Being ‘hyperconnected’ boosts cities’ ROI

Cities could collectively see a return on their smart city investments (ROI) of as much as $60 billion if they become fully “hyperconnected”, according to a new study.

The Building a hyperconnected city report by ESI ThoughtLab is based on a year-long global study of 100 cities which are using data and technology to improve, connect and secure all areas of their ecosystem. Each city was categorised as an implementer (making strides and investments to interconnect systems), an advancer (making progress on interconnecting the urban ecosystem and realising benefits) or a leader (ahead of most peers in interconnecting the urban ecosystem and seeing significant economic, business, and social benefits).

Leaders include Singapore, Hong Kong, New York, Seoul, London, Melbourne, Copenhagen and Dublin.

Dr Daniel Miles, Chief Economist, ESI ThoughtLab, told SmartCitiesWorld: “When we did a study last year, we saw that cities really weren’t getting the benefits that we thought they should be. So we started to dig deeper into how cities are using data, and whether they are using it across different areas of their ecosystem.”

He added: “We found this year that cities that ‘hyperconnect’ engage citizens and use data and technology across the ecosystem to connect the different pieces. They get much more return on their investment than they would otherwise.”

Hyperconnected ROI

In 2019, the 100 cities surveyed for the report said they will spend $141 billion on hyperconnected projects. This amounts to an average investment of $1.4 billion per city and $1,220 per citizen.

According to estimates by the reporting cities, the average return on investment on smart city initiatives ranges from three to four per cent. As cities become more interlinked, their ROI grows. Returns in dollar terms can range from $19.6 million per city for hyperconnected beginners to $83 million per city for hyperconnected leaders. This is on top of social, quality of life and environmental benefits such as reductions in crime, congestion and pollution, as well as improvements in public health and living conditions.

In 2019, the 100 cities surveyed for the report said they will spend $141 billion on hyperconnected projects.

For example, the research found that using technology to interlink different areas of public transit programmes increases passenger satisfaction 38 per cent, on-time arrival 33 per cent and transit ridership 29 per cent. Digital public transit payment systems, used by 72 per cent of cities surveyed, are particularly effective, with hyperconnected leaders recognising a 6.5 per cent ROI.

Leaders also report a 4.9 per cent return on real-time public transit apps, 4.8 per cent on open-loop payment systems, and 4.6 per cent on mobility-as-a-service apps.

Miles said city ROI could be two to three times higher due to being hyperconnected rather than simply ’smart’ – i.e. deploying initiatives in isolation.

A roadmap to ROI

“The real value comes not just from using technology to link assets within urban areas, such as mobility, safety, energy and sustainability, but also from connecting city stakeholders, including governments, citizens, businesses and academia. When these are all aligned, cities can reap the greatest economic, business and social rewards,” said Lou Celi, CEO of ESI ThoughtLab.

ESI ThoughtLab offers a number of recommendations based on the survey findings and takeaways from the study’s leaders. These include:

• Craft an evidence-based business case and continuously monitor performance – analysing ROI systematically with the right metrics.
• Calculate the full benefits, including social, business, economic and environmental.
• Capitalise on advanced technologies – particularly various forms of AI – while also bearing in mind the importance of cybersecurity.
• Generate more value from data by gathering, integrating and monetising it in a responsible way, as well as sharing it with stakeholders as appropriate.
• Organise resources within a largely centralised department and draw on both internal and external staff to operate hyperconnected city programmes.
• Use the ecosystem effectively, partnering with business and academic communities, but keeping crucial development and implementation tasks in-house.
• Ensure all citizens are engaged and connected by seeking input from stakeholders and reaching out to disadvantaged populations.

Miles also noted the importance of engaging employees as well as citizens. The research found that only 40 per cent of cities feel that the average city employee is well informed about smart city initiatives.

“That could have a tremendous effect on how successful the projects are,” Miles said. “If city employees don’t understand what the team is doing and what the impact is going to be, that could slow down any progress.”

Roadblocks

The research also highlighted a number of potential roadblocks to becoming a hyperconnected city. Uncertainty among citizens and other stakeholders who feel their health, privacy or other interests could be compromised by new technologies is perhaps one of the thorniest. The study found that cities like Moscow, Barcelona and Stockholm alleviate this through effective communication and outreach to build citizen trust and engagement.

Funding for smart initiatives is another hurdle and the report highlights several possible solutions, both public and private, that leaders around the world have adopted. Cities must also overcome policy and regulatory barriers – such as those around procurement.

One challenge is uncertainty among citizens and other stakeholders who feel their health, privacy or other interests could be compromised by new technologies.

“Getting past these roadblocks may not be easy,” said Celi. “But the journey to hyperconnectivity will provide tremendous dividends to all city stakeholders – from citizens rich and poor, to residents young and old, to workers skilled and unskilled, and to businesses large and small.”

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