Harnessing the Power of Emerging Technologies to Solve Complex Problems

By Gordon Feller, Consultant – Cisco Systems & Founder – Meeting of the Minds

Where and how are cities harnessing the power of new digital tools to transform how they organize their systems? Or how they deliver their services in new and better ways to residents and visitors? Can cities create a prosperous environment for small and larger enterprises?

In the mid-1990s, after Bill Clinton assumed his eight year Presidency, he appointed a new World Bank President. James Wolfensohn focused part of his term on helping cities to make big changes happen, especially in the Global South. He pulled a team together to work on finding ways that could accelerate the progress for cities and bring innovative solutions to bear on the full range of problems facing cities: urban energy, urban water, urban transport, urban education, urban health care. A group was formed inside the World Bank, with a focus on ‘The Urban Age’. In the year 2000, the Urban Age Institute became an independent non-profit organization. One of the best of Urban Age’s corporate partners was Cisco Systems.

Another early partner was Siemens, along with a variety of leading corporates and leading foundations. Working with Urban Age, they saw the world’s rapid urbanization and they sought out technologies which enabled a positive transition for cities around the globe.

In 2006, the Urban Age began working with the Canadian government, the German government, and many cities around the world. What was born was Meeting of the Minds to ensure that the leaders innovating with the very best emerging tools — urban technology, connected solutions, and sustainability – could jointly build a common platform.

In 2009 or thereabouts, Cisco’s executive team invited me to work on these problems, from a base inside the headquarters in Silicon Valley. I took on the assignment of helping Cisco, via teams around the world, address this challenge of getting cities aligned with the data generated by a myriad of assets (buses, taxis, street light, etc.) – so that the city leaders could fully utilize what was readily available to them. Over time, cities were provided with a new way to accelerate their transition to a more equitable, prosperous, environmentally sustainable future.

For many of the smartest and best-led cities the focus has been on infrastructure, which is a strong tie-in to what we’ll be talking about on April 4th and 5th at GLOBE Capital. GLOBE has always been focused on infrastructure problems facing cities and businesses, including the vital digital infrastructures like wireless networks that make so much else possible.

The 3 Stages of the Internet

Think about the transformation of technology in the last 10 years, especially the big changes in how we communicate. The Internet’s first age was all about basics like email, enabling better communication and changing some of the ways we do things. The second stage of the internet was e-commerce and buying things online instead of in person, and then, the third stage – which we’re in now – includes the immersive social media that we’re surrounding ourselves in 24/7/365 and it includes the Internet of Things.

We can now connect with people and project teams we’ve never actually met. Going beyond just better and more efficient communication, we’re surrounded by both e-commerce and by the commercial development of the Internet as a tool for transforming how we live. This 3rd stage of the internet is being characterized by the Internet of Things where all of the objects in the world – city streets, parking meters, traffic lights, street lights, doors, windows, etc. – are all going to be emitting data about their conditions.

Data Is The New Oil

The priority is gathering data that helps generate insights that can make traffic flow more smoothly, and make the parking experience both better and more affordable. Embedding technology into infrastructure systems, like transit, means that technology is going to have an impact on the 99 percent of the world that hasn’t yet been connected to the Internet. New opportunities come with new insights; the data itself doesn’t provide those insights. The insights are derived by analyzing and interpreting the flow of data, and preferably doing so in real-time. This is precisely what allows a smart city to embrace smart infrastructure — receiving data inputs and/or transmitting data about the conditions in this very moment. For example, if you don’t have a way of using real-time data to generate insight on-the-fly, then it’s not very useful to the driver who’s looking for an open and affordable parking space.

Hundreds, maybe even thousands of companies, are busy building the analytical tools that enable big data to become little insights, each of which are (ideally) actionable. The cities in North America starting to make headway along these lines are early leaders. They are the cities investing in the big data analytics to make those little insights available to whoever inside the city needs to take an action.

The Road to Becoming a Smart City

On the road to this smart-city future there are many big challenges, however. Much of the US city infrastructure currently in place was built 30 or more years ago. How do you take digital intelligence and overlay it on top of a city’s aging physical system? A convergence of digital with physical is imperative, since this is what makes it possible to manage infrastructure in ways that reduce energy consumption and decrease overall energy demand.

Expensive physical assets, into which we’ve invested trillions of our treasure, do not change without a fight.  How do existing structures — buildings, roadways, pipes (water, sewage, gas, oil), bridges,  tunnels — become a hyper-intelligent, more responsive, sustainable infrastructure? One method is by using digital sensor networks placed on top of old existing systems. This seems to make more sense than ripping out these degraded physical systems.

