Around 2008, global civilisation reached three historic thresholds, which set up a clear path for smart cities to become reality rather than just a buzzword.
1. Unprecedented Urban Population Growth
For the first time in history, the urban population caught up with the rural population of the world. One hundred years ago, only 200 million people lived in cities, approximately 1/8 of the world’s population at the time. Today, just over a century later, more than 3.5 billion call a city a home, tipping the balance in favor of cities.
By the end of 2015, the United Nations forecasts that the urban population will expand to nearly 6.5 billion. In 2100, global population could top 10 billion, whereupon cities could accommodate as many as 8 billion people. Throughout history, there has been a strong correlation between the growth of cities and technology adoption. Especially at times when cities reached a critical mass such that technology solutions were called upon to fix a dire need (telegraph, garbage disposal, ventilation, sewage, etc).
2. Mobile Broadband
For the first time, mobile broadband subscriptions exceeded fixed broadband subscriptions globally. Smartphones are not just becoming cheaper and ubiquitous, but they also lie at the technical crux of the Internet of Things. Now they are acting as a central command and control to just about everything.
3. IT-Spend to Shift from Corporations to Governments
Cisco, IBM and the likes had a long-lasting legacy as suppliers to governments. The companies’ novel ideas, however, focused on the multinational corporations that were their bread and butter.
In 2008 the global recession upended the way things were run and reduced multinational companies’ IT-spending on new systems practically overnight. Then, the premise for huge urban infrastructure investments emerged at around the same time that governments began planning stimulus programs to buy-up underperforming economies.
As the private sector tapered down IT-spending even more, an aggressive urgency to push the technologies of global business into government took over.
The Opportunity for Startups
While tech companies instrumented private sector verticals like the airline industry with hardware and embedded software, they haven’t yet fully manifested themselves in cities. In light of an ever growing urban population, the companies – IBM, Cisco, and Siemens, among others – have prepared an engaging pitch for city governments worldwide: The same technology that built the IT-backbone of global businesses can also solve local problems. These ads make bold claims about how traffic congestions can diminish and how water and power controls can be rendered close to our fingertips, fostering efficient water and energy consumption at home, work and on the street, they claim.
Building smart cities should be approached surgically and will oftentimes be a long, messy and incremental process, depending on the city’s DNA, municipal politics and budget. That being said, there’s no one-size-fits-all smart solution for cities. Nor is there a single place we can go to see the smart city in its entirety; they are emerging in fits and starts all across the world.
The utopian idea of a smart city will emerge in the somewhat distant future. What we do have in place – patchily – are sensors, smart meters for plenty of utility companies, software, digital networks, and remote controls that automate the things we used to operate manually. The real magic of a fully networked and automated city won’t be seen until designers start writing code to program truly novel behaviors for entire buildings and neighborhoods to communicate with one another.
Startups focused on these smart city verticals have started earning their rightful place. Conservative estimates suggest there are over 500 mature startups in the smart city space. Such companies are involved in: Parking, Grid/Energy, Data-Driven Urban Planning, Smarter Transport, Environmental Sensors, Waste Management, Traffic/Transit Data, Water Software & Analytics, and Disaster Management.
Sizing the Global Smart City Opportunity, a Rough Estimate
According to BCG, the global need of infrastructure investments and expected maintenance costs for all of the bridges, roads, power plants, water mains, and sewers will be an estimated $60 – $75 trillion over the next ten years (ending in 2030) worldwide.
Minded by the fact that the bulk of this enormous sum will only pay for the basic city ware of asphalt and steel, if a small fraction goes to chips, glass fibers, and software, it will be a windfall for startups in the technology industry. Songdo’s intelligent infrastructure – equipping / instrumenting traditional infrastructure (pipes, roads, street lights) with smart devices (chips, sensors, digital networks, software) – added only 2.9 percent to the project’s construction budget.
Scaling the ratio of smart devices to traditional infrastructure costs globally yields us $800 billion over the next decade alone. That sum spans a big spectrum, including but not limited to:
● installing municipal wireless networks
● implementing e-government initiatives by providing access to city departments and initiatives through websites
● integrating public transportation with intelligent transportation systems
● developing ways to cut carbon footprints and reduce the amount of recyclables consigned to the trash heap
To get a bird’s eye view on smart city indices and municipal / city governments’ strategies, Roland Berger’s report is among the most comprehensive out there.
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