white paper smart cities analysis in spain 2012 — the smart

W H I T E P AP E R

S m a r t C i t i e s An a l y s i s i n S p a i n 2 0 1 2 — T h e S m a r t J o u r n e y Sponsored by: Atos, BBVA, Ferrovial Servicios, Microsoft, and Urbiotica

Rafael Achaerandio Roberta Bigliani José Curto Gaia Gallotti September 2012

I D C O P I N I O N

Becoming a smart city requires vision, political will, strong leadership, stakeholders' inclusion, adequate financial resources, and collective intelligence. However, like any other complex initiative it also requires strong and disciplined project and program management. Most importantly, though, a smart city's transformation requires appropriate governance.

Interest in smart cities continues to expand, develop, and concretize across the world, and especially in Spain. In Spain, over the last year cities have started to organize themselves to share knowledge and experiences, learn from peers, and leverage inherent economies of scale, which led in one case to the creation of the "Red de Ciudades Inteligentes en España" (Network of Smart Cities in Spain), spearheaded by the city of Santander.

Cities that are testing the "smart city" waters have an understanding of the various areas they will target in their efforts. In the IDC Smart Cities Index, they are categorized as smart government, smart buildings, smart mobility, smart energy and environment, and smart services. However, cities are struggling to concretize their smart city journey, as very few clearly detailed showcases exist around the world. With this in mind, IDC has developed its "Smart City Journey," organized across four major steps: plan, design, build, and execute. The IDC Smart City Journey lays out an action plan that can be leveraged by cities, emphasizing that a "one-size-fits-all" approach is not recommended. The model adopted needs to be inclusive, foster collaboration and coordination of efforts across all the projects' teams, and manage progress and redefine priorities and resource allocation to minimize the risks and the impacts of overruns or issues across initiatives.

Encouraging the proliferation of best practice and lessons learned, IDC analyzed five critical areas of success in a smart city journey, leveraging specific cities' experiences. The five areas analyzed are:

Establishing a public-private partnership

Developing a plausible funding strategy

Involving citizens in the smart city project

Deploying efficient internal processes

Boosting city innovation

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This paper also updates the IDC Smart Cities Index Ranking of the top 44 cities originally ranked in 2011. The results of the 2012 IDC Smart Cities Ranking for Spain have been grouped into the top 5 (in order of highest score), five "contenders" in order of highest score), "players" (the next 20 cities in alphabetical order), and "followers" (the last 14 cities, also in alphabetical order).

M E T H O D O L O G Y

For the second consecutive year, IDC provides an objective and independent analysis of the smart cities market in Spain, in terms of both demand and offering. Based on the findings of the 2011 IDC White Paper, which showcased the IDC Smart Cities Index and its first application in Spain, this IDC White Paper provides guidance to cities considering or attempting to make the journey to become a smart city. The paper includes the following sections:

2012 Smart Cities Index analysis for Spain. IDC updated its Spanish assessment, benchmarking the top 44 cities in terms of population, assessing and analyzing their initiatives, maturity, and developments in predefined areas.

The Smart City Journey. IDC traces the smart city journey on its five smartness dimensions (government, buildings, mobility, energy and environment, and services) across three stages (the scattered, integrated, and connected maturity levels), based on the amount of data and its respective level of integration. IDC elaborates its smart city journey with specific tasks and milestones to be met in its four-step action plan: design, plan, build, and deliver. IDC's Smart City Action Plan guides cities in their journey toward becoming a smart city.

Focus on select Spanish cities making the smart city journey. IDC deep dives into the smart city journey of four Spanish cities (A Coruña, Barcelona, Bilbao, and Santander), showcasing their accomplishments and the major lessons learned to encourage knowledge and experience sharing.

Recommendations. IDC provides recommendations for both city halls and smart city solution and service providers in order to promote and develop smart cities in Spain.

I D C S M AR T C I T I E S I N D E X : 2 0 1 2 R E S U L T S F O R S P AI N

I D C S m a r t C i t i e s I n d e x

In 2011, the first IDC Smart Cities Index was developed and then applied in Spain (as well as in other countries such as Germany) to evaluate cities' "smartness." This year, the same approach was followed to create the new 2012 ranking of the 44 largest Spanish cities (those with more than 150,000 inhabitants).

The IDC Smart Cities Index is based on eight building blocks used for the analysis. They are organized into two macro-groups:

Smartness dimensions. Smart government, smart buildings, smart mobility, smart energy and environment, and smart services. These are the domains for which initiatives can be developed and deployed.

©2012 IDC #IDCWP32U 3

Enabling forces. People, economy, and information and communication technologies. While it is true that the population and local economies benefit from the development of smart cities, they also act as enabling factors creating more attractive conditions for successful implementations. Considering IDC's smart city definition — a local entity which declares and makes a conscious effort to adopt information and communication technologies to transform its essential modus operandi — ICT plays a key enabling role. For this reason its relative weighting is higher (40%) than those assigned to people (30%) and economy (30%).

For both the smartness dimensions and enabling forces, relevant and synthetic evaluation criteria were developed and weighted. The 23 criteria included in the model range from city population dynamics to education level and average population age, local economic composition and dynamism, local government transparency, environment protection policies, access to eservices, residential and commercial building efficiency standards, clean energy development, remote working, traffic management, low carbon mobility, and the level and quality of ICT adoption. To appropriately assess these criteria, the model includes a set of 94 indicators.

