Embracing open system approach to support innovation & investment

innovation & investment

Most cities have limited financial resources, personnel, and expertise at their disposal, but city government does not have to be the sole funder and operator of every type of service and infrastructure system. While implementing most of the applications examined, the majority of the initial investment could come from private actors. Public financing may be reserved for only those public goods that must be provided by the government. Furthermore, more than half of the initial investment that needs to be made by the public sector would generate a positive financial return, which opens the door to partnerships. Cities may enlist multiple partners, not only for purchasing and setting up systems but for ongoing operational management.

It makes sense to identify those areas where city agencies can step back and make room for other players, including private-sector companies, state-owned utilities, universities, foundations, and nonprofits. Adding more actors to the mix is positive, since it increases adoption and applies more creativity to the available data. Abu Dhabi introduced telemedicine services through a joint venture with Medgate, a Swiss telemedicine provider. Mexico City’s early earthquake warning system is the product of the CIRES Center, a non profit institution, and SkyAlert, a startup that delivers alerts to users via a mobile app that generates revenues through advertising and subscriptions. Singapore’s Smart Nation initiative incubates many pilots, with the eventual goal of turning some over to the private sector or instituting user fees.

In cases where smart city innovations come from private-sector companies, the role of government may involve creating the right regulatory environment, convening key actors, offering subsidies, or changing government purchasing decisions. National governments can also play a role in areas such as convening city leaders, highlighting best practices that can be replicated, providing funding, and encouraging data sharing and inter-operability standards across cities.

Encouraging innovation by external actors typically starts with making government data open source and easily accessible, but some cities take that further by creating consortia, partnerships, and even physical collaboration spaces. Amsterdam Smart City, for example, is a public-private partnership that defines itself as an innovation platform. It brings together municipal agencies, educational institutions, nonprofits, private-sector partners, and startups to tackle projects along broad themes such as smart energy, mobility, and livability.

Barcelona used public funding to reinvent a former industrial site as @22Barcelona, a space for startups to develop new apps and tools. The initiative has since drawn private investment from Cisco. Other cities are partnering with tech firms and real estate companies to create large-scale smart developments and districts.