure must be created to manage the growing complexity, provide maintenance predictions or to enable digital interactions. This demands more budget and presents a new field of exploration for city administration.

Influence the ripple effect

Digital transformation starts with the definition of the future city vision, followed by analysis and discovery of values generated for different city stakeholders. Values drive requirements toward interoperability and synergy creation. This way cities avoid deploying isolated, siloed "smart" services and attract the attention of the private sector through data-economy enablement. Digital transformation is not only about emerging technologies, but how they impact processes, expand responsibilities to third parties, engage new partners or create new business models.

It is all possible with data. Data can report on the state of physical objects, fuel the automation of processes and operation of machines, and is crucial for the sustainability of new business models. It also brings different parties closer, by creating a digital bridge that in the physical world used to be a network of separate supply chains. Therefore, being digital requires city authorities to reconsider the status quo and start a ripple effect stimulated with smart application of influence.

Values drive requirements toward interoperability and synergy creation. This way cities avoid deploying isolated, siloed ‘smart’ services and attract the attention of the private sector through data-economy enablement.

Data aggregation, classification, availability and quality are key for the maintenance of knowledge and fueling of smart services. In times when data is more valuable than oil, cities need to understand and follow the rules of the data-based economy to maintain their attractiveness for external partners willing to trade, barter or purchase data generated by city infrastructure. 

This domain, the data economy, is not captured in traditional accounting, yet is crucial for revenue generation and ROI of digital city deployments that struggle to fit in city budgets, overwhelmed with a long-list of urgent construction works.

Solving complex problems requires cooperation

The way authorities shape the future of cities is influenced by a variety of stakeholders, from residents that decide where to live, through to business owners and enterprise management that decide where to settle their offices and facilities. Neighboring cities will also be affected by such a transformation, either by competing or collaborating. Each of these stakeholders can contribute to city efforts and bring significant advantage to digital transformation, when properly encouraged. For some, this might be just the satisfaction of participation. For others, it might be access to city automation or data sets. Sometimes, mandates are a must to enforce a change, but a small tax relief might speed things up.

Some capabilities to trigger influence

There are several different ways cities can create influence to drive transformations.

A strong vision of a future city can, for example, encourage partnering cities to align and streamline discussions about shared budget for digital mobility around commuter transportation. When a city platform for data analysis is developed, a policy about data standards and interoperability, that is consulted or even shared with partnering cities, encourages them to adopt such policies. That increases the interest of private stakeholders to participate in data bartering, as it shows business potential.

Secondly, financial engagement and investment can drive a city's transformation. For example, city authorities know how to apply tax reliefs to economic development zones to attract investors or subsidize private initiatives that help cities to progress or achieve socio-economic benefits. This can also be applied to support digital transformation, for even greater benefit. 

Encouraging an enterprise to contribute to city transformation with its knowledge, services and technologies pays off in reduced city investments, but, perhaps more importantly, in sharing risks and responsibilities. Enterprises are usually faster to adopt technologies than the public sector. They also, by their nature, have ways to effectively control costs, risks and identify benefits, which also applies to selection of technology capabilities. 

Therefore, cooperation with the private sector might be more valuable for the digital city’s sustainability. In return, some data associated with performing public services might be of great value for enterprises that know how to use insights to improve their internal processes, go to market or increase sales. 

Conclusion

To plan a city transformation, it pays to conduct an influence capability analysis for every city area, as well as identifying stakeholders and their interests to define synergies and long-term benefits. 

As a result, any identified gaps in influence enforcement, or areas of weak influence, should be considered as constraints and removed from the activities defined in a city transformation road map.

With the right vision, financial engagement and approach to regulation, cities can effect digital transformations for everyone’s benefit.

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Citizens and businesses expect their cities to be more responsive, accessible and agile. Digitalization is the answer – but it requires finance and expertise, which are both in short supply among city authorities. Broad availability of data holds the key to digital transformation.

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Krzysztof Łapiński

EY EMEIA Advisory Center for IoT Strategy Leader

Technology and usability enthusiast. Loves cracking through problems to reveal reasoning and values. Inspiring attitude and encouraging team player. Appreciates quality, aesthetics and simplicity.