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By JUAN M. BARRIONUEVO, PASCUAL BERRONE and JOAN E. RICART
Smart Cities,
Sustainable Progress
OPPORTUNITIES FOR URBAN DEVELOPMENT
In the wake of the devastating floods and
mudslides that hit Rio de Janeiro in April
2010, the city resolved to develop a $14
million intelligent operations center
equipped with the latest technology in disaster
management and response. It can control the
city’s traffic flow and public transit systems, and
handle power outages. Its alert system includes
mobile, e-mail and instant messaging services, to
provide residents and emergency services with
real-time status reports.
Rio de Janeiro is one of a growing number of
metropolises using new technology and inte-
lligent resources to streamline their everyday
operations and improve the quality of life for
their citizens.
These so-called smart cities offer huge
opportunities for businesses to partner with
public authorities, who are eager to tap the pri-
vate sector’s expertise in systems design and
strategic management.
At IESE’s Center for Globalization and
Strategy, we have been studying various urban
development models around the world. This
article highlights some of our early findings
and the key implications for public and private
sectors alike regarding the future development
of smart cities.
What Is a Smart City?
Being a smart city means using all available tech-
nology and resources in an intelligent and coor-
dinated manner to develop urban centers that
are at once integrated, habitable and sustainable.
Drawing on the urban development model
of the IESE Cities in Motion project, we have
EXPERT
insight
IESEinsight
50 THIRD QUARTER 2012 ISSUE 14
With urbanization on the rise
globally, failure to adapt to
the new urban reality could
be disastrous for cities facing
unprecedented demographic,
economic, social and
environmental challenges.
Development models are
needed to transform such
challenges into opportunities.
The authors outline the strategic
planning methodologies
needed to create smart cities
– sustainable, innovative,
connected and socially cohesive
places that enhance the quality
of urban life. And when it
comes to transforming cities,
the private sector has plenty to
contribute.
EXECUTIVE SUMMARY
Sustainable Ecosystems
Against such a backdrop, the major challenge
for urban authorities is to build cities that can
function as habitable and sustainable ecosys-
tems. The cities that are able to pull this off
will almost certainly lead the way in attracting
investment, talent, tourism and employment
opportunities.
The smart city concept covers a broad
cross-section of strategies and measures de-
signed to enhance the quality of urban life, the
provision and management of public services,
and long-term sustainability.
After all, a city’s vitality and reputation de-
pend on a whole host of factors, including com-
munications technology, disaster and waste
management, access to clean drinking water,
green areas, public transportation, health, edu-
cation and public safety.
The key, therefore, to developing smart ci-
ties is to integrate all of these components in
one holistic vision, thereby boosting manage-
ment efficiencies – an area in which the private
sector has much to contribute.
For newly built business hubs like Songdo
in South Korea, designing such a tightly inte-
grated system is relatively easy, as there are
virtually no limits – beyond the usual finan-
cial restraints – to what urban planners can
dream up. Conversely, the transformation
of conventional cities presents far greater
challenges.
Most smart projects that have emerged in
recent years focus primarily on information
and communications technology (ICT) and
sustainability, which is understandable, given
the scope and scale of the business opportuni-
ties on offer. According to the consulting firm
IDC, the income generated by ICT used in
smart city projects may hit $57 billion by 2014.
Nevertheless, we must not forget that ICT
is only a means to an end – which is ultimately
to measurably improve people’s quality of life.
Progress By Planning
With the global urban space expected to grow
exponentially in the coming decades, cities
will need to streamline their strategic and sce-
nario-planning processes. Only then will they
be able to think up new ways to innovate, and
identify opportunities and priorities for future
development.
This means developing a flexible, partici-
patory process with a defined goal: to design a
sustainable action plan that gives uniqueness
and visibility to the metropolis.
identified five types of capital that contribute
toward a city’s intelligence:
n economic (GDP, sector strength, internatio-
nal transactions, foreign investment);
n human (talent, innovation, creativity, edu-
cation);
n social (traditions, habits, religions, fami-
lies);
n environmental (energy policies, waste and
water management, landscape);
n institutional (civic engagement, administra-
tive authority, elections).
These are the lifeblood of the modern urban
system, and can be nurtured through strategies
targeting innovation, social cohesion, sustainabi-
lity and connectivity. See Exhibit 1.