I D C S m a r t C i t i e s I n d e x : 2 0 1 2 S p a n i s h R a n k i n g

The 2012 IDC Smart Cities Index Ranking of the largest Spanish cities revealed that over the past year, since the first ranking was completed, there has been active commitment and real action taken by cities in Spain as they make the smart city journey. This is demonstrated by the significant steps made by some cities, especially among the top 5.

The results of the 2012 IDC Smart Cities Ranking for Spain have been grouped into the top 5 (in order of highest score), five "contenders" (in order of highest score), "players" (the next 20 cities in alphabetical order), and "followers" (the last 14 cities, also in alphabetical order). This differs from last year when the top 5 were followed by the next 10 contenders, not the next five contenders. This year, only five cities really merited the contender title. The results of this year's IDC Smart Cities Index Ranking for the largest Spanish cities are as follows for the top 5: Barcelona took the number 1 spot this year, jumping up from number 2; Santander and Madrid also climbed one spot, taking second and third places respectively; Málaga was in fourth place; and Bilbao entered the top 5 in fifth place.

Following the top 5 are the next five contenders — these cities made significant decisions, backed by concrete actions, in their smart city journey, meriting the "contenders" title. The cities are Valladolid (sixth place), Zaragoza (seventh), Vitoria-Gasteiz (eighth), Donostia-San Sebastián (ninth place, down from fifth in 2011), and Pamplona/Iruña (10th).

The remaining 34 cities were grouped into "players" (20 cities) and "followers" (14 cities) categories, where players are cities that are moving in the right direction with the right intentions but are still somewhat lacking in action to make the top 5 or next five contenders shortlists. In contrast, followers are behind their peers in their future visions of becoming a smart city, and are possibly not even considering it yet. The results of this year's IDC Smart Cities Index Ranking for the largest Spanish cities are shown in Figure 1. For more details on the 2011 IDC Smart Cities Index Ranking of Spanish cities, please see Smart Cities Analysis in Spain (IDC #IDCWP38T, September 2011), which also includes a detailed methodology of the index.


In a later section of this paper, Barcelona, Bilbao, and Santander are analyzed in more detail, specifically regarding their success factors in the smart city journey.

F I G U R E 1

S p a i n : I D C S m a r t C i t i e s I n d e x , 2 0 1 2 R an k i n g

Source: IDC, 2012

T H E S M AR T C I T Y J O U R N E Y

B e c o m i n g a S m a r t e r C i t y

Smart city initiatives are being carried out in every part of the world, and though all of them can be tagged as such, none of them are the same. City managers are directing their focus and improvement efforts to meet their cities' specific priorities. The ecosystem of private/public companies involved might also determine diverse clusters of action. For instance, in the case of Málaga or Amsterdam there is a strong push from the respective energy players involved. In cities such as Madrid and Stockholm, elements like public safety and traffic congestion management, and water management in the case of Madrid, were the initial starting points. In other cities, such as Santander and Göteborg (the ZigBee City), the first step was the creation of a pervasive communication infrastructure.


"One-size-fits-all" is not a viable or practical approach to consider when initiating the journey toward smartness. It is a multifaceted transformation to become a smart city, and there are many steps to consider. The migration involves initiatives impacting government, buildings, mobility, energy and the environment, and services. The level of coordination among existing and planned initiatives might also vary in relation to a city's maturity of transformation.

In its journey toward smartness a city can achieve and move along different levels of maturity. These can be summarized in a simplified maturity model based on the following three stages (see Figure 2):

Scattered. These cities are fully committed to acting along one or more smartness dimensions, for instance introducing intelligent transportation systems or reducing energy consumption. At this level, smart initiatives are managed by departmental structures as a series of isolated projects.

Integrated. At this maturity level initiatives start to be much better coordinated, looking for synergies to leverage and more collaborative governance of a portfolio of projects. At this stage the value delivered by initiatives is greater than their sum.

Connected. At this stage, smart initiatives are part of a holistic master plan managed by dedicated citywide governance, including citizens and businesses. At the connected level, the best social outcomes are fully delivered.

A smart city can not only be at different levels of maturity in different timeframes, but might also be simultaneously at different stages for each of the smartness dimensions.

In the progression through the various levels of maturity, information and communication technologies (ICT) play a critical enabling role: from minimal digitalization to fully connected open digital platforms supporting public and business applications; from no significant ICT projects to a well-articulated and managed ICT master plan fitted into the smart city holistic visions and goals. Data availability and its respective level of integration also transform during the journey:

Open data exists at the scattered level of maturity of a smart city. Open data is when a city makes an effort to provide its citizens and businesses with various types of data, mainly via online portals. It is generic and one-size-fits-all, not tailored to personal needs.

Valuable information is achieved when a city makes the upward leap to have an integrated level of maturity. Valuable information enhances open data by being easier to find and use, and by being put into the relevant context to enable better business processes and citizens' usage.

Ubiquitous information characterizes the top level of maturity (connected). Ubiquitous information is when, at any moment or in any place, tailored information is proactively delivered to citizens (only those who desire it) without the need for them to go and find it themselves. This is enabled by pervasive computing and the "Internet of things." The personalized information is gathered based on citizens' profiles. Information is organized via open and secure platforms that private and public businesses can leverage to innovate or optimize their operations.


Examples of capabilities characterizing the different levels of maturity are summarized in Figure 3.

F I G U R E 2

T h e J o u r n e y t o S m a r t n e s s

Source: IDC Energy Insights, 2011

Government Buildings Mobility ServicesEnergy &

Environment

Connectedlevel 3

Integratedlevel 2

Scatteredlevel 1

Ubiquitous information

Open data

Valuable information

MATURITY


F I G U R E 3

S m a r t C i t i e s M a t u r i t y M o d e l


O r g a n i z i n g t h e S m a r t C i t y J o u r n e y

Becoming a smart city, and after that a continuously smarter city, requires vision, political will, strong leadership, stakeholder inclusion, adequate financial resources, and collective intelligence. However, like any other complex initiative it also requires strong and disciplined project and program management.

