Seeta Hariharan from Tata Consultancy Services shares insights and best practices that can benefit civic leaders who want to build smart cities.

The global smart-city movement, which has been around for more than two decades, has gone through three phases of evolution. It initially focused on technology-led solutions to challenges. Then came a citizen-centric, collaborative approach in the second phase. Now, the features of smart cities have expanded further to include safety, happiness and well-being.

Europe is ahead of the U.S. on the smart-city curve, but it has the advantages of having smaller countries and pan-Europe initiatives that emphasize a cohesive approach. Smart-city mayors need to focus on prioritizing projects that give them the most bang for their money. They also must find funding through innovative ways and create public-private partnerships. In addition, they need to spend resources wisely through efficient and creative procurement processes.

Seeta Hariharan, general manager and group head at the digital software & solutions group at Tata Consultancy Services, has for many years had a ringside seat in the conception, planning and execution of smart-city projects across the globe. Knowledge at Wharton and TCS recently collaborated in producing a special report titled Smart Cities: A Toolkit for Leaders. In a recent interview with Knowledge at Wharton, she shared insights and best practices that can benefit civic leaders who want to build smart cities.

An edited transcript of the conversation follows.

Knowledge at Wharton: Let us start with a basic question. What is a smart city? What did the concept mean originally and how has it evolved over time?

Seeta Hariharan: Between 2002 and 2015, the number of smart cities across the globe quadrupled from approximately 21 to 88. By 2017, some 178 cities had embarked on 250 smart-city projects, from Melbourne to Copenhagen to San Francisco. These data suggest that there is rapid urbanization across the globe, and there are leaders in the municipalities and cities that are trying to figure out how to cope with it.

The definition of smart cities has evolved over the last couple of decades. In the first phase – when smart cities started to be discussed in the public forum – technology players looked at some of the challenges that were created by urbanization. So, they said, “Let me create point product solutions addressing the various challenges,” related to parking, mobility, water management, lighting, and so on. (Point product solutions refer to those that address specific needs rather than an integrated approach.)

However, as many city leaders lamented, technology players didn’t quite understand how the city would consume those solutions. So came the second phase, when the city leaders said, “Let me take control of the technology agenda for my city.” However, two things were lacking: collaboration across the various departments of the city; and keeping citizens at the center of everything that they do.

Now we are in the third phase of the smart-city definition. City leaders are saying, “I want to create cities that are livable, that focus on the well-being and happiness of my citizens.” It is a citizen-centric agenda that is evolving. The capital city of Iceland – Reykjavik – developed a program right after the 2008 financial crisis called the “Better Reykjavik Program” – a platform for citizens to participate in policy-making. Other examples include San Antonio, with its highway signboards, and Beijing, with an “I Love Beijing” app that can be used by citizens to report power outages, broken street lamps or potholes to the government.

“Health care disparity doesn’t come by itself. It’s also because of the disparities in education, housing and food access.”

Knowledge at Wharton: How could smart cities provide platforms that enable collaboration between different groups of stakeholders?

Hariharan: If you start by being citizen-centric, that provides the right motivation to drive the right behaviors and take the right actions. Collaboration is absolutely needed across the various departments of the city, but it is also needed with the citizens and private enterprises.

If you consider, for example, the linkage between water management and traffic management, or that between city management and city commerce, it becomes apparent as to why such a collaboration is essential. If there is a water pipe breakage in one part of the city, you want to divert traffic to avoid traffic jams or congestion in that part.

Similarly, when a city hosts, say, a football match or a popular music concert, it will enhance its safety and security measures, but what is not obvious is how that relates to city commerce. Retailers will do well if they can increase foot traffic in the areas where such special events happen. It also increases tax revenue for the city. So, collaboration across the various city departments is essential, and a unified platform will drive that collaboration.

