The 4 Types of Cities and How to Prepare Them for the Future
The prospect of urban innovation excites the imagination. But dreaming up what a “smart city” will look like in some gleaming future is, by its nature, a utopian exercise. The messy truth is that cities are not the same, and even the most innovative approach can never achieve universal impact. What’s appealing for intellectuals in Copenhagen or Amsterdam is unlikely to help millions of workers in Jakarta or Lagos. To really make a difference, private entrepreneurs and civic entrepreneurs need to match projects to specific circumstances. An effective starting point is to break cities into four segments across two distinctions: legacy vs. new cities, and developed vs. emerging economies. The opportunities to innovate will differ greatly by segment.
Characteristics: Any intervention in a legacy city has to dismantle something that existed before — a road or building, or even a regulatory authority or an entrenched service business. Slow demographic growth in developed economies creates a zero-sum situation (which is part of why the licensed cabs vs Uber/Lyft contest is so heated). Elites live in these cities, so solutions arise that primarily help users spend their excess cash. Yelp, Zillow, and Trip Advisor are examples of innovations in this context.
Implications for city leaders: Leaders should try to establish a setting where entrepreneurs can create solutions that improve quality of life — without added government expense. Airbnb is an example of a win-win quality improvement: landlords realize more cash flow from their assets, and customers gain both better choice and lower costs in their travel lodging options. Similarly, city leaders should encourage enterprises that create jobs directly (Lyft or Uber) or that indirectly facilitate expansion of work (Angie’s List or Handy).
Implications for entrepreneurs: Denizens of developed legacy cities have discretionary income. This means that entrepreneurs should focus on highly targeted solutions that work for defined segments of the population. Solutions should trend toward entertainment, education, and social networking, and they can be location specific. OpenTable (a restaurant reservations service), Motivate (the operator of CitiBike, Bay Area Bikeshare, and others), and Luxe (a web-based valet parking service) are examples.
Characteristics: Most physical and institutional structures are already in place in these megacities, but with fast-growing populations and severe congestion, there is an opportunity to create value by improving efficiency and livability, and there is a market of customers with cash to pay for these benefits.
Implications for city leaders: Leaders should loosen restrictions so that private finance can invest in improvements to physical infrastructure, to better use what already exists. They should also encourage sources of repayment for such investments beyond just user fees. Large-scale examples include Hong Kong’s historic real estate subsidy for MTR rail from the airport to downtown, or the per-liter subsidies for private urban water and sanitation providers in Algiers and many other cities.
Implications for entrepreneurs: Focus on public-private partnerships (PPP). Compelling solutions that focus on the usefulness of existing infrastructure — for example, traffic-route optimization or ride sharing or more effective trash pickup — also can be essentially self-funded when subsides are not available. Waze, Turo (formerly RelayRides), and WasteZero are examples. There are opportunities to combine creative financing with thoughtful use of new sensor and big-data technologies to create projects that contribute to building sustainable cities.