Achieving important goals – such as reducing climate-changing gas emissions — means reducing energy consumption and softening the natural system impact of human activity. In essence, we must re-engineer our collective metabolism. This becomes a bit easier when connected things transmit data – and due to their connectivity these smart-objects have the potential to effect change. When data is analyzed in real time, it then becomes possible to change the business process, whatever it might be. It could be commuting from point A to point B; finding a parking space; lights turning on and off, as needed – all of these systems can be made more responsive to real world conditions.

Canadian-Style Public  + Private Sector Partnerships

There are an abundance of innovative solutions emerging from the private sector. Public sector agencies – often lacking technology backgrounds – do struggle to figure out which technologies are the best for their city. Unfortunately, this often results in a state of confusion, especially with such an abundance of choices.

Public/private partnerships, Canadian style, will inevitably become much more prevalent around the world. Canada’s certainly been a pioneer by developing innovative approaches to public-private partnership.

There are many companies who offer smart streetlights and many other companies providing smart parking meters. The question is, how best to help the decision makers in these cities make the most appropriate choices? Sometimes public agencies will have to partner with the private sector; sometimes they need to turn to their citizens; and sometimes they need look closely at what other cities are doing and learn from their lessons.

The good news is that we can and will transform the built environment. There are always going to be unknowns, and we’ll find some unintended consequences that we didn’t expect. Consider the situation facing my home city of San Francisco. One of the unintended consequences of the economy’s digital transformation is that living in this city has become much less affordable than it should be. A shift has occurred, rending any semblance of economic balance, accentuating big divides between the haves and the have-nots. Those who historically lived in the downtown are now in conflict with young, highly-paid technology workers who want to live downtown — even if it means crowding out the people who have historically been there. This is same situation in other cities, like Toronto and Vancouver. An unintended, negative consequence for all the people suffering through resultant dislocations.

The Bankers’ Lens

What’s holding us back from making all the changes as fast as they’re needed? How will these changes be financed? GLOBE Capital in Toronto on April 4th and 5th will address this head on. We’ll debate how to finance the innovation economy in ways that enable the deployment of transformational digital tools — and in ways that make all lives better.

In this domain the visionary bankers are key. Bankers will always look at new opportunities through a banker’s lens. They do want to know the risks, and to understand the impacts: What will generate new revenue? What will reduce existing costs? Offering solutions that reduce costs or increase revenue or create new revenue models – this is key. Without these, the banks won’t step up and participate in financing smarter urban infrastructure.

I spend much of my time advising investors, and the very first priority is to find the inefficiencies. Consider Uber, as an example: take on the highly inefficient taxi industry, build a platform that allows the car owner to provide their own asset, thus making it possible for Uber to not own a single vehicle while being the largest provider of taxi services in the world. The same with Airbnb – as the largest hotelier in the world they sell a million room nights every day, but don’t own any hotel. These companies have created ways to engage asset owner who are willing to make their asset available for a fee. Technology enabled these transactions between asset owners and short-term buyers who had a need. Look first to the inefficient systems that the economy has slowly built, over decades or centuries, and change those systems very fast.

Can digital innovation disrupt those businesses in a ways that don’t create economic dislocation for those who depend on incomes built on the older models? Uber creates a lot of disruption, and not all of it is ethical or sustainable. Impact-minded investors increasingly want to see responsible investment opportunities created by emerging technologies.

The challenges ahead are fourfold: keeping the new economy people-centered; minimizing potential negative impacts; bringing wealth-generation opportunities to all classes of people; and, reducing the environmental impacts of human activity.

We are in the middle of an historic time as we experience a big, fundamental transition to a new technology-based economy.

Building Partnerships for the 21st Century

By Gregory J Smith
President and CEO, InstarAGF Asset Management Inc.

Cities of the future will require innovation in both infrastructure design and delivery

Quality infrastructure is necessary for communities and countries to thrive. As rapid urbanization continues globally, sound infrastructure serves as a major factor in where people decide to live, work and do business.  Moreover, it attracts the capital and talent that a city’s potential depends on.

While federal governments in Canada and the United States are doing more to provide for critical infrastructure, we are still facing an overall infrastructure deficit in North America in the trillions of dollars for roads, transportation, electricity and water systems and more.

