The ‘smart city’ bandwagon is rolling into the world’s metropolises. But with many cities now claiming to be smart, what does the word actually mean in this context? And what impact could being smart have on inward investment?
Mark Deakin, a professor of built environment at Edinburgh Napier University in the UK, believes there are two traditional definitions for smart cities, which come from different disciplines. “One is from the smart side and the other is from the city side,” he says. “The smart side has been ICT [information and communications technology] driven with high-tech and computational applications at the heart of developing new services to support the city and augment the various capacities for intellectual capital and wealth creation. The city side is infrastructure for energy consumption and carbon emissions as well as critical capitals, such as water, air quality and even food.
"Those two traditions are converging in the sense that one provides the form and the other provides the content, and the platform that develops off that becomes the means to the end.”
Smart, and getting smarter
Adrian Ulisse, a partner at consultancy firm Ethos Valuable Outcomes, likens the way in which smart cities function to what happens when everyone watching a major football match turns their kettle on to make a drink at half-time.
“The national grid expects this – and a few extra power stations are switched in. So imagine this extended to a much more granular level, to the citizen, and covering everything from electricity to road usage in real time. Weather, traffic or resource availability are taken into account. In simple terms, it is more integrated and sustainable and moving towards a circular economy," he says.
Louis Zacharilla, a co-founder of global think tank Intelligent Community Forum, expands even further on the concept of the smart city. “A smart city is one that has an effective digital infrastructure," he says. "Where street lights can be monitored or controlled for energy consumption, traffic flows managed by technologies such as GPS to enable easier commutes and where a broadband network has been put in place that allows adequate connectivity to public institutions and potentially reduces costs to the private sector.
"However, by themselves, smart cities and their infrastructure investments only provide an investor or a company considering relocation with confidence to know that they are investing in a place where the minimum requirements of the 21st century exist. By contrast, an ‘intelligent community’ adds a layer of knowledge, applications and human innovation and services over that infrastructure. Wealth is generated by this and not the other.
“By becoming an 'intelligent community', a place sends out the signal that a culture of innovation and excitement exists. This is a vital distinction. For example, in Taoyuan County [in Taiwan], they have invested in an infrastructure that enables a ton of innovation to be added to one of Asia’s most lucrative logistics clusters.”
Open to all
Both existing and new cities have their challenges and merits when it comes to creating smart cities. This perhaps explains why there is such a broad mix of cities that are considered to be 'smart'. They include the purpose-built eco community of Mata de Sesimbra in Portugal and the purpose-built international business centre of Songdo in South Korea, as well as the Spanish cities of Santander and Barcelona, the UK's Birmingham, Bristol and Manchester, the Swedish cities of Stockholm and Malmo, and the Dutch capital of Amsterdam.
“With historic cities, the focus is more on smart ideas that suggest a higher, better use of big data, so existing ICT can be used more efficiently as an important enabler,” says Archana Vidyasekar, a team leader and senior research analyst in the visionary innovation research group at global consultancy Frost & Sullivan.
“In new planned cities, the nodes that need to be connected via ICT have to be created from scratch as well. While this allows for greater freedom in planning the city, it also presents a huge management and maintenance challenge.”
David Altabev, who manages the 'Future Cities Demonstrator' programme at the UK's innovation agency, the Technology Strategy Board, says: “The UK cities of Birmingham, Manchester and Bristol were some of the early adopters and a large part of their success is due to a clear vision of what they wanted to achieve and strong leadership from the top. Each of these three has a dedicated smart cities team.
"To increase the momentum in the UK, both for the cities and for the industry looking to develop and sell solutions/products, the Technology Strategy Board ran a competition in 2012. It invited cities to develop proposals to show how they would invest £24m [$36.7m] in integrating their systems to deliver value to the city itself and its citizens.” Glasgow eventually won the competition.
Barcelona has also taken its seat at the smart city top table. Juan Blanco, business development manager for the south Europe region at network company Cisco, says: “What we like about Barcelona is its holistic vision, where open innovation, IoT [Internet of Things], ICT in general and a converged, integrated IP [internet protocol]-based network infrastructure in particular will play a key role in urban transformation.”
Mr Blanco says that Cisco has committed significant resources to initiatives in the city, including urban platform reference architecture; iCity – an open data, open infrastructure project which trials new and innovative ways of delivering public services; and its urban transformation initiative, City Protocol. The company is also holding an upcoming IoT World Forum in Barcelona, where it is collaborating with the city on showcasing a range of innovative services. In addition, it is setting up an innovation centre to develop new solutions with key strategic partners, with Barcelona acting as what it calls a 'living lab'.