Failure to adapt to the new urban reality
could be disastrous for cities facing unprece-
dented demographic, economic, social and
environmental pressures.
The United Nations has predicted that the
world’s urban population will grow by 75 per-
cent by 2050. This mass migration to the cities
will increase the number of densely populated
areas, further complicating urban mobility and
putting even greater strain on public services.
The McKinsey Global Institute concurs,
pointing out that, with up to 65 percent of glo-
bal GDP growth soon to be concentrated in the
world’s 600 largest cities, associated problems
such as income inequality, mass unemploy-
ment, illiteracy, social conflict and ghettos will
be exacerbated.
Such rapid urbanization also has an envi-
ronmental impact. While cities occupy a mere
2 percent of the planet, they already account
for 60 percent to 80 percent of energy con-
sumption, and 75 percent of carbon dioxide
emissions. Increased traffic, pollution, was-
te and energy costs will no doubt continue to
present a growing threat to human health and
sustainability.
EXPERT insight SMART CITIES, SUSTAINABLE PROGRESS
IESEinsight 51
ISSUE 14 THIRD QUARTER 2012
SIX WAYS MARKETING CAN CHANGE THE WORLD
But just as two companies will have diffe-
rent recipes for success, each city must forge
its own development model that tackles, in a
systematic way, the unique set of challenges
and opportunities that it faces – all of which
presupposes a veritable sea change in the way
city authorities operate.
Amazingly, many cities still employ urban
planning methods that fail to monitor whether
goals are actually being met or not.
Indeed, most cities don’t do strategic plan-
ning at all. Instead, they tend to deal with issues
as and when they arise, rather than adopting an
integrated, holistic approach. They remain fixa-
ted on taking an industrial approach to urban
planning, rooted in a bygone reality. Further-
more, they constantly run up against brick walls
erected by government bodies, which are more
interested in protecting their own power bases.
Large cities must take a longer view, make
greater use of innovation to improve the effi-
ciency and sustainability of their services, im-
prove communications and engage
local residents in their projects.
To do that, cities need to deve-
lop smart governance systems that
take all these factors into account.
Only by doing so will they become
Public
Spaces
Appropriate
Density
Compact
Growth
Energy
Efficiency
Diversity
Community
Spirit
Health &
Safety
Democratic
Values
Technology
Creative
Activities
Private
Sector Talent
International
Connections
Efficient
Mobility
Pedestrian
Friendly
Commu-
nications
SUSTAINABILITY
SOCIAL COHESION
INNOVATION
CONNECTIVITY
CONDITIONS
FOR CITY
PROSPERITY
The Path to
Prosperity
A GOOD MODEL FOR
URBAN DEVELOPMENT
SHOULD PROVIDE THESE
ESSENTIAL CONDITIONS.
exhibit 1
sustainable places, with long-term strategic
projects developed in partnership with the
private sector and local citizens.
When drawing up a long-term strategy, the
city must take into account the full spectrum of
its constituent elements. We propose a three-
step process, beginning by diagnosing the si-
tuation, then developing a strategic plan and
finally taking action. See Exhibit 2.
Analyze the Key Areas
ICT has opened up whole new dimensions to
urban development. However, as we already
mentioned, there is more to smart cities than
just ICT.
City authorities must try to take into ac-
count all the various factors that create va-
lue and bring success to the city, both at the
local and international level. This diagnosis
should be based on a thorough analysis of the
following factors, including but not limited to
technology.
ECONOMICS. This encompasses all the factors
that contribute toward a city’s economic devel-
opment, including local development frame-
works, transition plans, business strategies, for-
mation of industrial clusters, and the presence of
innovation and entrepreneurship.
In the strategic plan drawn up for the eco-
nomic development of the South Korean in-
dustrial center of Suwon, the new economy
was given prominence. By extending finance
to SMEs specializing in IT, biotechnology and
nanotechnology, the city’s authorities created
an economic landscape in which two out of
every three companies now operate in high
tech.
A similar approach has enabled Eind-
hoven to establish itself as the Nether-
lands’ technological capital. The city
decided to stake its future on R&D and
innovation. Since then, leading com-
panies from a broad range of sectors
– automotive, design, food and nutri-
tion, technology and medicine – have
flocked there. This boost to the local
economy has yielded a steady stream of
new projects.
