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© 2012 IBM Corporation

Get Smarter for a New Economy

How cities are competing in the innovation economy

Martin FlemingIBM Chief Economist and VP, Business Performance Systems

June 27, 2013


Cornelius Vanderbilt built the Grand Central Terminal with the help of engineer William Wilgus and created mid-town Manhattan

Begun in 1903 and completed in 1913

Covered Park Avenue and created billions of dollars of GDP and real estate value

Also created:– Commuter Fares– Red Carpet Welcome– Ramps

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Displayed bare electric light bulbs as a massive advertisement for electricity.


Get Smarter for a New Economy: How cities are competing in the innovation economy

In the years ahead, economic growth will increasingly rely on the merger of creativity, technology and innovation.

– Cities will face increasing competition for human capital, entrepreneurship, and investment.

Addressing this challenge will require cities to provide services that meet the needs and expectations of the highly skilled and diverse population.

– Analytics and systems thinking will require new deployment of information and communication technology for cities to gain competitive advantage in this new economic age.

Investing in city’s to improve social and economic returns will help address pressing capital constraints.

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Skills and knowledge are having an increasingly significant impact on economic growth and activity among cities and regions

Leading regional and urban economies combine

– a strong base of skills and talent, and

– a high share of knowledge-intensive industries in the overall economy

Economies are becoming more skills and knowledge-intensive over time

Skills and knowledge are driving growth in income (Regional and urban data, 1999-2007, size of the bubble reflects

income per capita, US$ PPP)

0

10

20

30

40

50

60

0 10 20 30 40 50 60

Third level education, % of labor force

Kn

ow

led

ge

in

ten

siv

e s

erv

ice

s,

% o

f to

tal

19992007

Source: OECD Regional Statistics database, 2010 and IBM Global Center for Economics Development analysis

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As focal points of economic activity cities are strongly positioned to benefit from the new talent-intensive economic growth

Bangalore

New Delhi

Beijing

Guangzhou

Shanghai

Johannesburg

Cape Town

SydneyMexico

Paris

Lisbon

Brussels

Seoul

-10

0

10

20

30

-5 5 15 25 35 45 55

Top cities act as economic activity hubs(Size of the bubble – ratio of city share of national GDP

to its share of national population, 2009)

The top 100 cities worldwide accounted for roughly 25% of the world’s GDP in 2005. By 2008 this had increased to over 30%

The world is at an unprecedented level of urbanization.

Cities contain an increasingly large share of the world's highly skilled, educated, creative and entrepreneurial population

Cities support large-scale business networks that absorb and extend innovation

Source: UN Habitat 2010, and IBM Global Center for Economics Development analysis

Cit

y s

ha

re o

f c

ou

ntr

y p

op

ula

tio

n,

%

City share of country GDP, %

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Cities are competing globally for more diversified and internationally mobile talent Diversity of skills, creativity and knowledge has a positive effect on cities’ income

per capita

By 2030, the stock of highly educated migrants will more than double on 2010

Internationally, flows of skills and talent are also becoming more cities-centeredDiversity of skills, creativity and knowledge is

positively linked with income 50 leading US cities, 2006

17,000

19,000

21,000

23,000

25,000

27,000

29,000

31,000

20 30 40 50 60 70

Source: UN Human Development Report, 2009, Diversification score is based on data from Impresa Consulting, 2006, and IBM Global Center for

Economics Development analysis

Inc

om

e p

er

ca

pit

a,

PP

P U

SD

Diversification score, percent

0

20,000

40,000

60,000

80,000

100,000

120,000

Europe NorthAmerica

Asia World

1990 2010 2030(f)

Inflow of highly educated migrants Thousands, 1990-2030

Source: UN Human Development Report, 2009, and IBM Global Center for Economics Development analysis

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Congestion is one of the main urban transportation problems faced by almost all cities and incurs significant costs

0 1 2 3 4 5

KualaLumpar

Bangkok

Sao Paulo

Mexico City

Dakar

Manila

Dublin

Congestion costs %of GDP

Source: Ley and Boccardo, 2010; CSO, County Incomes and Regional GDP 2010

Congestion negatively impacts the quality of life in a city by

– decreasing personal and business productivity

– lowering air quality

– creating noise pollution.