Figure 4 shows IDC's suggested approach in the organization of a city's transformation, drilling down into four major action areas. While every city may have its own specific strategic objectives and action priorities, there are common steps each city needs to consider — plan, design, build, and deliver — to fulfill its mission to better serve its citizens and provide valuable services on an ongoing basis.

Connectedlevel 3

Integratedlevel 2

Scatteredlevel 1

MATURITY

Government Buildings Mobility ServicesEnergy &

Environment

Transparent Government

Online Availability of Data

Limited Collaboration Among Gov'tAgencies

Participatory Government

Online Sharing of Valuable Info

Cross-Agency Collaboration

Inclusive Government

Online Tailored Actionable Info

Stakeholde-Centric Collaboration

Enforcement of Energy Class Standards for Construction & Refurbishment

Increased Penetration of Smart Buildings

Widespread Adoption of Zero-Energy Buildings (ZEBs)

Traf f ic Congestion Mmgt

Low Carbon Mobility Initiatives (i.e. Carpooling; Inf rastructure for PEV; Car/Bike-Sharing; Teleworking)

Smart Mobility Optimization Platform

Pervasive Private & Public Low Carbon Mobility

Partial Deployment of Smart Metering/ Smart Grid Technologies

Limited Penetration of RES

Action Plan for Decrease in Emissions

Environment Protection Initiatives

Integrated Smart Meters and Sensors

Increased Share of RES

Customer Engagement Programs

Fully Operational Intelligent Networks

Pervasive Prosumerism

Ubiquitous Predictive Security, Emergency and Services Connected Platform

Integrated Monitoring & Control Systems

Rich eServices Platforms

Partially Integrated Monitor & Control Systems for Public Safety

Availability of Few eServices for Citizens & Enterprises (i.e. eCommerce, eTourism, e-Education)


F I G U R E 4

O r g an i z i n g t h e S m a r t C i t y J o u r n e y


Planning is crucial to set the strategic direction. A city should assess the best smartness dimensions on which to start taking action, while maintaining a holistic approach. A good assessment provides the city manager with challenges and opportunities, but also strengths and weakness in the transformation journey. International best practices are useful references to better understand one's own specific context. Peers' experiences may help define an ambitious but achievable smart city vision. In the planning stage the vision is articulated in measurable objectives. The metrics need to focus on measuring what matters to citizens and businesses, in other terms measuring valuable outcomes. In the planning phase long-term and short-term horizons need to be balanced. Low-hanging fruit can be instrumental in creating the much needed public engagement for the success of a smart city. A clearly laid out smart city master plan, which prioritizes investments, defines concrete milestones, and ultimately paves the way for policy revision, is the guide for city transformation and the basis for moving into initiative design.

Smart City Program Governance

Risk and Compliance Management

DESIGN BUILD DELIVER

Operational planning Activities scheduling Operations

Partnership Procurement management

Incident/problem resolution

Funding Deployment Continuous Improvement

Policy design Activities budgeting

PLAN

Define vision and goals

Strategic planning

Resource planning

Policy planning

Performance Monitoring

Operations budgeting

Communication and Engagement of All Stakeholders


Once the vision and project direction are set, specific initiatives for the overall program can be designed and organized from an operational perspective. Like any project, the smart city journey requires investment, so alternative funding mechanisms should be evaluated and consequently adopted. Public-private partnerships are an interesting option, but there may be the opportunity to access some of the structural development funds available from the European Commission, the World Bank, or country and local development plans. Figure 5 shows the most adopted financing mechanisms for smart city projects among Spanish cities based on the 2012 IDC Smart Cities Index Questionnaire, in which 43.2% of the largest cities in Spain said they receive some sort of structural development funds.

F I G U R E 5

M o s t A d o p t e d F i n an c i n g M e c h a n i s m s f o r S m a r t C i t y P r o j e c t s A m o n g S p an i s h C i t i e s

Q. How is your city financing its smart city projects?

*Note: Structural Funds for Development = European Commission/Central Bank funds, etc.

Source: IDC Smart Cities Index Questionnaire, 2012

Creating the right ecosystem of partnerships and collaboration is a key success factor, and after being envisioned in the plan phase, this needs to be concretized and formally established during the design phase. It should be made up of multidisciplinary teams based on the smartness dimensions being addressed. Subject matter experts should be leveraged for specific niche projects and initiatives. Universities, research centers, businesses (from energy companies to technology providers, to telecommunication companies, to service providers), public agencies, and the general population must be involved and at least listened to in order to encourage participation and create momentum.

13.6%

13.6%

36.4%

43.2%

0% 10% 20% 30% 40% 50%

Private investment

City budget

Public-private partnerships

Structural Funds for Development*


Figure 6 shows the distribution of the types of partnerships most leveraged by Spain's largest cities in their smart city journey; following collaboration with academia (cited by over half of interviewees), over 40% of cities cited the involvement of their community and citizens, which is a growing trend. Involving citizens is increasingly being seen as a way to improve visibility into smart city endeavors, as listening to peers is a very effective way to enhance popularity and to engage project ownership. Many cities are selecting specific families or citizens to champion their innovations among their neighbors and friends. Of course the ecosystem itself continuously evolves, realigning with the projects and priorities that emerge as the smart city journey unfolds.