Countless similar examples demons-
trate that urban development in the 21st
century can stimulate recovery and revitaliza-
tion, thanks largely to the partnerships formed
between the public and private sectors.
HUMAN RESOURCES. The main objective of any
EXPERT insight SMART CITIES, SUSTAINABLE PROGRESS
IESEinsight
52 THIRD QUARTER 2012 ISSUE 14
city is to enhance its human capital. As such, it
must attract and retain talent, as well as raise lo-
cal education standards, and promote creativity
and research.
Take the example of Vancouver. Following
the University of British Columbia’s decision
to promote biotech research, the city has be-
come a hotbed of highly specialized biotech
companies, attracting a steady influx of quali-
fied labor from overseas.
To retain that talent, many of the compa-
nies in the sector have established flexible
work policies, and they offer attractive perks
and incentives to high-value staff.
In a similar vein, Suwon has strengthened
its competitiveness by investing more than 350
million euros in improving educational infras-
tructure and specialized courses.
ENVIRONMENT. With increasingly scarce resourc-
es and ongoing environmental degradation, cit-
ies can no longer afford to ignore the issue of
environmental sustainability. In fact, by tackling
pollution, managing water efficiently, and sup-
porting green buildings and alternative energy,
cities can become cleaner, more pleasant places
to live, while at the same time drastically reduc-
ing their energy bills.
Yokohama, Japan, is a case in point. Its
commitment to renewable energy and conser-
vation has made it a pioneer in the field, hel-
ping to reduce carbon dioxide emissions and
dependence on fossil fuels.
The authorities in Moncton, Canada, have
unveiled a sweeping green city project, which,
among other things, aims to encourage greater
use of public transport and bicycles, and more
recycling. It has installed LED traffic lights
throughout the city, and provides electric cars
for city services. In addition, it has imposed
tighter controls on irrigation water and laun-
ched tree-planting campaigns.
In Europe, the Spanish city of Málaga has
launched an ambitious effort to become an
eco-efficient city, aiming to reduce carbon
dioxide emissions by more than 6,000 tons per
year, and shifting toward renewables.
SOCIAL COHESION. Improving a city’s social envi-
ronment requires extensive research and action
in areas such as immigration, community devel-
opment, elder care, health care and public safety.
One interesting case is the health-care
scheme launched by Copenhagen city autho-
rities, which gives doctors instant access to pa-
tient records, thereby reducing the percentage
of medical errors and raising the levels of user
satisfaction.
In the United States, Chicago has imple-
mented an ambitious public-safety plan. A
system of widespread video surveillance and
license-plate recognition technology has led to
substantial improvements, including in emer-
gency response times across the city.
URBAN PLANNING. To make their spaces more liv-
able, many cities are launching local master plans
focused on the design of green areas and public
spaces. They usually include a firm commitment
to smart growth.
Most importantly, new urban planning
methods should focus on creating compact,
well-connected cities, with easily accessible
public services.
Although this is more easily done when
smart cities are built from scratch, there are
many initiatives to revitalize neglected areas of
existing cities, as in the case of 22@Barcelona.
Backed by a public investment of 180 mi-
llion euros, this project in Spain’s second city
is among the most ambitious urban transfor-
mation projects to be launched in Europe.
A former industrial area has been regene-
rated through the construction of 4,000 new
Juan M. Barrionuevo is
director of strategy at Mobile
World Capital and VP of
the IESE Cities in Motion
Strategies platform. He
has more than 15 years’
experience in the ICT industry,
as well as a background in
entrepreneurship, both as a
business angel and as a creator
of venture capital networks.
Pascual Berrone is an
assistant professor of Strategic
Management at IESE and vice
president of the Iberoamerican
Academy of Management.
Holder of a Ph.D. in
business administration and
quantitative methods from
Carlos III University in Madrid,
he has extensive experience
in American and European
firms. His research focuses
on corporate governance,
executive compensation,
family business, sustainable
innovation and corporate
social responsibility.
Joan E. Ricart is director of
the Strategic Management
Department and holder of
the Carl Schroeder Chair of
Strategic Management at IESE.