One example is Arizona’s Institute for Digital Progress. They have a unified leadership structure that drives collaboration across various municipalities, authorities, academic institutions like Arizona State University, as well as private sector companies like Google, Uber, Cisco and Intel, in order to tackle their traffic congestion problems.

Knowledge at Wharton: The role of the leadership is crucial in making a city smart, or at least smarter. How do mayors and other civic leaders go about setting priorities that define how a city becomes smarter across different dimensions of its operations?

Hariharan: You’re right, mayors play such a critical role. I was watching a documentary several years ago from HBO called The Weight of the Nation. This documentary takes you through the neighborhoods of Cuyahoga County, Ohio – particularly Lyndhurst and Hough. They’re about 8.5 miles apart, and as you drive through these neighborhoods, the life expectancy drops by approximately 24 years. And it’s not unique to Ohio. When you take a tube ride in London from Oxford Circus to Star Lane, which takes about 15 minutes, the life expectancy drops by approximately 20 years (from 96.38 years at Oxford Circus to 75.3 years near Star Lane).

[Those are] two neighborhoods that are so close to each other, but so far apart. The question is why. An obvious answer is, yes, there is a health care disparity between these two communities, but the health care disparity doesn’t come by itself. It’s also because of the disparities in education, housing and food access.

So, mayors have a crucial role to play in terms of addressing some of these real-life challenges and balancing that with driving economic growth for cities. They need to do that in three steps.

[First], they need to define a clear and simple vision for their city. I’ll use an overused example here, but a powerful one. One of the former mayors of Barcelona, Jordi Hereu (September 2006-July 2011), said that his vision was to create a “Dancing Barcelona,” a city where visitors felt welcome, the streets were well-lit, the city smelled fresh, and the citizens and the visitors were safe and happy. This powerful, simple vision drove the choice of technologies for Barcelona, whether it be in mobility, parking, lighting, energy management or security. The second is collaboration with citizens and driving initiatives that are citizen-centric. Third, mayors need to understand the local and political context, which they are quite adept at.

“It is important for mayors to understand the local and political context, instead of getting excited and trying to figure out, “If these solutions work somewhere else, can I replicate them in my city?”

For example, San Francisco a few years ago implemented dynamic pricing for its parking system. Los Angeles is implementing a similar system with expansive and expensive in-street sensors, garage sensors and smart meters. [However], dynamically calculating pricing for parking isn’t suitable for smaller cities. Smaller cities can do that using transaction data that they collect, as well as some occasional manual surveys. So, it is important for mayors to understand the local and political context, instead of getting excited and trying to figure out, “If these solutions work somewhere else, can I replicate them in my city?” They also have to balance the resources available to them between solving citizens’ challenges and driving economic growth.

Knowledge at Wharton: One of the biggest challenges that many mayors seem to be facing these days is how to handle the influx of new people. They could either be immigrants from other countries, or just an influx of people from the hinterlands or rural areas into the cities. How could mayors and other civic leaders deal with these challenges in a smart, inclusive and compassionate manner?

Hariharan: In Asia, Africa, and Latin America, every hour of every single day, nearly a thousand people [relocate] from rural areas to urban areas. If this were to continue, we would have to build a city as large as London – one every month for the next 33 years. It puts a lot of pressure on the cities’ limited and scarce resources.

Another critical issue many of us are overlooking is the growing disparity across the various regions of a nation. In the U.S., the bigger communities today are growing faster [than others], and they’re also contributing to the nation’s economic growth more than ever before. These bigger communities are powered by well-educated millennials and the agglomeration of trends caused by digital technologies. [Alongside], some of the smaller metros are waning, and rural areas are sliding into deep decline.

In the U.S. in the last couple of years, more than half of the jobs created because of digital technologies have gone to the top 20 metros, which are home to only one-third of the country’s population. They include the usual suspects of New York, Boston, the [San Francisco] Bay Area, Seattle and Washington, D.C., followed by the Sun Belt hubs of Atlanta, Dallas, Miami and Orlando.