F I G U R E 6

M o s t C o m m o n T y p e s o f P a r t n e r s h i p s f o r S m a r t C i t y P r o j e c t s A m o n g S p an i s h C i t i e s

Q. Describe the types of partnership in which your city is involved or will be in the short term to support its smart city project?

Source: IDC Smart Cities Index Questionnaire, 2012

Once the smart city project and initiatives have been planned and designed, they need to move into the build and deliver phase. Project management techniques provide guidance on how to schedule activities, manage procurement contracts, monitor actual deployments, and control costs. As with all projects, it is important to have appropriate mechanisms to evaluate success — mechanisms that are meaningful to the general public and can provide ongoing support.

As projects move from build into ongoing operation, they become part of the "deliver" phase, which requires continuous monitoring and improvements to consistently deliver value to citizens and businesses.

15.9%

29.5%

40.9%

52.3%

0% 10% 20% 30% 40% 50% 60%

Collaboration with private companies

Collaboration with other municipalities from which to exploit economies of

scale in smart cities

Involvement of the community and citizens in the smart city projects

Collaboration with academia (research centers or universities' smart cities)


The smart city transformation requires appropriate governance. To succeed with the available resources, a smart city program governing body should be established. The adopted model needs to be inclusive, foster collaboration and coordination of efforts across all the project teams, manage progress, and redefine priorities and resource allocation to minimize the risks and impact of overruns or issues across initiatives.

A successful smart city program requires the following elements:

Visibility. Provides a comprehensive view, supported by analytics, of all projects in the smart cities program, eliminating inconsistent planning and delivery.

Risk assessment and compliance management. Enables closer alignment between optimal planning targets and actual outcomes. Analytics provide the ability to model scenarios earlier and better understand risk. The same goes with risk of deviations from compliance.

Centralized governance. Provides tools to enable common processes and best practices across the smart city project portfolio as well as appropriate program overview and capability to redefine priorities and resource allocation.

Collaboration, communication, and stakeholder engagement. Supports the sharing of information among project teams working on the different initiatives, and most importantly creates a framework for engaging the community impacted by each initiative and the overall smart city program.

S M AR T C I T Y J O U R N E Y — O V E R C O M I N G C H AL L E N G E S

The smart city journey is very complex, especially considering the vast array of topics and areas of coverage involved. It is exceptionally difficult to get right at the initial phases of planning and design — areas where many Spanish cities are already involved. Creating the appropriate framework for development and collaboration with the different stakeholders is critical for success. IDC identified five key areas here to set up the right framework:

Establish a public-private partnership

Develop a viable funding strategy

Involve citizens in the smart city project

Deploy efficient internal processes

Boost city innovation

These five areas will be analyzed with key lessons learned from specific smart city projects in four cities in Spain: A Coruña, Barcelona, Bilbao, and Santander. Three of these are among the top 5 (Barcelona, Bilbao, and Santander), while A Coruña was classified as a "player" in the 2012 IDC Smart Cities Index Ranking.

IDC carried out primary research on these four cities, aiming to understand how they strategized these challenges and defined a framework for smart city development. This paper highlights some of the key strategies the cities are putting in place to overcome these issues in order to create a smart framework.


IDC analyzes the core smart city strategy these cities have laid out in order to define their smart city framework:

A Coruña. Its approach to the smart city is based on its vision for 2020: "A Coruña, a city smart, sustainable and inclusive, where the efficient use of ICT will be a tool to help achieve city hall objectives as an institution and from a socioeconomic perspective and increase the quality of life of citizens." With this vision the council has developed its digital agenda, pending approval, as a city strategic commitment that includes the Smart Coruña project that seeks to address the complex transformation process required to transform the city into a smart city and coordinate actions in the short, medium, and long term.

Barcelona. Smart City Barcelona has identified information technology as a key tool to achieve its strategic objectives. These objectives are mobility, egovernment, smart cities, information systems, and innovation (MESSI). To implement these objectives, the council has begun a major internal transformation process which seeks to train and prepare it to transform the city.

Bilbao. Its goal as a smart city is to build a competitive city based on knowledge management and innovation. For the past six years, Bilbao has built its strategy around the implementation of the "Digital Agenda 2012" plan, which has boosted the information society indicators in the city.

Santander. Its strategy is linked to two factors: innovation and collaboration. Both factors are integrated in the main smart city project, Smart Santander, which proposes a world city-scale experimental research facility in support of typical applications and services for a smart city through the Internet of Things (it is installing up to 12,000 sensors in the city for different purposes).

E s t a b l i s h i n g a P u b l i c - P r i v a t e P a r t n e r s h i p

Cities are unable to become smart cities on their own, and they need close partnerships with technology vendors, service providers, infrastructure operators, and many other private stakeholders. It is not by chance that some of the most important developments in smart cities are linked to strong public-private ecosystem partnerships.

Despite the importance of these partnerships, it is not easy to make them happen. Regulation, public procurement behavior, economic uncertainty, long-term commitments and returns, and governance and objective divergences are other major hurdles that need to be overcome. Consistent and long-term alignment is a necessary condition to make these partnerships happen and be successful in the long run.

With different approaches and levels of maturity, the four cities profiled have diverse strategies to create these public-private partnership ecosystems. The stronger and more complete the alliances strategy is, usually the more mature the project.


A Coruña

Cities need the active cooperation of all their agents. In the digital agenda, this is defined as triple-axis collaboration, with public entities, companies, and universities working together on initiatives and projects. Some of the initial results of this approach are as follows:

The Smart Coruña Platform and pilot project definition as a Smart Urban Technologies Living Lab initiative.

