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Smart city industry outlook
Being the key enabler for cost-saving and effective solution to persistently soaring urban problems, smart cities are expected to play a pivotal role in helping fight against climate change (EC, 2013) and to shape the future of technology in the upcoming fourth industrial revolution (Klaus Schwab, 2016).
A large body of research evidence supports the idea that ICT-based smart urbanization enables agencies to allocate resources wisely and to gently drive a positive change in individual’s behavior, believed to be part of efficient ways to solve challenges that cities of the future are facing. With great expectations of how smart cities can help build a better society, the global smart cities market size also has dramatically increased over the last decade.
Numerical data on the market size are updated by a number of research groups, and they all consistently say it’s very positive all around over the forecast period.
<Global smart cities market forecast>
|Market research firm||Global smart cities market|
|Markets and Markets (’19.1)||
Global smart cities market:
USD 308 billion (2018) → USD 617.2 billion (2023), (AAGR: 18.4%)
|Navigant Research (’17.4)||
Smart city services:
USD 93.5 billion (2017) → USD 225.2 billion (2026)
|Frost & Sullivan (’17.10)||Global smart cities market: USD 2.1 trillion (2025)|
Given the conceptual ambiguity of its nature, often conflated with cross-sectoral identities, and inclusiveness of business scope, public consensus on to what extent smart cities can be industrially defined has yet to be reached, however. Besides, the market forecasts by each research firm also vary.
The same can be said for the market analysis in Korea as well, because limited pool of statistical sources are not enough to help fully understand industry trends of smart cities in Korea. In this sense, Korea research Institute for Human Settlements (KRIHS) has reviewed the national budget allocated to public works since the early 2000s. The KRIHS report estimates that nearly KRW 2 trillion was spent on U-City formed in 52 business districts for the period from 2003 through 2014, adding that vast majority of the finance went to ubiquitous digital interface and technologies embedded across the city infrastructure in the process of early stage smart city development.
The total amount of funding for public works alone, posted by Korea Online E-Procurement System, a B2G platform for which companies place bids, however, signifies that an estimated procurement value for smart city initiatives has been enormously on the rise from KRW 6.5 billion in 2018 to KRW 175 billion in the year 2019.
Specifically, KRIHS found that the government has started to inject greater amount of financial resources into building out the technology base, rolling out a diverse range of possible applications- installing digital interfaces in traditional city infrastructure or streamlining city operations through platform consolidation- in the pursuit of smart city initiatives.
The birth of the smart city industry, the measurement of applications to be implemented in real urban settings
A broad range of business portfolios under the smart city initiatives have been underway over the past few years. The most radical transformation is probably a rapid transition into “smarter” models that are globally competent. Smart cities, traditionally, used to be developed in the form of adding digital intelligence to existing urban systems. Nowadays, they are getting into a new phase of evolution; adopting a regulatory sandbox, an approach to potential relaxation of regulatory requirements that build in more testing and feedback through a safe innovation zone, forming private-public partnership, exploring the value of the living lab with civic engagement and developing operational metrics and criteria (goal attainment assessment model) by employing dozens of methodological tool kits so as to corroborate the potential impact of the newest technological applications to be implemented, while monitoring progress.
The process for business application assessment does not simply guided by the authorities or a few of agencies in charge of construction projects, but rather concentrates largely on whether new smart city models can well perform in accordance with the aforementioned evaluation categories, inspired by empirical solutions of the pan-Atlantic projects, US’ Smart City Challenge and EU’s Horizon 2020.
- Potential relaxation of regulatory requirements by allowing a safe innovation zone where new applications are tested
- A regulatory sandbox
|Civic participation||- Civic engagement from problem solving to public usage of new services|
- Smart city innovations made both by private actors with creative ideas and administrative body
- A new business paradigm of “convergence” which take place through horizontal governance, replacing traditional hierarchical leadership with collaborative work with different levels or boundaries of entities
|Goal attainment scaling||- Developing a monitoring system that works constantly and a guideline to clarify the target, in consideration of unforeseeable outcomes of new applications in real world settings|
With unique characteristics to embody verifiable outcomes in an open space in real-urban life settings, multiple factors must be taken into consideration at every step along the way for the examination process.