Besides serving as the vice
president of the Iberoamerican
Academy of Management, he
was the founding president
of the European Academy
of Management and also
presided over the Strategic
Management Society. His
areas of interest include
the design and economics
of organizations, corporate
governance and sustainable
development.
ABOUT THE AUTHORS
EXPERT insight SMART CITIES, SUSTAINABLE PROGRESS
IESEinsight 53
ISSUE 14 THIRD QUARTER 2012
SIX WAYS MARKETING CAN CHANGE THE WORLD
homes, along with parks and facilities. Since
the year 2000, the zone has attracted 4,500
companies, many in tech-related industries. To
date, the scheme has helped create more than
56,000 new jobs.
GOVERNANCE & CIVIC PARTICIPATION. Citizens
are the main focal point for responding to the
challenges facing cities. As such, consideration
should be given to levels of participation, the
ability of authorities to engage business leaders
and local residents, and the implementation of
electronic government, or e-government, plans.
One of the pioneers in this area is Singa-
pore. Since the ’80s, Singapore has supported
numerous initiatives to facilitate communica-
tion and collaboration among government, ci-
vic and business institutions. Today, the city’s
e-government offerings are among the most
advanced in the world. Its citizens now have
access to more than 1,600 online services via
mobile devices.
Singapore’s experience reveals an essential
truth about smart cities: Bureaucracy must be
minimized, and most procedures can be con-
ducted electronically.
Another notable project is Change by Us
NYC, a platform promoted by New York City
to encourage neighbors to share ideas and then
create work teams to put those ideas into ac-
tion. Participants are provided with tools and
resources to access public services and contact
the relevant associations for implementing
their plans.
PUBLIC MANAGEMENT. Many cities are trying to
improve the efficiency of local government in-
stitutions, focusing in particular on the design
of new organizational and management models.
This area presents major opportunities for the
private sector, whose experience of optimizing
efficiencies is invaluable.
Take the example of England’s second city,
Birmingham, whose city council has entrus-
ted the management and maintenance of local
roads, sidewalks, bridges, lighting and green
areas to a consortium of private companies.
This represents good business not only for
companies but also for the city, which stands
to save several million pounds each year.
TECHNOLOGY. While cities do not live on technol-
ogy alone, ICT is an essential driver of a commu-
nity’s economic and social development. As such,
cities around the globe should be – and many are
– seeking to harness the benefits of the latest gen-
eration of ICT.
Take the Chinese metropolis of Chengdu,
which is in the process of adopting fiber op-
tics and other technology to control traffic,
police, firefighters and ambulances from a
large operations center. In addition, Internet
access will soon be available from any point
in the city.
South Korea’s Songdo will likewise soon
have integrated all its information systems for
buildings, hospitals, transport and businesses.
In South Africa, Johannesburg is teaming
up with a technology company to build a broad-
band network that will provide high-speed ser-
vices to businesses and local residents by the
first quarter of 2013.
This is not to say that ICT is the exclusive
domain of major metropolises. Consider the
case of the satellite town of Sant Cugat del
Vallès, located just outside Barcelona, which
has fitted one of its streets with a network of
sensors that enables the council to manage a
Analyze the
Key Areas
Assess the Levers
of Change
Use Indicators
Benchmark Against
Other Cities
Identify Promising
Opportunities
Design the
City Model
Define Strategic
Actions
Create
Coordinating Body
Develop
Operational Plans
Implement Action Plans
DIAGNOSE
THE
SITUATION
(2-5 months)
DEVELOP A
STRATEGIC
PLAN
(5-12 months)
TAKE ACTION
(2-10 years)
Step By Step
THE PROCESS OF BUILDING A SMART CITY
CAN TAKE A DECADE OR MORE.
exhibit 2
EXPERT insight SMART CITIES, SUSTAINABLE PROGRESS
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54 THIRD QUARTER 2012 ISSUE 14
whole range of services remotely, including tra-
ffic, parking, waste management, trash recepta-
cles, environmental control, lighting and Wi-Fi.
MOBILITY & TRANSPORTATION. Making it eas-
ier for people to get around town and access
public services will be among the major urban
challenges of the future – especially given the
coming explosion in urban populations.
