Partners in Growth – Creating Strong Smart Cities

Right now, 1.7 billion people, or 23 per cent of the world's population— live in a city with at least 1 million inhabitants. By 2030, this will rise to 27 per cent, and the world will host no less than 41 megacities, with 10 million or more inhabitants, an increase from the current number of 31. As the numbers of people increase in a city, so too does density in order to enable access to services; Mexico city has around 8,400 people on average in every square kilometre; London 5,100; and Singapore 8,350.  These compare with the rising population of Sydney, for example, at 2,100 per square metre. If you are reading this blog on public transport at the moment, these numbers will not surprise you.

For Governments charged with maintaining equality, services affordability and environmental and societal sustainability for the rising and centralising number of constituents within cities, these are serious times. In the fourth industrial revolution, energy, transportation and communications will shift to new digital platforms, data systems will proliferate within cities and between cities, and data will be collected, supplied to, and analysed by multiple players. Creation of “smart cities” – an ambiguous, seldom defined and ubiquitous descriptor – is no longer optional for Governments.   

Enabling Partnerships for Growth

There are many definitions of a smart city; the most common definitions focus on the digital enablement of service efficiency for a population through connectivity and data. Smart cities embody a mindset shift from componentry to systems and from technology enablers to societal outcomes. While there are several greenfield examples – Masdar in Abu Dhabi and Japan’s Panasonic led town of Fujisawa to name two – most smart city initiatives are limited to mere spokes in the smart city wheel; smart meters, unlinked IoT initiatives and monitoring. In the world of smart cities, connecting people, machines, data and insights is only the first step. True potential will only arise as machines and digital technologies are installed, begin to connect with each other, when data is crunched and algorithms adapted to predict patterns, and then these patterns reused to make decisions in a loop. Living cohesively in such large numbers in the future will require true partnership between a population and its digital and physical infrastructure, and true enablement will take many years and trillions of dollars to create.   

Within this, there is a primary question for Government. Do they devise, create and control the architecture and infrastructure that enable smart cities, or trust the invisible hand of the market. Indeed, entrepreneurial innovation has done its part over the last ten years. New systems of platform based capacity trading have so far brought long standing guilds to their knees in the fields of transportation and accommodation. There is no doubt that now energy, professional services and insurance will experience similar in the medium term. The power of the market to drive innovation, productivity and growth is unparalleled; so too however is the responsibility on Government to understand the direction of society and to establish clear rules of play. As Edward McMahon once said “Growth is inevitable and desirable, but destruction of community character is not. The question is not whether your part of the world is going to change. The question is how”. The private sector cannot optimise without a blueprint, a capital agenda, and the need for partnership between the private and public sectors in the design and development of the city of the future has never been more important. 

The Genus of Capital

At the heart of this partnership is an understanding of how capital works. Government must understand and optimise the process of how different forms of capital are created, deployed and managed, within the different and complementary roles that can be played by the private and public sectors. At the highest level, having a clear capital agenda framework makes clear the role and strategic outcomes of Government, the long term strategic blueprint, then in more detail; what it will own, what it will control, and what it will fund. Only when these primary decisions are made can the doors to different types of capital be most efficiently opened; yield capital, growth capital and venture capital are like different species from a genus. They raise, deploy, manage and divest on completely different rules of engagement, on different timeframes, but are extremely powerful when engaged with an understanding of both expectations and technique. Social bonds and private public infrastructure partnerships, for example, have enabled billions of dollars of yield investment to be made within clear and concise public policy outcomes. 

The need for Government to plan for the future, and to design new frameworks to link capital, through pathways, into the smart city vision, has never been more critical. A cohesive relationship between the public and private sectors will ensure that the cities of today become the smart cities of tomorrow.

The future of smart cities will require the full suite of capital to unite under a clear and concise framework and strategy, with success stories set to come from Governments who can take into account the needs of their citizens as well as the need for smart budgetary measures that ensure strong fiscal planning. For more information on the smart cities of the future, or to chat about the way that capital will need to interact with society and Government to enable them, message me or leave your comments below.