By Louis Witters, Market and Consumer Insight team, Alcatel-Lucent

Isn’t it amazing that today half of the world’s population lives in cities, and just a few decades from now, more than three out of four people will call a city “home”? At the beginning of last century, the number of mega-cities worldwide could be counted on the fingers of one hand. But within some decades, adding the toes of our feet will not be enough to count them.

This growing concentration of people in cities will lead to constraints, new needs and additional pressure on the cities’ various systems. That’s why Jane Anderson, Debbie Fisher and I, all members of the Market and Consumer Insight (MCI) team within Alcatel-Lucent, were asked to study smart cities — and consider related market opportunities.

Research phases

Our 2011 research included the following phases.

• We first reviewed studies undertaken by key stakeholders in smart cities and looked at 18 smart city projects in order to better understand the players, the processes and the focus of vendors and service providers.
• Next, students from the EDHEC Business School of Nice joined us for a deeper dive into seven smart city projects. “Persons of interest” in these projects helped us grasp the business models, funding, and engagement models that manage complex relationships among players.
• Finally, we substantiated the smart city types and the initial motivations behind smart city projects by applying them to 52 projects. Students from the Presidio Graduate School of San Francisco (California, USA) joined us in this phase.

Key results

What did we learn from our research? We gained a better understanding of who takes the initiative to set up greenfield smart cities or to refurbish existing cities into smarter ones. We learned that smart cities are not possible without government involvement or government backing, and that, in general, telecom service providers are not yet taking a leading role in smart cities, despite having assets that could enable a more active and beneficial role. (However, a lot is changing in this respect since we undertook the studies.) And finally, we found that Information and Communication Technologies (ICTs) play a major role in the development of smart cities projects, but ICT is seldom seen as a separate segment with its own designated budget. ICT is typically part of other functional areas, such as transportation, energy saving, or waste management.

A market for service providers?

Our research results are available on the Alcatel-Lucent website (see Getting Smart about Smart Cities). But how do these results help us in better understanding the market opportunities for service providers? We have segmented smart city projects in terms of types and motivations, so that telecom service providers can develop a focused strategy for each.

We concluded that there are four basic types of smart cities (which can be further segmented). IT box types are the best fit with service provider offerings. Dream box projects require cooperation or partnerships with companies in the industry that drives the project. Black box types are “inaccessible,” except when invited to join the ecosystem. And, Fragmented box projects need a case-by-case evaluation to better define the appropriate strategy.

Our research also revealed three defining initial motivations, which will play a role in further development: social motivations intend to improve the quality of life for citizens and businesses; economic motivations result in observable advocacy for economic growth and a new economic model; eco-sustainability motivations intend to hit targeted sustainability goals that will result in environmental benefits. Service providers must take these motivations into account when creating solution offerings and approaching key decision makers.

Going forward

MCI’s research on smart cities does not stop here. The next round of research will focus on bringing out the voices of the citizens who live — or will live — in smart cities. Debbie Fisher is leading a survey of citizens, government officials and NGOs in cities worldwide. Some of the primary research results were presented at the Digital London event (March 13 and 14). Initial results of the research in Chattanooga (USA) can be found in the blog “Smart Cities – Today’s Difference; Tomorrow’s Ideas.”

For an exclusive and limited access to download our Market Analysis and Executive Summary please visit our web site at www.alcatel-lucent.com/mci