In this context, mayors have two key imperatives. One, make regionally balanced growth a priority. It’s not a very difficult task. It is just that leaders have to consciously say, “I’m going to drive economic cohesion.” And it’s not a novel idea, either, because if you look across the pond, the European Union [has allocated] one-third of its budget between 2014 and 2020 to its Cohesion Policy Program, which will allow some lagging regions to catch up.

The second [imperative for mayors] is make re-skilling a priority. There has been a lot of talk about machine learning, artificial intelligence, robotics and automation getting to factory floors. The jobs of tomorrow will not be the same as the jobs of today or yesterday. Even white-collar jobs will get disrupted.

Data shows that whenever public sector investment is directed towards human capital, it has always led to prosperity. In three decades following 1910, the U.S. spent a lot of its public sector funds in educating its citizens. The high school enrolment rate in that period went from about 18% to 73%, and the graduation rate went from 9% to 51%, (according to a Harvard University study).

What did that mean? It meant that U.S. citizens were highly educated, and their income was substantially higher in comparison to their counterparts in some of the other industrialized countries at that period of time. If we could do it then, we should be able to do it now – particularly given the access we have to many digital tools.

Knowledge at Wharton: One of the effects of digitalization is that it generates vast amounts of data. Could you speak about how data analytics and collaborative data sharing could enable smarter decision-making about cities?

Hariharan: Data is by far the most valuable asset nowadays that private enterprises and the public sector have. Whether you are driving through a traffic light or paying a utility bill or browsing a city’s website or calling a city department – or even dumping garbage into your neighborhood dumpster – the city collects so much data about you. If the data is mined properly, then the city can use that to serve the needs of the citizens. Better yet, they can even anticipate the needs of the citizens.

So, if the city were to mine this data and develop a platform, there are five Cs that the special report talks about (on Page 12). The first C is collaboration across the various departments of a city. The second C stands for the citizens: How do you use the platform to effectively serve the needs of the citizens? Using that unified platform, how can a citizen either pay a bill or get a license for starting a business? This would require collaboration, as you can imagine, across several departments of the city itself.

The third C is about colleges and university systems. How do you collaborate with them effectively for you to tap into the local talent? The fourth C is communities and neighborhoods. How do I use the platform to effectively serve the needs of a community, neighborhood, and provide them information related to their neighborhood? It may be related to safety or health about that community.

“Before cities start to collect your data and use it, they have to get explicit permission from the citizens – an explicit opt-in is absolutely needed.”

The fifth C is about civic tech space. How do you open up your platform, publish APIs that the private sector can use in order to develop new applications and tools in support of your smart-city agenda?

Before cities start to collect your data and use it, they must get explicit permission from the citizens – an explicit opt-in is absolutely needed. The city needs to also explain to the citizens how it plans to use that data in simple terms, instead of throwing a 25-page document at us. In the end, cities need to be responsible guardians of citizens’ data.

Knowledge at Wharton: My next question is about the sixth C, and that is cost. As cities try to become smarter, how do these initiatives get funded, and how do you get their costs covered? Could you talk about the different financing models that cities have used to fund some of these smart-city initiatives, and what are some of the pros and cons?

Hariharan: The costs and funding are by far the biggest challenges for smart-city initiatives. Federal grants are an option. Philanthropic grants [are another option]. The Knight Foundation, as an example, funded the smart-city roadmap study that the City of Philadelphia published in February, as we all know. But these grants are not sufficient for citywide smart-city programs.

There are a couple of other options that have been toyed around with. One is the possibility of increased taxes, thereby increasing the revenues of the city to fund some of these programs. But most of us may not be in favor of getting our taxes increased. The second option is, [since] the city has access to so much of our data, can they sell it? Can they monetize the data? I’m not actually in favor of that option until we understand that there are adequate privacy and security measures that are in place by the city.

That gets us back to an option that is an age-old technique, but it has been improvised recently. It is public/private partnerships. The way it has evolved lately, a repayment model has been built into the partnership.