Congestion pressures faced by cities will intensify going forward

Car ownership in Sao Paulo is increasing at the rate of 1,000 cars a day

Traffic is growing four times faster than the population in Mumbai, Delhi, Ahmedabad, Bangalore, Chennai and Hyderabad

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Poor public safety has a negative impact on skilled and innovative workers and businesses

Source: Lloyds, Under attack? Global business and the threat of political violence

Corporate location responses topolitical violence and terrorism

% respondents (past five years)

37

8 7

0

5

10

15

20

25

30

35

40

Avoid investmentsin certain territories

Cease or sell ofoperations in a

territory

Relocate operationswihtin a territory or

region

Levels and quality of human capital are linked to overall levels of public safety

– Higher individual and average levels of education increase demand for public safety

How cities respond to threats to public safety, such as violence and terrorism, are of utmost importance for business location decisions

– Crime and poor public safety have a deterrent effect on foreign direct investment and domestic entrepreneurship, especially in highly skills-intensive sectors

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Health is fundamental to the quality and productivity of a workforce and is crucial for a city’s overall survival and attractiveness

0.0

0.1

0.2

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0.4

0.5

0.6

0.7

0.8

0.9

1.0

0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0

Education indexHuman development index, 2007

Leaders

Followers

Better health is positively correlated with higher quality of skills and knowledge

Ed

uc

atio

n a

nd

H

um

an

De

velo

pm

ent

Ind

ices

Health Index

Source: UN Human Development Report, 2010 database, http://hdrstats.undp.org/en/indicators/ and IBM Global Center for Economics Development analysis

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Smarter Cities solution portfolio can help no matter where a leader starts

EnergyGovernment HealthcarePublic Safety Transportation Water

Operations insightLaw enforcement and

public safetyBuilding management

Planning and Management Infrastructure Human

Transportation management

Water managementUtility Network

managementAsset Management

Social program management

Citizen health and safetyEducational outcomes


Smarter Transportation enhances the traveler experience

InfrastructureHuman

Planning and Management

“What used to be a time-consuming process is now accomplished automatically and in real

time, allowing us to make smarter and more timely decisions that keep our city’s traffic

flowing smoothly.”

Used intelligent video analytics to provide real-time traffic information to drivers, conduct traffic surveillance and improve city roads.

Bucheon City Official, Korea

Smarter Transportation

Leverage information to create visibility across transportation networks and improve operations

Anticipate commuter demand to optimize capacity and minimize congestion

Coordinate resources to assure safety and improve the traveler’s experience

Smarter Transportation

Leverage information to create visibility across transportation networks and improve operations

Anticipate commuter demand to optimize capacity and minimize congestion

Coordinate resources to assure safety and improve the traveler’s experience


T

Public safety analytics make cities safer and more desirable for citizens and businesses

InfrastructureHuman

Planning and Management

“Coplink proved to be an important resource tool to help identify a suspect

and solve an otherwise unworkable case.”

North American police agencies worked together to attain guilty convictions for theft cases

Smarter Law Enforcement

Leverage crime data to get a holistic view and identify leads more quickly

Anticipate and uncover criminal trends to proactively deploy police resources

Coordinate police resources and processes to quickly and efficiently resolve crimes

Smarter Law Enforcement

Leverage crime data to get a holistic view and identify leads more quickly

Anticipate and uncover criminal trends to proactively deploy police resources

Coordinate police resources and processes to quickly and efficiently resolve crimes

David Maher, Tustin Police Department


One platform, many use cases

• Organization-wide dashboards • Domain analytics • Event and KPI management • Geospatial mapping • Data modeling and integration • Simulation and visualization• Cross-department collaboration • Situational awareness• Incident management • Alerts and directives

One platform, many use cases

• Organization-wide dashboards • Domain analytics • Event and KPI management • Geospatial mapping • Data modeling and integration • Simulation and visualization• Cross-department collaboration • Situational awareness• Incident management • Alerts and directives

…within a particular service area or managing across many services

• Leverage real-time visibility of cross-city data to optimize cost efficiencies• Anticipate and proactively manage problems to mitigate impact to services and citizens• Coordinate cross-agency operations with business and citizen participation to drive

economic prosperity and enhance citizen involvement

Intelligent Operations Center for Smarter Cities provides integrated insight


Analytics is transformational and will improve decision making, but will require increased skills and ways of thinking about the entire work force

Analytics are moving away from answering well-defined business problems towards solving for questions users don’t even know to ask.

Hadoop and visualization are complementary to data warehousing and will be integrated into most analytic processes in the future.

Analytics is shifting to more probabilistic platform that analyzes only some of the data, while sifting out the noise.

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Source: Morgan Stanley Research; Tech Hardware Insights Meetings Highlight Pent-Up Demand for Analytics / EDW; December 14, 2012

The shortage of data scientists and complex integration issues are critical problems that often hold companies back from adopting analytic solutions.


In spite of current financial constraints, there are some basic steps city leaders can and must take now

1. Decide what their city brand should be

2. Adopt policies conducive to skills, creativity and knowledge-driven growth

3. Optimize their services around the citizen

4. Employ systems thinking in all aspects of planning and management

5. Develop and apply the fundamental enabling information technologies to core city systems

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1. Cities need to decide what their city brand should be

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What are your city’s

differentiating strengths?

