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Article Type: Guest editorial From: Journal of Strategy and Management, Volume 8, Issue 3.
Smart cities: business models and ecosystems
This special issue proposes an overview of the main strategic and managerial challenges faced by public and private actors involved in the deployment of green and sustainable innovations that characterise smart city (SC) projects. Although a general definition and a clear framework is still lacking (Wolfram, 2012), the concept of SC appears as a new paradigm of intelligent urban development and sustainable socio-economic growth (Neirotti et al., 2014). However, as SC initiatives are conducted in countries with different needs and contextual conditions, identifying shared definitions and common current trends at a global scale is still difficult. Different academic works from different fields have investigated the subject in a variety of ways. The first one defines, or more accurately confuses SC with that of a digital city (Mahizhnan, 1999; Cocchia, 2014; Dameri, 2014). In fact, there is a wide agreement that a SC is characterized by a pervasive use of information and communication technologies (ICT) in various urban domains in order to help cities make better use of their resources. ICT systems are viewed as the digital nervous systems that obtain data from heterogeneous sources (i.e. traffic lights, parking spaces, security cameras, etc.). A SC is then viewed as a complex system in which a great volume of real-time information is processed and integrated across multiple processes, systems, organizations and value chains to optimize operations and inform authorities on incipient problems (Neirotti et al., 2014). A SC is then a city where ICT contributes substantially to solving the emerging problems of urban living. De facto, one additional characteristic of SC is the role of human capital. ICT is unable to transform cities without human capital, and without fostering a city's capacity for learning and innovation (Caragliu et al., 2009; Giffenger et al., 2007; Hollands, 2008). David and Terstriep argue in this special issue in support of an empirical study undertaken on the specific case of transport and mobility, the deployment of smart innovations needs highly skilled workforces.
More generally, the recent various approaches agreed that a SC is a city that achieves the goal of resources' consumption optimization in various domains that are more critical for a cleverer usage of urban resources. These domains could be classified as follows: natural resources and energy, transport and mobility, buildings, living, government, economy and people (Neirotti et al., 2014). A more general and more cited classification is the one proposed by Giffinger et al. (2007). According to these authors, the smartness of a city is composed of several dimensions: smart mobility, smart environment, smart people, smart living, smart governance and a smart economy. Although this approach is useful for analyzing SC through projects, initiatives and actions carried out both by public and by private organizations, it is not sufficient to build an evaluation framework and to address the main challenges of a SC project.
For that purpose, it is first important to identify the core components of a SC and to measure its smartness. For Dameri and Rosenthal-Sabroux (2014), these core components are: land (the geographic area upon which the city rises up), infrastructures (all the physical, material components of a city such as buildings, streets, transport facilities, etc.), people (all the citizens, i.e. who works, study or visit the city) and government (the local political bodies which govern the administrative aspects of the city). To improve the smartness of these core components, a city should transform them into more effective, environmental and innovative ones. Hence the smartness of a city could be measured through three main characteristics: effectiveness (the capacity of a city to supply effective public and private services to citizens, companies, not-for-profit organizations), environment consideration (how a city tries to prevent a further environmental degradation) and innovation (how the city uses all the new and higher available technologies to improve the quality of its core components to deliver better services and to reduce its environmental impacts) (Dameri and Rosenthal-Sabroux, 2014).
In this special issue, these components are analyzed through a business vision of a SC. Strongly based on the pivotal role of technology, especially ICT, the business vision of a SC derives from both the previous idea of a digital city and from the strong need to solve several concrete problems strongly affecting life in a large metropolis, such as traffic, pollution, energy consumption, waste treatment, water quality (Cocchia, 2014; Dameri, 2014). As an answer to these problems, eco-innovations became a driver of economic and social progress at both macro and micro levels. From the macro level point of view, national and supranational governments consider eco-innovations to be a key economic and sustainable challenge. In Europe, for example, the European Commission adopted an ambitious program (the Intelligent Energy-Europe) in order to encourage and stimulate the development of innovative services satisfying one or the three sustainability challenges: energy efficiency, renewable energy and green mobility. These environmental themes are an important part of SC goals (Dameri and Rosenthal-Sabroux, 2014). They reflect a SC vision nearer the idea of green city according to which the smartness of the city is reflected through eco-innovations deployed on it's territory. Eco-innovations aim to satisfy different goals. More generally, eco-innovations are technological or non-technological (organizational, institutional or marketing-based) innovations which provide customer and business value while significantly decreasing environmental impacts (Arundel and Kemp, 2009; Bartlett and Trifilova, 2010). According to OECD (2009, p. 19), an eco-innovation means "the creation or implementation of new, or significantly improved, products (goods and services), processes, marketing methods, organisational structures and institutional arrangements which - with or without intent - lead to environmental improvements compared to relevant alternatives." For example, energy production from renewable sources aims to reduce energy cost, CO2 emissions and satisfy the increasing energy demand in urban areas; building efficiency devoted to the reduction of energy demand and consumption; local transport quality and greenness's objectives intend to reduce pollution deriving from transport cities, etc. In definition, a smarter city is closely linked to cleaner territory, water and air, and transformed behavior of energy consumption. In other words, a city becomes smart when in its territory implemented infrastructures, water and air are cleaner, and innovative technologies and services are deployed to improve the quality of life for both all citizens (inhabitants, tourists, companies, etc.) and local governments.
