Thoughts on Smart City Strategy

This is a repost of my recent advisory at Realcomm.com

There is no doubt that the way cities are being built, improved and operated is changing.

A few years ago I was leading the strategy for Nakheel to create smart cities. The business case was based on a belief that services revenue would fund the operator so that there would be no need for taxes and property values would increase dramatically due to the quality of service, efficiency of operation and lower costs. At that time, our thinking was a big bang or revolutionary approach where new cities would be built this way. Now, with the impact of the financial crisis on the property industry and a much better understanding of the impact of instrumenting cities, social networking behaviors and the evolution of the municipal supply chain we can see that the change will be more gradual and evolutionary. This has a big impact on the strategy a vendor and in fact the whole industry should take.

For me, three years ago the development of the “City-as-a-platform” was a holy grail that would reduce the cost of integrating systems, improve reliability and provide an open architecture for collaborative development of innovative solutions and services.

Now, I see that vendors of traffic light systems, street lighting and even public transport fleet management are all virtualising their control software and standardizing device protocols. This means that over time, all the individual verticals of solutions that make up a city will change. This is where the “City-as-a-Platform” solution will be come a simple evolutionary step rather than the big bang issue it is for many right now. Plus, point solutions for new areas will emerge, mainly from the Telco and location based marketing industries. I’ve thought for some time that location based services would be the real revolution – there is so much value add here that we are only just beginning to understand what can be done and the value that can be created.

To understand some of the reasons for this we need to understand the origins of some of the technology and systems thinking involved. I think that the whole convergence issue in city operations has come from four key technology areas:

• Building Automation

• Telco’s

• Real estate operations – mostly building automation but more recently enterprise system vendors

• M2M (process automation, mostly from the manufacturing sector)

My first experiences in the workplace were in the process automation space and I think this was one of the things that set up my interest in technology, that and selling one of the first IBM PC’s to arrive in Australia.

The original smart building dialogue was generated by vendors like Tridium and Panduit who saw the potential for convenience and efficiency by tweaking existing business models in building operations. This gradually extended into smart Grid and has proven to be a very viable model. But it didn’t connect with property services provision or the customer.

Most dialogue in the industry seems to have originally been generated by the Telco’s as they naturally saw city automation as a pathway to cash – more data to carry etc. Telco’s saw the smart home space as a way to get more services into their customers and build their average revenue per subscriber – thus building their corporate valuation.

The problem with the smart building and Telco models is that they never joined together – this was because the developer, the property services company and the municipality that sat in the middle were not technology aware. They had no idea that process automation and linking together enterprise processes with smart buildings using the Telco infrastructure would create any benefits. They saw it as a bunch of tech guys peddling snake oil.

 Finally, the M2M guys who have been driving automation in manufacturing gradually got interested in industries such as transport, utilities and now, devices such as traffic signals. For me this closes out the loop and means that with everyone beginning to see the same picture we are going to see an informed evolution.

Now, when a city maintenance department goes to market to upgrade their traffic controls systems they will get proposals from vendors that talk about IP enablement, virtualization and mobile access to control systems in the Cloud. If we are lucky, the enterprise vendors who provide accounting through to supply chain and business intelligence for these organisations will pick the sent of cash and drive for an integrated solution that will delivery lower costs and enable more revenue.

Its only with this type of grass routs change in the existing supply chain that purchasing decision makers will move to new models.

With all areas of the city operation gradually being IP enabled and virtualised the issue of large scale integration and an “always on” model will become more important. That is when the average purchasing will see the safe choice is to implement a “city-as-a-platform” model. That’s when you will start to see truly smart communities in our existing built environment – totally an evolutionary model that requires a grass roots approach to getting adoption. The remaining issue is that some of the largest benefits come from solutions that really only are of benefit when the platform is in place. And it will be from solutions that we probably don’t even see as yet such as instrumented sidewalks an roadways connecting to instrumented equipment and vehicles.

If you follow this thinking them all the companies interested in getting devices instrumented and systems virtualised need to focus on a large, fragmented supply chain of city systems. This implies a two pronged approach – driving awareness and demand from the purchaser side and engaging with deep expertise and holistic thinking on the supply chain side – demonstrating the value and benefits of a different approach to traditional vendors of slightly smart systems.

I think this creates an interesting industry view – who will be the leaders and why? The major players in the enterprise strategy and technology space who have been investing heavily in the smarter communities space really should partner with M2M vendors who know how to make low cost large scale systems and may not see the value of a high margin or strategy focused partner. The competitive strategy within the industry is in danger of causing a major road block to progress unless the right path can be defined and followed.

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