Benchmarking study: Smart city investments trigger economic growth

Philadelphia — ESI ThoughtLab released key findings from a worldwide benchmarking study of 136 cities that found that smart city investments trigger a robust cycle of economic growth by unlocking savings and attracting businesses, residents, and talent. The catalytic impacts associated with becoming a smarter city have the potential to increase GDP per capita by as much as 21 percent and population growth by 13 percent over the next five years for cities beginning their smart city journey.

As digitization, globalization, and demographic change redefine the urban landscape, becoming a smart city is vital for fostering economic growth and prosperity, while addressing the expectations of citizens and businesses. But the path to a smart city future is often unclear to urban leaders. To help them find their way, ESI teamed up with a coalition of leading organizations to explore the business case for urban transformation in a research program titled Smarter Cities 2025: Building a sustainable business and financing plan.

The research found that to drive optimal results, cities need a well-thought-out roadmap and business case for smart city transformation. “Smart cities provide major economic, social, and productivity benefits to all stakeholders. But without the right vision, plans, talent, and funding in place, smart city programs will not reach their full potential,” said Lou Celi, CEO of ESI ThoughtLab and the project’s director.

In addition to the 136-city survey of government leaders, the research program included diagnostic surveys of 750 businesses and 2,000 citizens in 11 representative cities, along with economic impact models for cities in different stages of smart city maturity. The 136 cities, covering 55 countries, ranged in size from 35,000 to over 37 million residents and represented approximately 10 percent of the world’s population.

ESI ThoughtLab categorized cities into beginner, transitioning, and leader stages of smart city maturity by scoring their progress across 10 pillars of smart city development. These included five “foundational” pillars — smart governance, economy, infrastructure, talent, and funding — as well as five “tech-enabled” pillars — smart mobility, environment, public safety, public health, and payment systems. The study found that many beginner cities often jump into digital solutions before they lay down the foundational pillars, which are vital to long-term smart city success.

Other key findings from the research:

Data is the rocket fuel for smart city transformation. Since many smart solutions are dependent on data, it is crucial for cities to make data management an area of excellence. This includes gathering and analyzing an array of data, making it accessible to stakeholders, and monetizing its value. By 2021, almost all cities will draw on IoT and real-time data, and the use of AI-generated data will grow fourfold. Predictive data, which is already employed by about 40 percent of cities, will rise in usage by 63%. Similarly, the use of both geospatial and behavioral data will rise by 54 percent.

Keeping up with digital innovation is essential for smart city success. Cloud-based technology, mobile apps, citywide data platforms, IoT/sensors, biometrics recognition, and geospatial technology are now used by more than half of the surveyed cities. By 2021, these technologies will be table stakes for urban centers. While just 1 out of 10 cities now use more advanced technologies, these will skyrocket over the next three years: blockchain usage will grow by 752 percent AI by 526 percent drones/robots by 298 percent Vehicles to Everything (V2X) by 257 percent and VR/AR by 254 percent

Spending on smart programs rises with smart city maturity. As cities move up the smart city maturity curve, so does their spending on smart city projects as a proportion of their operating and capital budgets. For example, beginner cities allocate 15 percent of their capital budget to smart programs, while leaders apportion about 20 percent For some pillars (mobility, environment, governance, economy, payments), the level of investment increases as cities become more mature, while for others the level of investment decreases (infrastructure, public safety, talent).

The future of mobility will be multi-modal systems connected through smart technology. The study revealed that cities around the world are developing multiple modes of transportation to provide greater efficiencies for residents and businesses. As cities move to a tech-enabled, multi-modal mobility model, which includes ride and car sharing, smart traffic signals, mobile apps, and smart public transit systems, there can be large returns in time and money. For example, in beginner cities, mobile apps can save riders 10.3 hours annually per capita in waiting time and increase transit ridership, while smart traffic signals can offer per capita annual personal time savings of 9.7 hours and fuel savings of 3.3 gallons per capita.

City leaders see the environment as the top challenge to address through smart city programs, and improved public safety and health as the main benefits. For example, environment investments in smart grid technology generate annual per capita savings of $229.86 and reduce C0₂ emissions 223 pounds per person annually in beginner cities. Pollution reduction has positive effects on health, particularly for sufferers of chronic obstructive pulmonary disease (COPD), for whom treatment with smart public health technologies such as telemedicine can reduce annual healthcare costs per capita by $24.83. In public safety, technologies such as predictive policing reduce violent crimes by about 5 percent and property crimes by about 10 percent, leading to a potential savings of $420.33 per capita for beginner cities.

Funding smart city solutions remains a key challenge for most cities. Urban leaders need to be creative and resourceful in finding ways to fund their future. In three years, public-private partnerships (65 percent) will be the dominant financing technique, followed by concession financing (60 percent), revenue share financing (60 percent), and department budgets (59 percent), which will all grow in use over current levels. Federal and state support will grow the most in use over the next three years, by 71 percent and 58 percent, respectively.

For more information visit: https://econsultsolutions.com/esi-thoughtlab/smarter-cities-2025.