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  7 Forces to Success in PPPs: Smart Cities via Public-Private Partnerships  Premium

Berrone, Pascual; Ricart, Joan Enric; Ferradans, Hugo; Rodríguez, Miguel; Salvador, Jordi
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In the wake of devastating floods and mudslides that ravaged Rio de Janeiro in 2010, local authorities poured $14 million of public funds into an intelligent operations center. It was money well spent. The facility -- equipped with the latest in disaster management and response technology -- now controls the city's traffic flow and public transit systems, handles power outages and, through mobile, email and instant messaging services, provides residents and emergency services with real-time status reports.

Underpinning all this is a dense, intricate network of cooperation involving operations officials from dozens of public agencies across the city. While the local government supplied the funds and workers, IBM provided the design. The tech giant had already created similar intelligent operations centers elsewhere as part of its Smarter Cities initiative, but only for individual public agencies like police departments. The Rio project was the first time IBM had created a citywide system that integrated data from multiple agencies, all under one roof.

In essence, IBM's Smarter Cities initiative is about pooling public resources and private-sector expertise, knowledge and access to data. "Smart is all about information," IBM's Guru Banavar told The New York Times. "Once you have the information and understand it and know what to do with it, you are halfway to smart."

Getting the whole way to smart is another ball game. It requires identifying and getting to grips with some of the biggest challenges facing global cities -- and by extension, the wider world -- and then developing bespoke solutions for them, by combining public resources with private-sector innovation.

In this article, based on work we have done for IESE's PPP for Cities research center, we will outline what businesses can bring to the table in these kinds of partnerships. We will also explore the types of partnerships available as well as break down the seven forces for success in today's PPPs.

Cities Are Where Things Happen
The future is undoubtedly urban, as statistics emphatically show. Today, over half the world's population lives in cities, more than twice as many as 50 years ago. By 2050, 2 out of every 3 people are expected to live in cities. The speed of growth is astounding: according to U.N. data, the world's urban population is growing at an annual rate of over 60 million people -- roughly the equivalent of adding the entire population of the United Kingdom or France each year.

This planet-wide trend has massive implications, not only for sustainable human development, but also for future business opportunities. Some megacities are already matching or outperforming entire countries in terms of their economic activity. For example, Seoul's economy is bigger than Malaysia's, London's is bigger than the Netherlands' and the Chinese metropolitan cluster of Chongqing-Chengdu has an annual GDP of $2 trillion, roughly the equivalent of India's.

Cities are where important events and developments take place, where people, power and money are concentrated. They are also where many of humanity's biggest challenges will be faced -- from climate change to immigration to automation to social cohesion. For businesses, both local and global, these challenges afford immense opportunities to carve out new, lucrative niches as they seek to engage and serve multistakeholder communities.

Where Business Fits In
Business already plays a major role in the day-to-day running of large cities. Many urban systems -- including for food, energy, waste, water and transportation -- are already partly or fully managed by the private sector. Most of the expertise in cutting-edge technologies, financing and business models also predominantly resides within the private sector. The new generation of challenges that cities face will demand an even larger role for business in local governance.

Here are five ways businesses can contribute to making cities more hospitable, functional and sustainable places to live and work:

IDENTIFYING CITIZENS' NEEDS. If local citizens and firms are directly consulted about the future direction of local government policy, they are more likely to feel engaged in the city's development. And happier citizens make for happier cities.

If private and public actors work together to provide data-sharing and openness, the city -- and its residents -- will reap considerable benefits.

CAPTURING SYNERGIES & COLLECTIVE GAINS. By involving different actors in the decision-making process, valuable synergies can arise, as tasks and responsibilities are assigned to those best qualified to deal with them.

SHARING THEIR KNOW-HOW & INNOVATION. Private firms are specialized in particular fields in which they possess cutting-edge technology and expertise. Public authorities can benefit from the latest technological innovations available in the market and adopt more effective strategies to tackle urban problems.

MOBILIZING FINANCIAL RESOURCES. Public budgets are facing ever tighter constraints, particularly at the local level. Inviting private firms to help finance certain projects can help bring additional resources to bear on the development of essential projects without causing an immediate drain on public resources.

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This article is based on:  7 Forces to Success in PPPs
Publisher:  IESE
Year:  2017
Language:  English

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