One example that comes to mind is Kansas City, with its citywide IoT (Internet of Things) effort. The municipality in this particular case funded approximately $3.7 million and the private partners funded about $12.3 million for a total of about $16 million. The city used that money to install 25 kiosks around the city, which provided free internet access to citizens, through which they could also access city-related information. The city also uses these kiosks as an emergency alert system. The revenue model is built on advertising on these kiosks. The initial calculation has shown that both the city, as well as the private partners that funded this initiative, will be able to recoup most of their costs in less than five years – pretty impressive, right?

The second example is a pilot project in Portland, Oregon. The city has a federal grant for this pilot, where it is using IoT-related sensors that go on top of the traffic signals, as well as on many of the light poles in the city. The objective of this project is to figure out how they can [decongest] traffic and improve air quality. If it goes well, they want to try and get funding to implement it across the entire city. The initial funding came from the National Institute of Standards and Technology, while the sensors at the major intersections are provided by private partners.

“Sometimes it is never too late, or it is sometimes good to be late to a party, because that allows you to learn from the lessons that someone else has had.”

Knowledge at Wharton: Once the funding has been raised, what are some of the best practices and the ways the funds can be allocated across different priorities that the cities have?

Hariharan: Funding is by far the most challenging aspect for mayors to contend with in smart-city programs. There are three ways, at least, that they should consider before they go about spending the money. First, which is pretty much a no-brainer, is to pick programs that give the maximum bang for the buck.

For example, depending on the size of the city, you’ll find 10,000 to 300,000 lights. This is a valuable part of the infrastructure because it already has power supply built into them. The lights at an elevation of nearly 30 feet, so imagine [what you can achieve] if you put sensors on top of these light poles. They can be used to monitor for traffic. Based on that, determine when to turn on the lights and turn off the lights. They can also be used to monitor traffic and detect crimes. The city can achieve at least three things: Increase the safety and security of citizens, ease traffic congestion, and save energy costs.

Secondly, before spending the money, think through the regulatory changes that are needed. For example, Columbus, Ohio, plans to roll out electric vehicles and autonomous vehicles. The question that the city has to ask is: How do they work in the context of the existing infrastructure? What regulatory changes have to be made?

Thirdly, the cities should consider the procurement process. How do I streamline procurement? If funding is the most difficult thing to do, the second most difficult is a city’s procurement process. They take a long time and are also laborious.

A couple of approaches have been proposed in order to ease the procurement process. One, consider cooperative procurement. If another city is already working with that vendor, see if you can piggyback on that contract.

The second approach is to consider driving the initiative at a state level. For example, in January 2017, the department of transportation in the state of Illinois launched an RFP (request for proposals) for smart street lighting across the state. Once that RFP is awarded, [each of] the cities can use its existing contract instead of having to negotiate the terms and conditions on an individual basis.

Knowledge at Wharton: Which cities in the U.S. have done a good job of implementing smart-city initiatives, especially in tackling challenges like climate change? What can other cities learn from their examples?

Hariharan: Quite a few cities in the U.S. have driven initiatives that are smart and sustainable. Some of them are tackling climate change, as well. I want to talk about two cities – Atlanta and Orlando.

Dan Gordon, the [former] chief operating officer of Atlanta had this clear vision on what he wanted to do for the city. Gordon and the former mayor, Kasim Reed, put together several smart-city initiatives in transportation, safety and communication with citizens and businesses. For example, Atlanta recently deployed “ShotSpotter,” an IoT acoustic technology in order to reduce gun-related violence. This technology will help the city dispatch police officers to a crime scene in real time, without anyone having to call 911.

Atlanta also plans to install solar panels in many large downtown buildings, and that would work towards their sustainability initiative. It will increase their renewable energy capacity, as well as reduce energy waste, such as greenhouse gas emissions.

