Key takeaways:

  • The success of smart city implementation will depend on collaboration between government and business.
  • A three-tier model for smart city development provides a blueprint for evolution.
  • Critical developments, challenges and maturity levels will all benefit from the model’s holistic direction.

There’s no denying that smart cities are big business. Projections show that the global smart cities market will exceed US$2.5 trillion by 2025, up from an estimated US$1 trillion in 2020.1

The pace of smart city development is increasing, but its success hinges on collaboration between the public and private sectors. With competing interests of profit, progress and social cohesion, and differing ways of working, the relationships critical to successful smart city development can often be at odds.

In our recent PwC report, Creating the smart cities of the future, we illuminate the role of public-private relationships in smart development. We explain how the evolution of these partnerships will encourage smart city growth, allow developers to tackle challenges, open up commercial and service opportunities and plan the intelligent road ahead.

Let’s be smart
about this…

Smart cities face a variety of challenges. While they differ in nature and importance depending on locality (as may be expected with differing technological, social, political and other geographic-dependent factors), their navigation requires a degree of trust, especially between stakeholders, in order not only to overcome the hurdles, but also to unlock new ecosystems of value.

Approaching smart city challenges without a proper strategy, plan and public-private ecosystem working together, the impact of any solution deployed for citizens will be negligible, hence undermining their confidence in going ‘smart’ and decelerating progress, or by creating unintended socioeconomic consequences that affect people’s quality of life. As such, these challenges can’t be taken lightly.

Despite this, many cities are already integrating smart elements into large-scale public infrastructure programs and residential and commercial developments (smart buildings, for example). But so far, much of this digital/physical convergence has occurred in parallel to government smart city initiatives.

It speaks in part to the differing levels of maturity of the smart city movement. Across the globe, the readiness and ability of cities to seize opportunities varies widely. While there are opportunities for all – government and the private sector alike – only a holistic way forward will mature the market and lead to further growth.

Can’t we all just get along?
A model for progress

We suggest a three-tier progression of how government authorities and private-sector partners should work together that will reshape how smart city digital infrastructure will be developed, financed and delivered worldwide in the years and decades to come.

Tier one: Traditional contracting structure

Governments contract private companies to deliver specific smart services or capabilities. For example, smart lighting or public Wi-Fi.

Tier two: Public-private partnerships

Additional or enhanced services are built upon the existing base of digital city infrastructure and potentially monetised. Private sector partners may receive a share of revenue. For example, smartphone payment mechanisms used for city transit.

Tier three: The rise of the digital ecosystem

An ecosystem develops around the city’s digital infrastructure, leading to new products, services, businesses and revenue opportunities. For example, smart street lights with Wi-Fi, or traffic congestion sensors whose data can inform retailers, or dispatch services.

While parts of a smart city and its services can exist in different stages at various times (and may be implemented that way for particular reasons, eg. quick wins, clearer business cases), integrating this model into the smart city project process aims to trigger further development, with the success of one tier spurring the confidence to attempt more.

Smart cities

The evolutionary path of smart city development. Source: Creating the smart cities of the future, PwC, November 2018.

For people, profit
and smarts

The three tier model provides the flexibility to address different needs and levels of trust required at different stages of smart projects, and is therefore a useful framework for addressing challenges while opening up commercial and service opportunities at same time.

Government will play a critical role in developing an innovation ecosystem necessary to create smart services that benefit citizens experiences and revenue streams. But it needs to fulfil multiple roles – from contract owner to partner and beyond – and be flexible enough to get the dynamics right.

For the private sector, in order to capitalise on the opportunities created by smart city initiatives, engagement with government in more collaborative and creative ways is necessary. For both, there is a range of questions that need to be asked.*

Instituting the initiatives needed to make cities truly smart relies on first building partnerships which will support the goal. Both government and business will need to adapt as they progress through the continuum, but doing so will mean that smart city solutions will “deliver the fullest possible value to citizens, government and business alike – and deliver this value not just in the present, but for the foreseeable future as well.”

For more detailed information on the three-tier development model for smart city services, view the full report, Creating the smart cities of the future.

*See the full report for a list of key questions government, private sector and solutions providers should consider.


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Guest Contributor

Daryl Walcroft - PwC US partner, lead of Capital Projects & Infrastructure practice

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Guest Contributor

Greg Chiasson - PwC US partner, Capital Projects & Infrastructure practice

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Guest Contributor

NSN Murty - PwC India partner, lead of Smart Cities practice