Signing agreements for the smart city with private entities such as Gas Natural Fenosa.

The creation of the Smart Coruña Technology Forum.

Initiatives to stimulate innovative public technology procurement, review of future relationships with providers to incorporate the smart project, or revision of the criteria for new concessions.

Initiatives to improve IT infrastructure as part of the Smart Coruña program.

Barce lona

Faced with such a large and challenging project as transforming Barcelona into a smart city, the city clearly needs a very strong public-private partnership. The council is working on a number of different approaches:

Cooperation among companies to develop the necessary digital infrastructure of a smart city. The approach envisioned is that the IP network should be a platform of services that includes remote access, traffic lights, cameras, transportation, fleet management, environment services and data, corporate information systems, mobility, and security and emergencies. For the creation of this converged multiservice sensor platform, the city is working with companies such as Endesa, Cisco, Orange, Telvent, UPC, Telefónica, Urbiotica, and T-Systems.

Local and international transformation and collaboration through initiatives such as "22 @," which seeks to strengthen the cooperation with companies and allows the city to be used as a pilot area, events such as Smart City Expo World Congress, and establishing joint projects between cities such as the City Protocol.

B i lbao

Within Bilbao's digital agenda, one of the action lines was searching, creating, and developing strategic alliances with public and private organizations and institutions to realize the objectives of the agenda. Each alliance has been directly linked to a specific project and its needs, resulting in tailored approaches. For example, in the "Bilbao Kilorak" project the city council has signed agreements with energy services companies to achieve a cost reduction of 25%, as well as a 38% reduction for gas consumption and 14% for electricity consumption.

Bilbao is currently developing a common strategy of alliances, learning from the experiences in the 40 existing action lines of its digital agenda. It seeks to create a collaborative platform to facilitate the development of mutual interests and foster leadership initiatives not only by the municipality but also by the companies themselves.


Santander

Santander is creating partnerships to implement initiatives with shared goals with its partners, and the city is involved in a number of collaborative projects in Spain and in Europe as a whole.

Smart Santander is a good example of a public-private partnership as it involves companies, universities, and other cities, including Telefónica I+D, Alcatel-Lucent, Ericsson, Ferrovial Servicios, TTI Norte, University of Cantabria, the University of Surrey (the U.K.), the University of Lancaster (U.K.), University de Lübeck, Commisariatt á l'energie atomique (France), Computer Technology Institute (Greece), Alexandra Institute (Denmark), Santander Council, Sodercan, University of Melbourne, and ITC National Institute (Japan). Moreover, the council is planning long-term relationships with companies such as Telefónica, universities, and other cities to create sustainable projects. It is also pushing a proposal to create a nationwide network of smart cities, with the city keen to take on a leadership role.

D e v e l o p i n g a V i a b l e F u n d i n g S t r a t e g y

Funding and financing the smart city projects is probably one of the most complex issues to overcome. Given the complex economic situation in the country, access to new, reasonable, and cheap credit is almost impossible even for the biggest cities in the country. This is a clear inhibitor to smart city development in Spain, creating a difficult context for public city investments.

Traditional competitive procurement processes don't really help cities to create long-term partnership environments. These relationships are based on a risk versus profitability trade-off. There are different approaches, and none is perfect, but there are some critical areas that must be clear in terms of risks and profitability for private industry players and financial institutions.

Countries such as the U.K. have been using project finance structures to transform and create infrastructure projects: the public entity defines the scope, quality standards, and service level agreements, while the private company designs, builds, and operates the infrastructure in the long term under contract. Financing sometimes come from private entities lending money to the project. In the end, a strong and secure framework is critical to facilitate these funding strategies. The new collaborative public contract in Spain is a good starting point to create the required financing strategies for smart city projects.

Cities interviewed are trying to fund their smart city projects with state or European funds, but are also establishing collaboration frameworks with private services and solution providers with a long-term agreement perspective that creates the right environment for the private financing entity. Smart city savings are becoming the key cash flow generator to comply with the expected returns on investment. But savings don't depend solely on the service provider: they require a common holistic perspective and coordination with the city council to make them happen.

http://www.boe.es/boe/dias/2011/11/16/pdfs/BOE-A-2011-17887.pdf


A Coruña

The viability and sustainability in the long term of the smart city project is the top priority for the city council. Coruña is considering three ways: self-financing, state funds, and public-private collaboration.

Self-financing. As becoming a smart city is part of the city strategy, the city has invested €18 million in the digital agenda (up to 2014).

State funds. The council is planning to attract grants from and work with other government services. Coruña already has an agreement with the Ministry of Economy and Competitiveness, for a total of €11.56 million, and 70% co-financed by the European Regional Development Fund (FEDER) under the R&D + I operational program.

Public-private collaboration. At the same time, the council is taking part in collaborative projects with companies such as Gas Natural. The creation of the Urban Technologies Living Lab seeks to attract private funding to the city.

Barce lona

In the current situation, the financing of the Barcelona Smart City project is a major challenge. The council is tackling this in a number of ways:

Self-financing: Within the city plan, Barcelona has allocated public budgets to a number of developments linked to the smart cities project, including "Habitat Urbà" and "Habitat to the City." The goal is to create a city of neighborhoods within a metropolis that is hyper-connected and energy efficient.

Use of financial instruments authorized by the European Commission (EC) for Smart Cities (7PM/Horizon 2020), as well as Spanish funds, including the transportation initiative under the EC program Miracle Civitas.

At the same time, the council is involved in collaborative projects through contracts, partnerships, and licensing rights.