Fortunately, many cities are already on the
front foot. Curitiba, Brazil, for example, has
introduced an intelligent, integrated transpor-
tation system to improve mobility, for which a
fleet of 2,160 buses has already been assigned.
The city’s main hubs are served by high-capa-
city, high-speed, high-frequency buses, com-
plemented by other lines operating between
neighborhoods, along loop routes and other
conventional lines. The city has also built 120
kilometers of bike lanes.
On the other side of the globe, Singapore
authorities are working on a pilot project to
determine the most effective and useful tech-
nology for facilitating urban mobility. The city
has already installed a system of traffic sensors
that allows authorities to predict traffic jams
up to one hour in advance.
INTERNATIONAL PRESENCE. Given the intensity
and scope of competition between international
metropolises, big cities looking to prosper must
first achieve a prominent place on the world map.
Building international presence means attract-
ing tourism and foreign investment, which, in
turn, requires bold initiatives to boost the city’s
overseas representation and global positioning.
Take the example of Barcelona, which has
developed a Strategic Tourism Plan with a se-
ries of activities until 2015. The ultimate goal of
the plan is to increase the city’s attractiveness
and to position it internationally, particularly
among high-quality tourism segments.
To achieve that, the city council is working
alongside the Barcelona Chamber of Commer-
ce to organize public-awareness campaigns,
exhibitions and forums.
In many ways, Barcelona is following the
Making it easier for people to access public services
will be among the major urban challenges of the future
– especially given the coming explosion in urban
populations.
example already set by Vancouver, whose long-
held strategic commitment to sustainable tou-
rism has established the city as an internatio-
nal role model.
For the past two decades, the local govern-
ment has been working closely with companies
to improve sustainability and support energy
conservation programs, through associations
like the Oceans Blue Foundation, BC Hydro
and Ethos.
Diagnose the Situation
Through the analysis of these key areas, the
city begins to understand its current situation,
and to see how mature it is in relation to in-
novation, social cohesion, sustainability and con-
nectivity. But that is only part of the equation:
Before executing action plans and achieving
the goals defined, the city also needs to diag-
nose its competitive situation and strategic
position along several other fronts.
ASSESS THE LEVERS OF CHANGE. City authorities
need to review the main levers that will drive
the city’s progress. These are: strategic and
scenario planning; collaboration and commu-
nication; public-private partnerships; funding
strategies; capacity management; and techno-
logical infrastructure. See Exhibit 3.
As part of this process, authorities will
have to decide how plans are to be drawn up
and implemented, making sure that different
scenarios are being considered. They will have
to identify ways of improving communication
with local citizens, as well as how to get local
actors on board. They must devise strategies
for drawing in private-sector support and in-
volvement, and spell out how such partners-
hips will benefit the city. Above all, they need
to develop ways of delivering greater value to
citizens, which, among other things, may in-
volve identifying which technology is needed
to improve the city’s infrastructure.
BENCHMARK AGAINST OTHER CITIES. The next
step is to develop a set of indicators to iden-
tify your city’s strengths and weaknesses,
EXPERT insight SMART CITIES, SUSTAINABLE PROGRESS
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ISSUE 14 THIRD QUARTER 2012
Six WayS Marketing Can Change the World
Economics Human
Resources
Environment Social
Cohesion
Mobility &
Transport
International
Presence
Collaboration
& Communication
Technological
Infrastructure
Strategic
& Scenario
Planning
Capacity
Management
Funding
Strategies
Urban
Planning
Governance
& Civic
Participation
Seeking Opportunities
ANALYZING THE KEY AREAS OF A CITY AND THE LEVERS OF
CHANGE WILL HELP IDENTIFY OPPORTUNITIES FOR URBAN
DEVELOPMENT.
EXHIBIT 3
KEY AREAS
LEVERS OF
CHANGE
TechnologyPublic
Management
Public-Private
Partnerships
and compare them with international best
practices.
Appropriate indicators need to be establis-
hed for each of the previously mentioned key
areas. This should involve the active participa-
tion of key stakeholders. Economic indicators,
for example, may include GDP, exports and fo-
reign investment per capita. In this way, cities
can begin to chart their progress and identify
ways of further enhancing their position.