What strategycan best

support these strengths?

Which core systems

investmentsshould be

prioritized?

City brand

Identify the city’s differentiating strengths that will attract human talent

Create a strategy that emphasizes them, building on existent basis of core services

Prioritize investments in core systems: transport; government services and education; public safety and health; as well as energy, environmental sustainability, urban planning and design in line with the strategy

Source: IBM Global Center for Economics Development analysis

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New York is a global power city and exerts a significant impact on many professional fields, such as finance, media, art, fashion, and research

The home of the United Nations, New York is an important center for international diplomacy and has been described as the cultural capital of the world.

Mayor Michael Bloomberg has championed issues such as smoking, obesity, climate change and gun control.

Mass transit use is the highest in the US, and gasoline consumption is the same rate as the national average in the 1920s.

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NYC is the 2nd largest center for the US film industry, including independent film production.

Since 2005, the city has had the lowest crime rate among the 25 largest US cities.

Sources: facebook and Wikipedia


Boston is an intellectual, technological, and political center

A global city, Boston is placed among the top 30 most economically powerful cities in the world.

The area's many colleges and universities make Boston an international center of higher education and medicine, and the city is considered highly innovative.

Boston is sometimes called a "city of neighborhoods" because of the profusion of diverse subsections; there are 21 officially designated neighborhoods.

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The city's water supply, from the Quabbin and Wachusett Reservoirs, is one of the very few in the US so pure as to satisfy federal quality standards without filtration.

Sources: facebook and Wikipedia


2. Cities need to adopt policies conducive to skills, creativity and knowledge-driven growth

Attractinternationally mobile talent by enhancing

quality of lifeservices

Enablebetter opportunities for

deploying skills and abilities, using better

deployment of data collection and analytics

Retainthe existing base of

education, skills, creativity, and aptitude to reduce

the brain drain

Createa domestic skills and knowledge base by offering education

services and training

People, skills,

knowledgeand

creativity


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3. Cities need to optimize their services around the citizen

Shift from standardized services to tailored services that meet individual needs

Create digital linkage across core systems and the analysis and actions driven by data

Develop a transparent system of charges that reflects the costs of citizen-centric services, encouraging direct engagement by the citizens, and lower costs burden on public finances

This city is what it is because our citizens are what they are (Plato)

Old Reality

Not standardised... ...but tailored

Not uniform… …but individualised

Not only reliable… …but also green and clean

Not only accessible… …but also efficient

Sta

nd

ard

ize

d

ser

vic

es

Cit

ize

n-c

entr

ic

ser

vic

es

New Reality


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4. Cities must employ systems thinking in all aspects of planning and management

Consider problems, solutions and the value that improvements will create in the context of related and interconnected city systems

Identify, map and appeal to constituencies essential to the success of city improvements

Focus on system behaviors instead of singular events, and examine multiple approaches to changing system behaviors

Fully leverage the value of data across systems by making information widely accessible to citizens

Source: Bosellli, 2010

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5. Cities need to develop and apply the fundamental enabling information technologies to core city systems

Measuring, Monitoring, Modeling and Managing

MeteringMeteringSensingSensing

Real Time Data Integration

Real Time Data Integration

Real Time + Historical Data

Real Time + Historical Data

Data Modeling + Analytics

Data Modeling + Analytics

Visualization + DecisionsVisualization + Decisions

Data modeling and analytics to create insights from data to feed decision support and actions

Feed

back

to u

ser a

nd d

ata

sour

ce;

Ince

ntiv

es a

nd a

ctio

ns to

cha

nge

beha

vior

Feedback to user and data source;Incentives and actions to change behavior

Comparison of historical data, with newly collected data

Data collection

Data Integration

Cities need to deploy information technologies to core systems

– Collect and manage the right kind of data

– Integrate and analyze the data

– Based on advanced analysis, optimize the system to achieve desired system behaviors

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Cities must act NOW to gain leadership in the new environment of skills and knowledge-intensive economic growth

Recognize talent - skills, knowledge, creativity and innovation ability - as an ever more important driver of sustainable growth implies significant changes in how we think about managing and improving cities

Shift the thinking from appealing to mass audiences to appealing to individual citizens en masse

Leverage modern information technology to make this seemingly daunting challenge not only practicable, but also, over the long-term, cost-effective

Cities that adopt this thinking and make such wise investments to build a smarter city now will thrive. Those that continue to invest in traditional infrastructure improvements designed for a mass population will inevitably struggle

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© 2013 IBM Corporation24

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