B i lbao

The Bilbao financing strategy is closely linked to its partnership strategy and another action line from the digital agenda: cooperation. That is, funding has been sought directly but also through synergies with public and private entities.

On the one hand, the city has sought and raised European funding sometimes on its own and sometimes in collaboration with other cities such as Barcelona. In this process, new collaborative frameworks between cities have been designed. This type of funding has been complemented by state funds and grants.

On the other hand, new public-private funding strategies have been designed and deployed. The objective was to find frameworks or contracts that would generate benefits for both parties. For example, in the "Bilbao Kilorak" project, the cost of the contract was established as a fixed fee for the services including energy supply and management and maintenance of security installations; so the contractor increases the profitability in managing the contract to the extent that it is able to achieve or exceed the expected consumption reduction.


Bilbao has deployed an internationally recognized model since 2002, and the city was recognized by the European Institute of Public Administration in 2011 for its success in managing its projects and meeting its budget targets.

Santander

Within the context of the collaboratively defined city strategy plan, the council has determined the fundamental lines of action related to smart cities. These lines include the Smart Santander project among others. In these lines of action, the council seeks public-private collaboration as well as funding strategies. The main goal is to minimize public funding through private funding frameworks that would generate benefits for both parties, and external funding.

It is important to highlight that the council has been very successful in winning European funding. It currently has three European-funded projects — including the Smart Santander project (FP7-IDC-2009-5) — and will have two more in the future.

I n v o l v i n g C i t i z e n s i n t h e S m a r t C i t y P r o j e c t

The engagement of private companies, financial entities, and city councils is critical for smart city development, but even more important is society buy-in. Many smart city projects fail as they don't create the right framework to involve citizens in the initiative; even when creating or trying to create an initiative, they don't get the citizen commitment.

Winning individuals' interest and commitment isn't easy, and getting their direct involvement is even more difficult. Transparency is probably a good starting point, but not enough. Consistency is critical, and that's a very complex duty in the extended smart city we are discussing, as it is not only the city management, nor the city employees, but also the service providers and contractors that work for the city. These stakeholders must be completely aligned, acting as a single unit, with the same view, strategy, and responsiveness. So we can say that the external agenda is probably as important as the internal one to create an appealing framework that invites citizens to participate and engage in the smart city project. Again, a holistic and long-term view will be critical to win society's commitment.

Cities profiled recognized the importance of involving citizens in their initiatives, and in the "connected" maturity stage active individuals are critical in terms of getting the most from the smart city project, otherwise any value is seen only by the council itself and not the wider public. It is not easy to encourage participation, nor to manage and channel it properly in order to highlight any progress made or maintain citizen interest.

A Coruña

The digital agenda and the Smart Coruña project have been designed to keep in mind that the citizen must be the center of city strategy. In this sense, the starting point has been the public review of the digital agenda. But there are other initiatives such as Coruña Open Data, Coruña Particip@, and co-pilot design services.

Barce lona

Barcelona recognizes that citizen participation in the smart city projects is one of the main challenges. Not only is it difficult to encourage participation, it is also difficult to assess citizens' opinions and measure their feedback.

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A number of initiatives have been put into action to foster citizen participation, including:

Fab Lab Barcelona. Explores the relationship between the digital and physical world and brings technology closer to citizens with special focus on smart city technologies. Fab Lab projects are funded through crowd funding where citizens themselves decide which projects are carried out.

22@Living Lab. Part of the European Network of Living Labs, this initiative concentrates on open innovation through user involvement and co-creation.

Working groups. The "Barcelona Creixement" project consists of the creation of six working groups that will work together, with 70 experts analyzing common problems in various sectors in different fields.

B i lbao

Citizens are crucial players in a successful smart city development, and their cooperation has been crucial to developing the many initiatives that Bilbao has been working on for 10 years to establish communication and participation spaces such as the "district councils" where citizens can discuss issues and initiatives of interest for the city. Moreover, the council has complemented this approach with a focus on digital transparency related to open data projects that highlight how the city is evolving and which actions have been taken.

Santander

The citizen is a crucial player in the city's successful smart cities development. Santander has adopted two approaches to increase citizen participation:

SSmart Santander platform. Citizens can provide real-time feedback about the city, and this information can be used to improve and develop projects.

City strategy plan. The council has promoted citizen participation through crowdsourcing initiatives (what it calls a "bank of ideas"), telephone surveys, questionnaires, and personal interviews. The process is augmented with continuous feedback to identify the city's priorities.

D e p l o y i n g E f f i c i e n t I n t e r n a l P r o c e s s e s

Linked to citizen participation, internal cultural, organizational, and operational change is required to really transform a city into a smart city. IT is a critical tool for this change, but it is a necessary condition, not just a "nice-to-have." IT is a tool to leverage to transform the city's operations.

City employees are key assets to leverage the smart city transformation journey, as they are the ones that really know where the problems are and sometimes the best ways to solve them. A cultural shift is required in a complex environment that doesn't really help, as there is a lot of pressure on public servants in Spain.

Those who really transform their city operation will achieve the expected returns in their smart city journey; an internal, erratic approach won't help realize the full potential of the smart city. Councils that understand the opportunity this journey represents will transform the council's operation to involve the different internal stakeholders to align them with the smart city framework.

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The cities profiled have benefited from the new smart city paradigm to change their organizations, improve their productivity, and review their processes.

A Coruña

After approval of the digital agenda, the council will start a number of initiatives to optimize internal processes. These include:

A new IT architecture plan and organization

A new organization model

Optimization of processes

New, interconnected management positions for smart city projects and responsibilities

Barce lona

Barcelona's transformation into a smart city is not only a project of the IT department or the town planning department, it is an initiative of all council areas. The organizational transformation goes far beyond employees' training in ICT or an information systems upgrade. People are the key asset.