Each key area should have an indicator,
an international benchmark and a particular
improvement opportunity that must be assig-
ned a priority level.
Ready, Set, Go
Armed with this information, the city is then
in a position to design how it will grow and
progress in the future through a number of ca-
talytic and diversified projects.
DESIGN THE CITY MODEL. It is worth remember-
ing that each city is unique, with its own par-
ticular sets of needs and opportunities. So,
while other cities’ smart initiatives may pro-
vide some useful lessons, each city must de-
sign its own plan that reflects its own reality,
establishing priorities that are clear but at the
same time allow enough flexibility to adapt to
changing circumstances.
Local experts are the ones who should be
responsible for designing the key strategic
measures. When engaging with stakeholders,
city authorities must be sure to involve local
residents, particularly those who will be most
affected by any plans. The consultation pro-
cess must be as thorough and open as possible.
This requires seeking out and genuinely liste-
ning to local stakeholders’ ideas and opinions,
no matter how unpopular they may be.
DEFINE STRATEGIC ACTIONS & DEVELOP OPERA-
TIONAL PLANS. Although smart-city planning
should always have a long-term vision, short-
term projects will also play their part.
As with any corporate governance, muni-
cipal authorities must know how to strike the
EXPERT insight SMart CitieS, SuStainable ProgreSS
IESEinsight
56 third QUArtEr 2012 issUE 14
right balance and meet the needs of different
stakeholders.
In addition, they must diversify their urban
policies as much as possible. No city – nor any
business – should put all its eggs in one basket,
especially in today’s hyper-competitive world.
The process of defining catalytic projects –
that is, projects that rapidly speed up the deve-
lopment process – should include a timetable
with specific goals, tools, resources and res-
ponsibilities covering the primary objectives,
as well as giving a detailed description of the
tasks involved.
In this phase, a supervisory body should
also be established for coordinating, monito-
ring and adapting the various plans.
IMPLEMENT ACTION PLANS. Finally, all the plan-
ning needs to be put into action. This could
take anywhere between two and 10 years,
depending on how ambitious the smart-city
project is. During this phase, flexibility is
paramount: Planners must be ready to adapt
strategies, and even final objectives, to reflect
shifting, on-the-ground realities.
A Fully Networked Ecosystem
It cannot be overstated that every contribution
matters in this process, which is why stakehol-
ders must be invited to participate at every step
of the way. A networked ecosystem should de-
velop among all stakeholders, including civic
organizations, public bodies, government ins-
titutions, top universities, business experts
and research centers.
Working with this networked ecosystem
has certain advantages: It makes it possible to
identify the needs of the city and its residents,
set common goals, establish regular communi-
cation between different actors, increase lear-
ning opportunities, improve transparency and
implement more flexible public policies. As an
OECD report has stated, this ensures that local
policies are focused on those who matter: local
citizens.
Private companies are ideal for leading
and developing projects in collaboration with
This article is based on early research by IESE
Cities in Motion Strategies, an initiative of IESE’s
Center for Globalization and Strategy. This platform
connects experts and private companies with city
administrations all around the world, with the goal
of stimulating innovative thinking and encouraging
the private sector to play a major role in developing
smarter governments and better opportunities for
citizens.
n Find out more at www.iese.edu/globalcenter
TO KNOW MORE
Private companies are ideal for leading and developing
projects, in collaboration with universities and
other public institutions, thanks to their project
management and technical know-how.
universities and other public institutions,
thanks to their project management and tech-
nical know-how.
These public-private partnerships can re-
sult in significant savings to the public purse.
But the benefits go both ways: The private sec-
tor can gain greater government cooperation,
a better understanding of local needs, raised
international visibility and, consequently, ac-
cess to new business opportunities and talent.
The human factor remains crucial to ur-
ban development. Without a participatory,
intelligent and proactive society, any strategy
is doomed to failure, regardless of how well-
intentioned it may be.
Beyond technological and economic deve-
lopment, it is the citizens who hold the key to
turning smart cities into wise cities. That is the
goal that every large city should be pursuing:
for its inhabitants and leaders alike to lend
their talent in support of its progress, in the
broadest sense of the term.
EXPERT insight SMART CITIES, SUSTAINABLE PROGRESS
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ISSUE 14 THIRD QUARTER 2012