Moving with the times
Los Angeles is another city that has made progress along the 'smart' route. Mr Ulisse says: “It is pushing smart grid projects as well as electric vehicles. The port of Los Angeles is moving all of its trucks to electric vehicles. It has encouraged a company to set up in the port, manufacture the trucks, supply the port, and the port gets a commission on every truck sold worldwide.”
Over in South Korea, Gale International is building the $35bn Songdo International Business District (IBD) on six square kilometres of reclaimed land in Incheon. Songdo IBD bills itself as a model for sustainable city-scale development. It has more than 1.3 square kilometres of Leadership in Energy and Environmental Design (LEED)-certified space, including the first LEED-certified exhibit hall in Asia, and the first LEED-certified residential tower, hotel and school in South Korea.
Another South Korean scheme is in Cheongju, which is using smart city techniques to improve transportation. “The city doesn’t have serious traffic congestion problems now, but its mayor, Beum-deuk Han, expects that crowded streets and roads will be a major issue in a few years as the population swells and families acquire more cars,” says Jen Crozier, IBM's vice-president of global citizenship initiatives.
“With guidance from the IBM Smarter Cities Challenge team, he is trying to stay one step ahead by convincing citizens to use public transport. They include new means of transportation, including trams, and the use of IT to make mass transit more convenient. The city has also allocated $2.7m to reconfigure public transportation routes.”
Anecdotal evidence suggests that acquiring smart city status helps to attract investment. “At this stage, it is difficult to attribute causality to inward investment as a result of smart city actions,” says Mr Altabev. “However, a city that is a more attractive place to live and work, and which operates efficiently, is a more attractive investment opportunity for global businesses that want to innovate. Ultimately, a lot of the smart city agenda is about maintaining global competitiveness against other cities in attracting talent and businesses.”
Ms Vidyasekar also believes that smart cities will have a competitive edge. “Cities compete for inward investment, and investment decisions are determined by the city’s infrastructure needs and government agenda," she says. "In South Korea’s Jeju project, which is testing a variety of smart-grid solutions, private investors and government have stipulated an investment of $238.5m.”
Mr Ulisse thinks that locating in a smart city can also be good for corporate social responsibility (CSR). “If you’re more sustainable, it fits well with your CSR objective. But it’s also about hard cash, because if you do things well, you could achieve energy savings of between 30% to 40%. Plus, if you do get to the point of managing [the city] in real time, it’s going to attract citizens and knowledge workers who want to live in a city where things are easier and where traffic isn’t so bad, and they can move around in a safe and secure environment.”
A numbers game?
Tom Murcott, executive vice-president of Songdo IBD real estate developer Gale International, can see clear ways in which the city’s investment has encouraged inward investment. “The Songdo IBD smart city development model is driven by u.Life Solutions, a joint venture between Cisco, Gale International, [steel maker] Posco E&C and [IT services firm] LG CNS," he says.
"To date, Cisco has invested $47m in this enterprise, which is delivering a broad spectrum of citizen services and applications across a Cisco-enabled converged network. The intelligent nature of the buildings and the masterplan development has been a deciding factor in several recent tenant acquisitions, including those by ADT Caps, Hysong and E-Land.
"ADT Caps is now delivering security systems to many businesses in the greater Songdo area that tie into the greater Songdo IBD network backbone. Hysong’s contact centres were able to be quickly operational due to the connectivity and embedded technology in our Centroad Towers. E-Land will deploy its storefront retail experience in 254 units in our canal walk mixed-use development. We are exploring opportunities to integrate their retail technologies into the greater u.Life Solutions platform.”
Intelligent Community Forum's Mr Zacharilla says that there are tangible ways of measuring the effectiveness of smart city development, and uses the example of the Taiwanese city of Taichung to demonstrate this.
“You can measure what smart infrastructure yields in terms of low unemployment, the development of new businesses and industries and its ability to attract talent that produces wealth," he says. "Taichung has an unemployment rate of less than 5%. It can certainly measure its wealth and also investments such as Taiwan Semiconductor’s decision to build a new $5bn chip facility. It can also measure the growth of small companies, such as Green Culture, which employs 90 knowledge workers.
"Taichung’s mayor thinks of his city not in terms of industrial output [although it is a major exporter of precision machinery], but in terms of it being an emerging cultural centre. He knows that being the next Seattle or Singapore is where the action is.”
For Edinburgh Napier University's Mr Deakin, the move towards smart city status is not necessarily about economic figures or attracting big names. “Cities don’t want to be left behind,” he says. “They’re not targeting any particular corporate entity or sector of the economy – they want to be able to project themselves as world-class cities that perform on the world-class stage.”