In Orlando, Disney World [alone] has about 75 million visitors every year. The mayor says that it has the world’s highest hotel and car rental rates. [Chris Castro,] the director of Orlando’s smart-city program, says his city gets people with all sorts of driving habits. He says, “You don’t need expensive technology. Even some simple fixes could go a long way when it comes to making the city smart.”

Orlando’s mayor (Buddy Dyer) shared an example of a mobile parking alert system the city has developed. Initially, there was a lot of resistance, I believe, because city officials were worried that the revenue from parking fines would go down. It did. However, the city saw an increase in revenues, because it allowed people to pay for parking through their mobile devices. Of course, both citizens and visitors were happy, because they could avoid fines.

“It is the responsibility of the leaders in the private and public sectors, and academic institutions … to figure out how to make digital inclusion a part of the agenda in smart-city programs.”

Orlando is the only city in Florida that has passed an ordinance saying that all of its public buildings will publish data on both their energy and water consumption. The city has also committed to ensuring that all its buildings will use 100% renewable energy by 2050. Those are examples of cities that are not just focused on infrastructure, but also focused on citizens and sustainability.

[As for] tackling climate change, San Francisco recently received an award for its Zero Waste program that it launched in 2002. It has achieved an incredible reduction in landfill diversion rates of about 80%. San Francisco also uses 100 million fewer plastic bags every year. San Francisco is well on its way to achieve the zero-waste goal by the end 2019, actually.

Knowledge at Wharton: Do you have any examples of cities that are doing a good job working with the talent in the companies in their geographic boundaries, so as to enhance the impact of their smart-city initiatives? What can cities and companies learn from those examples?

Hariharan: Collaboration with private enterprises and academic institutions is a way by which cities can tap into local talent. One of the new concepts, thanks to the Brookings Institution, is of innovation districts. Think of them as geographic clusters that bring together academic and scientific research institutions – private sector, small and big entrepreneurial organizations, and then public incubators focused on doing research. These geographic clusters are placed in amenity-rich urban centers that drive economic development for a particular city.

There are several examples of such innovation districts. Mayor Andy Berke in Chattanooga set up the Chattanooga Innovation District that has helped the city drive its growth to the next level. It’s one of the best places to live in the country, and among Top 100 Best Places to Live. Among companies that have been successful and were built in that innovation district is Access America Transport, which was eventually brought over by UPS. The same founders also created another startup called the Lamp Post group (a venture incubator for startups). So, these innovation districts are a way for companies to create clusters to drive economic growth, but also to drive partnerships between various entities in the city.

Knowledge at Wharton: Could we take a look now across the pond at Europe and see how the American approach to making smart cities differs from the approach in Europe? Are there lessons that each continent can learn from the other, in terms of how to make the world more sustainable and more inclusive?

Hariharan: Europe has been working on smart-city initiatives a little bit longer than the U.S. has been. In the U.S., the smart-city programs typically have been tied to infrastructure and economic development. In Europe, having been at it for a little longer, they are now focused on creating citizen-centric initiatives. How do I make my cities more livable? How do I make my cities where the citizens are happy? Sustainability is one of the key initiatives that Europe has been focused on.

Europe is also unique in the sense that it has smaller countries. Then you have the European Union, so there is a concerted effort across communities, cities, and by the European Union itself to drive some of these smart-city programs. That is going to help them achieve their goal of 300 smart cities by the end of 2020, which is an ambitious goal.

But sometimes it is never too late, or it is sometimes good to be late to a party, because that allows you to learn from the lessons that someone else has had. The U.S. can take a lot of lessons from how Europe has approached smart-city programs. But with several of the initiatives across U.S. and the investments that the cities are making, the U.S. is well on its way to drive growth across major metros, as well as the smaller metros.

As we look at some of these programs that are happening, it is the responsibility of the leaders in the private and public sectors, and academic institutions, to collaborate effectively with city leaders, as well as with communities, to figure out how to make digital inclusion a part of the agenda in smart-city programs.