Smart City Challenge to explore inspiring business innovation
Businesses in different fields finally got a chance to show their ideas brought to life in urban spaces for the first time in Korea.
Smart City Challenge, a project unheard of in Korea so far, empowered communities to innovate through private-public partnership, while establishing a baseline and measuring results of smart solutions to help citizens tackle urban issues and generate new business opportunities.
In its early stage, Smart City Challenge formed and helped six consortiums joining together for a shared purpose of testing and evaluating theoretical applications devised to solve persistent urban problems for ten months in pilot districts or living laboratories. The project challenged participants and selected two to three teams who survived at the competition, giving them grants used to put the innovative solutions into practice.
Along with 49 municipal governments, nearly 200 businesses, small or large (including top players such as Samsung Electronics, LG, SK, KT and Hyundai Motors) and a couple of universities formed 48 separate teams to join 2019 Smart City Challenge Korea.
These participants shared thoughts on various topics, ranging from transportation, environment, energy, safety, cultural tourism, social welfare programs, local economy, and healthcare services to community amenities. The selectees who’ve reached to the final stage were provided a KRW 1.5 billion sponsorship. The list below is the details of multiple applications the finalists have brought out.
|Gwangju City, Glosfer, Jointree, XM, etc.||- Data-based mobile rewards platform designed for civic participation
- Data based digital rewards platform
-Community mapping with civic engagement
- A tool to share video evidence of traffic mishaps captured by car security cameras
- Trade area analysis
|Bucheon cCty, Kakao Mobility, Data Alliance, etc.||- Socio-economic models developed through local civic engagement
- Local connection platforms to manage car/ kick scooter sharing or E-hailing service, introduced by local venture firms
|Suwon City, Samsung Electronics, Samsung SDS, etc.||-Translating raw data collected throughout a city into mobile UX service
-Voice-based mobile applications
|Changwon City, LG CNS, etc.||- Cloud-based energy & safety solutions currently adopted in industrial clusters
- Energy consumption tracking
-Smart power saving system
-Smart fire detection / PM sensoring solution
|Daejeon City, CNCITY Energy, Jungdo UIT, etc.||- Solutions to old town slum upgrading
- Car sharing space, fire prevention system, UAV test sites, PM sensoring system etc.
|Incheon City, Hyundai Motors, etc.||-Demand-responsive transport (DRT) system
- Mobile as a service (MaaS) platform
Smart Cities Challenge has underscored what socio-economic returns to expect when measuring the impact of smart applications deployed in real world settings. It also substantiated what progress the initiatives have made while forging non-traditional partnerships that bring private, public and civic engagement together and how it transformed leadership hierarchy and regulatory regime.
Benefits sharing, a way to get smart city industry to take its stride
Pilot testing to evaluate the validity of applications could be the starting point for smart city initiatives. However, that does not mean the outcome itself can be a sufficient condition for innovation. Smart city applications should not only benefit a single community. They must be scalable and replicable throughout the world to make the initiatives real innovation. With the benefits of the lessons learned, cities must go beyond experimental urban designing.
An aid package that helps spread the benefits obtained through the pilot programs to communities worldwide needs to be adopted, which appears to be a baby step towards early stage market formation and a growth driver of innovative services. It must be recognized that many smart city applications succeeded only when they’re widely adopted. Authorities do not have to be the sole operator of the smart city initiatives simply to explore solutions. They could step in helping key actors amplify innovations they’ve generated in order to take the leadership role in the global market.
Unfortunately, most smart city projects in Korea have yet to reach a full pace, though a host of pilot testing programs turned out to be competitive enough to match similar projects conducted overseas in their scale and quality, due to insufficient government support so far. It’s not too late to be proactive. Above all, the government can keep close track of test results and have in depth discussions with all the entities engaged.
Constant efforts to keep discovering innovations making cities smarter, coupled with administrative assistance for the birth of the market are believed to be good ingredients that help smart city models in Korea prosperous in many cities around the world.
Lee, Jae Yong
Director, Smart City Research Center
Korea Research Institute for Human Settlements
* The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA.
1) U- city: Korea Ubiquitous City Association. An early model of digital- based smart cities developed in Korea.