Engineering Innovation in Value Management for Smart Places
Numerous barriers exist to the realisation of ‘smart cities’ – not least, who’s going to pay. This article by Derek Halden, DHC Loop Connections, republished from the Institution of Civil Engineers knowledge management hub explores how traditional perspectives on financial and civic capital are being complemented by innovations in value creation by engineers to deliver smart, people-centered cities.
From Crossrail in London to city deals across the country, public authorities are showing how they can work together to grow public investment, including partnership arrangements to raise private finance. This model is important for many types of civils projects but financial innovation to deliver traditional engineering solutions increasingly needs to be replaced with engineering innovation to deliver new types of value for a 21st century smart city project.
Future success depends on new types of business model that better enable the latent capacity of people to invest in the places they live. In the industrial age cities were dirty nasty places for wealth creation with social and environmental value being protected elsewhere as an overhead on the costs of production. In the 21st century, wealth creation has increasingly depended on the growth of social capital, but the ability to network virtually using Google or Facebook is only one aspect of the untapped value from creating a more sociable and less wasteful places. Excessive reliance is placed on property developers for place making benefits. Although there have been many improvements, such as the transformation of central Liverpool over the last decade, the investment opportunities created by these companies are largely private, rather than social. Could additional value be created by enabling investors to own more social and environmental capital; such as a householder owning not just their private house but the shared transport, heat and power system that serves the house.
Smart city developments enable this new sort of approach. Engineering innovations create new social and environmental services for people to buy into, such as financial benefits for households that share spaces or goods. New urban places are not just about wealth creation but also are the most social and least environmentally damaging places to live. Pressures for smart urbanisation are growing, but the fragile emerging markets are not yet being effectively managed or regulated. If local and central government could better stabilise social and environmental capital markets, or break the dominance of financial capital in social investment, they could rapidly transform the potential for investment in smart cities.
Early failures with carbon trading markets have damaged the public perception of environmental capital, and social capital markets remain largely unregulated, with even basic social protection roles for government being immature. This has meant that, where there has been rapid growth of business models with the potential for sustainable and balanced economic, social, and environmental capital, the returns from regulated financial capital markets have outstripped the disappointing social and environmental benefits. For example, car share company Uber has been extremely good at making people rich, whilst under-exploiting its scope for making urban transport more efficient.
Sometimes the old ideas are the best ones. If you walk around any town you find civil engineering infrastructure funded by public subscription. A civil engineer like Thomas Telford would go to a community and offer to build a new bridge across the river when he had crowd funded the construction cost. This was possible at a time when planning processes were less formal and partnership deals with big landowners, including the public authorities in a town, were not subject to 21st century scrutiny.
With funding from the crowd, social approaches to development depend on some party with social goals taking ownership of the capital to give them the capability to deliver their goal. This has been achieved by businesses, often led by some wealthy and socially minded individual, and often by governments, including some governments which have sought state ownership of capital to widen their social influence.
New technology changes the capabilities of both government and business to unlock social capital. However, as anyone with experience of crowd management knows, great care is needed when unlocking such immense power. The revolution that rebalances power in the economy is already happening, and civil engineers can still be the civic leaders in this fast changing world. Smart cities depend on engineering knowledge from people who instinctively think about the practical details of managing space for people, goods, waste and energy.
Managing information has not been a traditional strength of engineers. These skills are stronger in other fields such as retail and politics, persuading people to flock towards a desirable aim. However, people would rather trust the person that knows the answer, than the people with skills in manipulating them. It is for engineers to manage the information, rather than be subject to it. That is what engineering smart cities are is about; better optimisation of information, energy, transport, water and other networks. The success of the digital networks is that the trust of users is built from the bottom up and engineers delivering smart cities need to build the networks they need, including with influencers in retail and politics.
In well-designed smart cities the well-designed business model will manage value sustainably. Only engineers have ever been able to organise the value in urban spaces from well-designed streetscape to managing people and energy flows. Current business models are struggling with value chain management, depending largely on maximising growth of financial capital. A greater focus on the core values of civil engineers in civic responsibility, technical excellence, and project organisation could make smart sustainable cities a reality.