As stated above, one main characteristic of these green, sustainable and eco-innovations is that they are based on a wide range of ICT, justifying here the confusion of SC with that of a digital city. ITs are deployed in large urban cities, stressing the role of local governments in achieving sustainable urban growth for metropolitan and medium-size cities (Paskaleva, 2009). Consequently, the ecosystem of firms investing in such innovations is profoundly transformed. Customers and local governments are the key actors of the innovation ecosystem and have a complex role to play in green innovation ecosystems (Glaeser and Berry, 2006; Faucheux and Nicolaï, 2011; Attour and Rallet, 2014). The necessary development of new innovative business models - to explore different options involving users - is well underlined (Geert et al., 2013); however, from a strategic management point of view, more research should be devoted to the way such new business models influence the evolution of firm's strategies and ecosystems. As explained by Lazaric and Kendal in this special issue, green innovations, such as smart meters (a specific component in smart grid developments), play a major role of far-reaching transformation of their sectoral system, namely the energy system (Erlinghagen and Markard, 2012). However, their business model is difficult to predict because the transformation of current industry business model depends on the way consumers and citizens are included in the development of new products and services. As concluded by the authors, deregulation should play a major role in the necessary transformation of the energy industry.
Furthermore, much attention has been paid in the literature to the role of territories in the emergence of such eco systemic innovations. The extant literature focussed, however, on the different market models adopted by local governments which have different state-systems (Cooke, 2011). Other works analyzed the role of a territory as a platform of innovation and coordination. A SC is then viewed as that of living labs able to generate eco-innovation. But this implies the need to adopt an innovative business model. As Dupont et al. demonstrate in this special issue through the case of "Chaire REVES," SC development depends on the deployment of an innovative public-private partnership leveraging eco-innovations "with," "for" and "by" citizens. In the same vein, Capdevila and Zarlengua propose in this special issue an original framework for analyzing SC initiatives. Providing examples of different initiatives of SC domains in the city of Barcelona, the authors differentiate "top-down" approaches (SC projects are implemented by public and private organizations) from "bottom-up" approaches (SC projects emerge in a bottom-up manner and have their origin at the local community level). The authors demonstrate that these two types of SC initiatives are complementary and have a positive effect on the innovation capacity of a city.
From the micro level point of view, eco-innovation became an innovation, business and strategy challenge for firms. Two cases must be distinguished here: first firms with polluting service activities and second firms developing innovative services in order to face their current environment and sustainable challenges. In the former case, the development and implementation of eco-innovations are aimed at solving or reducing firms' polluting activities. In the latter case, making green innovations and IT a key driver of their innovation strategy are essential for firms to face the new competitive and convergent environments of their markets. In fact, the business models of such innovations often function at the intersection of various industries (Nair and Paulose, 2014). In this new economic and sectoral environment, firms' main challenge is to succeed in positioning themselves as leaders of such convergent ecosystems. It is in particular the case of firms with a dominant position in their sectoral systems. Mobile-based services, for example resulted in a radical evolution of the mobile ecosystem which is characterized by a large and complex network of firms from several sectors. Considering the case of mobile payment platform-ecosystems deployed in China, Zhong and Nieminen show in this special issue that differences in strategies, conflicts in collaboration, lack of trust in collective actions and battles for dominance in strategic alliances make resource-based co-innovation in mobile platform-ecosystems difficult. Nevertheless, these co-opetition challenges are one key characteristics of platform-ecosystem (Iansiti and Levien, 2004). It is therefore crucial to identify how members of a complex ecosystem such as a mobile or eco-innovation ecosystem co-innovate. Zhong and Nieminen propose an original framework which facilitates the analysis of strategic and innovation process in a platform-ecosystem.
GREDEG CNRS UMR 7321, University of Nice Sophia-Antipolis, Nice, France, and
BETA CNRS UMR 7522, Faculté des Sciences Economiques et de Gestion,University of Strasbourg, Strasbourg, France
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