A key challenge in overcoming this deficit is that traditional sources of funding are on the decline. Municipalities and core public institutions generally carry responsibility for 70% to 80% of public infrastructure assets, yet typically only collect 10% of every tax dollar. As a result, much of our infrastructure remains chronically underfunded.

The emergence of infrastructure as an asset class over the past two decades is largely a response to this staggering need for capital, and the incapacity of traditional models to meet it. New patterns of infrastructure demand, use and financing are materializing, necessitating innovation in the way infrastructure is designed and delivered, and how we collaborate in this pursuit.   Positioning our communities for the future likewise demands innovation in our partnerships, and transparent communication and cooperation between governments, the private sector, and local partners.

Partnering for innovation: renewal and refurbishment

Urbanization poses complex demographic, technological and environmental challenges that are putting municipalities, universities, schools and hospitals (known as “MUSH” institutions) under substantial pressure to modernize and elevate the condition of their infrastructure while still meeting their core purpose.  These MUSH institutions underpin the health and growth potential of our cities, bear a majority of the infrastructure burden, and are increasingly financially constrained in their ability to meet the needs of their constituents, which has clear consequences for long-term innovation and economic growth.

By collaborating with the private sector, such MUSH institutions can find new funding solutions, including through traditional public-private partnerships (P3s) or government asset sales, and also through newer contractual or alternative financing frameworks ranging from concession-like structures to green bonds.  MUSH institutions are also increasingly evaluating ways to leverage and modernize existing assets, thereby realizing sustainability gains and reducing future infrastructure expansion costs.

For example, InstarAGF is working with partner Johnson Controls Inc. to offer energy infrastructure refurbishment, retrofit and efficiency solutions to help MUSH institutions better manage their central utility or district energy systems. This provides a long-term, fixed-price contract or concession that delivers an immediate upfront payment and material savings through lower utility costs, energy conservation and sustainability improvements over the duration of the contract. Importantly, the MUSH institution retains ownership of its energy system, but transfers the entire risk of funding and operating it to an industry leader. As a result, the institution gains new, state-of-the-art energy efficient infrastructure and technology along with cost certainty, performance guarantees and customer service commitments.   At the same time, the MUSH institution can re-focus on fulfilling and funding its core purpose, whether it is academic instruction, health care or other vital community services.

Partnering effectively for the future and attracting private capital

With institutional investors increasingly seeking infrastructure investment opportunities, there is a real opportunity for our cities to more effectively tap this growing, global pool of capital.  By partnering with the private sector, governments at all levels can build higher quality infrastructure more efficiently and at a substantially lower cost — or no cost at all, in some cases — to taxpayers.

Using a local Toronto example, Billy Bishop Toronto City Airport, located on an island just south of the city’s downtown core and owned and operated by PortsToronto, is a unique collaboration between federal and municipal levels of government and the private sector.   Billy Bishop Airport is a critical transportation hub for Toronto, hosting 2.7 million passengers in 2016 and delivering more than $2 billion in economic output to Toronto and the surrounding region. It is also a great example of how infrastructure, innovation and public-private cooperation work in tandem.

The airport’s terminal building is owned and operated by Nieuport Aviation Infrastructure Partners, a consortium of local and international private investors with deep aviation infrastructure expertise that runs the terminal under a long-term lease with PortsToronto.  In addition, in 2015 PortsToronto successfully completed a pedestrian tunnel underneath Lake Ontario, the first P3 in Canada to be procured without a government guarantee.  In both partnership models, the private sector bears full responsibility for operating and maintaining this critical infrastructure according to stringent requirements, thereby preserving the value of the asset and enabling its significant community and economic contribution.

Notably, projects delivered through public-private partnerships have been shown to consistently outperform traditional models of financing, reduce the risks of infrastructure delivery and to amplify the economic benefits generated by infrastructure investments. Here in Canada, in a 10-year period, P3s have generated $92.1 billion in total economic output and more than 500,000 full-time equivalent jobs, and saved taxpayers a total of nearly $10 billion in costs, according to the Canadian Council for Public-Private Partnerships.  These statistics, and the success of infrastructure assets such as Billy Bishop Airport, clearly demonstrate how innovative partnerships can — and must — play a role in addressing our trillion dollar infrastructure deficit and accelerating infrastructure renewal.

Simply put, embracing new partnerships to deliver quality infrastructure will enable our cities to thrive and grow in the 21st century, resulting in more vibrant and sustainable communities, reduced income inequality, and greater opportunities for all.

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