The council has created a new area, called "Hàbitat Urbà," which integrates environmental, urban, and ICT areas. That means a disruptive change in terms of communication, transparency, organizational, and cultural integration for the three departments that must coordinate their activities for the development of smart cities. This change involves a redefinition of processes, responsibilities, technology, investment, communication channels, collaboration, and innovation.

B i lbao

The development of the "Bilbao Digital Agenda 2012" has improved the internal management of the City of Bilbao, with 81% of municipal employees equipped with computer and Internet access, and over a thousand municipal employees being trained on digital management and new solution software that has streamlined case management and improved the efficiency of local administration.

This means that the council has put a strong focus on transforming its employees into information workers. It has also set up a portal to improve internal communication, a platform for cross-tracking government plans, and a smart cities project management platform.

Santander

Within the innovation strategy for the smart city project, the council intends to develop an integrated platform to manage data, information, and services related to the smart city. The goal is to transform Santander into a real-time urban platform.

B o o s t i n g I n n o v a t i o n

Last but not least, innovation is more likely when all the different stakeholders — citizens, private companies, financial institutions, employees, etc. — are aligned to the right strategy.


Fostering innovation is critical for success, and creating the right framework to enable innovative ecosystems is a prerequisite for smartness success in the city. This sounds very simple but in fact is very hard to achieve as it means the different stakeholders need to be connected to each other. Cities cannot innovate alone; in fact, they shouldn't. They need to establish the right frameworks to empower entrepreneurs and private companies to invest in innovation. Ideas don't come by chance: cities must create the right environment to pursue good ideas, create a virtuous cycle where disruption happens, and establish the right places, connected with the right infrastructures under an open, innovative model.

We are analyzing a single city as an entity, which is not the reality in terms of innovation. The truth is that a joint view of the biggest cities, biggest companies, different city societies in the same ecosystem would create the right synergies for smart city innovation development. The approach then should be country based or, even more ambitiously, a common and connected European strategy to create a European industry for the future.

A Coruña

Under the digital agenda, Coruña will foster innovation through the "urban living labs" that will catalyze innovation among citizens. The ultimate goal is to have urban spaces for innovation that help to develop public-private-people partnerships. In the coming months, as the initiatives identified in the Digital Agenda begin, Coruña will start its path to a smart city that will deeply transform the city, its operational processes, and the way agents collaborate.

Barce lona

For Barcelona's council innovation is key to developing the smart city strategy. As a result, it has developed a number of initiatives to foster innovation. Since 2000, the 22 @Living Labs have been a pool of innovation in the city that focus on three areas — urban, economic, and social innovation — where companies, citizens, and public institutions can create formal and informal networks to create business cooperation projects to improve the city.

The organizational change being experienced by the city council with the integration of multiple areas also seeks to be a catalyst for innovation:

In the short term, transforming the innovation department to provide practical results.

In the long term, public servants becoming innovation poles for the city project.

B i lbao

Being a smart city is a long journey and Bilbao is already starting the next steps. "Bilbao Innovation Agenda" is a new project that follows and expands the digital agenda. With innovation and entrepreneurship at its core, it seeks to promote the creation of interaction community networks that will bring together concepts such as entrepreneurship, retaining and attracting talent, creativity, support for the development of emerging sectors, advanced management, and new governance.

The city is currently developing the initial diagnostic phase, to be followed by the development of a global strategy based on six main areas: economy, citizenship, governance, mobility, environment, and quality of life.


Santander

The smart city project in Santander is deeply linked to technological innovation. The objective was to transform the city into a living laboratory to test and validate services for the city based on the "Internet of things." The city is looking for a city model that can be extrapolated to other cities, and it wants to become a smart city role model.

To develop the innovation agenda, the city is pushing for the creation of innovation clusters where companies, cities, universities, and citizens can develop new services and ideas.

I D C R E C O M M E N D A T I O N S

R e c o m m e n d a t i o n s f o r C i t i e s

This section identifies the top 5 recommendations to create concrete opportunities for action for cities undertaking the smart city journey. The five recommendations, for the city manager and all the smart city stakeholders, are as follows:

1. Create a collaborative ecosystem. Executing smart city projects brings together utilities, regulators, local government and/or municipalities, businesses, citizens, technologies vendors, research centers, and universities. Only 15.9% of the cities interviewed said they collaborate with private entities. This is a very low penetration of public-private collaboration frameworks, making it more difficult to access international funds. Engage each stakeholder on specific goals under on a common vision, but be open to include additional partners along the way:

City leadership. A smart city is a collaborative venture and needs strong partners to succeed. It is the role of the local policymaker to facilitate a win-win scenario and it is the role of the city manager to manage the relationships between all of the partners from the public and private sectors. Some of the partnerships could involve new legal entities, others may have new risk/reward models, yet others will be less formal but nonetheless still important. Innovation and open-minded thinking on the part of policymakers and city managers are necessary if cities are to make the positive change that is needed to become smart.

Social involvement. Since citizens and communities make up any city, recognizing and leveraging their collective intelligence and co-creation capabilities is crucial to the success of any smart city project.

Effective governance. Mechanisms should be put in place to encourage collaboration among the city's agencies, so as to abandon the silo approach. Additionally, the need for partnership and collaboration goes beyond the boundaries of the city and its administrative structure. Private sector and public sector must work together, individuals and businesses must make joint commitments, and industry sectors must combine their collective knowledge. The combination of a holistic ecosystem of partners and having in place governance mechanisms facilitate the smart city journey.


Knowledge sharing. Small cities should consider coordinating with their neighbors to better share intellectual capital, such as those of universities, and to achieve larger scale for critical investments. For projects with very high capex costs in particular, combining resources will facilitate the burden and lower risks.

2. Define an actionable work plan, setting timescales, milestones, and outcomes. The journey to smartness needs to be managed as a portfolio of projects, adopting portfolio and project management methodology, techniques, and tools.

Value measurement. Establish KPIs that measure social outcomes and that are meaningful to citizens and businesses. Communicate to the market in an open way, or even better let third parties or citizens work with these results to aggregate value to the initiative.

Team management. Assign people with appropriate skills and capabilities to each project, sharing knowledge and objectives; it is very important to maintain project consistency among initiatives.

Fundraising. Leverage various mechanisms, such as public-private partnerships and structural development funds (European Commission, World Bank, etc.) to fund the initiatives with adequate and sustainable resources.

Assign clear roles and responsibilities. To make sure progress is being made and to solve the practical issues arising during execution, specific roles and responsibilities need to be assigned. Those who fill these execution roles, and have specific responsibilities, need to be held accountable for the attainment of measurable goals. If no specific person is responsible for a goal, then no one can be held responsible for not achieving targets.

3. Demonstrate continuous commitment. A smart city project must have strong leadership in place. The leadership must lead by example, constantly showing commitment to reach the goals set through the governance put in place. Additionally, strong leadership must be willing to take concrete actions to overcome obstacles and eliminate barriers (organizational, procedural, or technical), which would eventually slow down the smart city journey. Leadership needs to be supported by "champions of innovation." Look inside each department and agency for the people who will be able to support transformation by example and with their positive attitude to change. Leverage these employees by rewarding them to then engage their peers.

4. Give the right level of attention to ICT. ICT plays a key enabling role in the smart city journey. It is important to recognize this by developing a well-articulated ICT master plan as part of the smart city holistic vision and goals.

Create a master plan. This plan then needs to be managed, as with any of the other smart city initiatives. Assign this responsibility to skilled and capable specialists.


Digital infrastructure. Clearly understand the value of the digital infrastructure that each city is implementing or will implement with the eyes of all potential users (services, business, citizens, etc.). Be ready to open it, for instance via Open API (application programming interface), to private and public developers of applications. The mayor of a city recently said, "I want to be the app store of my city," and not be responsible for developing or owning the applications. This approach unleashes creativity and co-creations, which will ultimately increase the quality of public services and the benefits offered by smart cities to citizens and businesses.

Collaboration platforms. Collaboration among the ecosystem of players, as well as with the city's citizens, can be facilitated and enhanced by leveraging collaboration platforms and solutions.

5. Define a holistic approach to the smart city journey. IDC encourages city managers to create a holistic approach to the smart city. Siloed initiatives are good enough for a single purpose, but don't contribute to city smartness at all if not connected.

In conclusion, the smart city journey is a never-ending cycle of improvement. The goals set at the beginning will evolve to encompass more ambitious results. Since the smart city journey will never be a nice straight and easy path, but rather a windy road with potholes, it is important to have the appropriate processes in place, sustained by strong leadership, strong innovation capabilities, collective intelligence, the right governance, adequate financial resources, and the right amount of flexibility.

R e c o m m e n d a t i o n s f o r I n d u s t r y P l a y e r s

Promote collaboration. Public and private collaboration is key also for private players. Creating private ecosystems with the biggest industry players and small and innovative specialist disruptors would help players to present comprehensive and competitive solution ecosystems to cities. The smart city industry is still immature and the value chain is still unclear, so there is confusion in the market about who should do what. In that sense, emerging players that are able to articulate proper ecosystems will be ideal partners for city decision makers.

Hands-on financing. Financial challenges are a key priority nowadays, and financial muscle is becoming critical for smart city development. Small players should partner with big entities to be able to provide their solutions. Big players should also help to structure the project financials. Lack of public investment is creating great difficulties when it comes to funding these projects. Savings are the cash flow that industry players will get the return from, but these savings require upfront investments. Legal framework confidence, good and flexible contracts, and operational risk management and governance are critical when it comes to realizing those savings and improving cash flow for industry players. Creative and innovative approaches are required in these times of uncertainty and scarcity.


Social communication. IDC discussed the importance of solid cooperation in smart city projects. The involvement of the different stakeholders is critical for success, and success means savings and returns. Strong communication, information channeling, and social strategies should be enabled to overcome social barriers. Creating the right incentives is critical and incentive planning must be embedded in every smart project. Citizens will engage as soon as they are considered and treated fairly, and provide feedback.

Council transformation. Industry players must help to transform the city, and there needs to be commitment here. Sometimes, however, this is not easy as they have only limited power to really change the behavior, but they do have the power to influence decision makers. A common and holistic strategy defined with the city becomes critical to transform that city. This requires an organizational and cultural change in the people that serve the citizens, aligning them with the common smart city objectives. A strong management commitment and a change management plan will be critical for success.

Bring innovation. This is one of the expectations of city councils that industry players must commit to. Multinational activities, partnerships with experts, universities, research centers, etc. are key to bringing new ideas, products, services, and experiences to the city. Even though one solution does not fit all, cities are still expecting case studies, methodologies, and good practices for their smart city implementations. Those players with the ability to bring innovation from other places or industries will be welcome.

C o p y r i g h t N o t i c e

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Copyright 2012 IDC. Reproduction without written permission is completely forbidden.

white paper smart cities analysis in spain 2012 — the smart

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