Will the city of the future be a hyperlocal manufacturing cluster?


(Image by Rob Boudon)

I’ve become really excited recently about the ability of three trends to transform city economies: improving bandwidth and connectivity; the increasingly intimate way that information technology can be connected to the physical environment; and the relationship between industry convergence, localism and the creation of economic value.

Together, they lead me to the question in the title of this post: will the city of the future be a hyperlocal manufacturing cluster?

(They also lead me to a serious challenge. But I’ll return to that at the end).

Let’s take each theme in turn:

How increasing bandwidth improves the quality of user experience to the point of industry disruption

As the bandwith available for communications has increased over time, the quality of user experience we are able to provide online in advertising, shopping, music, telephony and video has in turn lead to disruptions that disintermediate traditional industry structures – epitomised by Craig’s List, Amazon, iTunes, Skype and YouTube. Business and technology innnovators are constantly looking for new opportunities to cause disruptions and take controlling stakes in the new markets they create.

How the digitisation of materials and physical processes will transform manufacturing

Digitisation and mass customisation are now sweeping through manufacturing. Intelligent materials and components capable of storing information will communicate instructions to the production machines processing them to indicate what product they should be fashioned into. New “apps” will be downloaded to those machines to change their function. Small versions of such “Smart machines” – the evolution of today’s 3D printers – will be distributed throughout cities, and even in our homes, along with a stock of raw smart materials. This wave of change is already known as “Industry 4.0” and is emerging as a strong theme of Germany’s economic strategy, as described by Professor Wolfgang Wahlster of the German Research Centre for Artificial Intelligence.

As these incredible advances in the ability of information technology to control physical materials take place, for some products it is becoming more important to be able to manufacture customised items locally in immediate response to individual demand – i.e. to perform in-market innovation – than it is to globally source the lowest cost manufacturer for large numbers of identical items.

How convergence between industries creates economic value

All of the examples above represent convergence between related industries such as technology, communications, publishing and consumer electronics. The theory of economic clusters states that such convergence is necessary to maintain profit margins, because over time those margins otherwise diminish through competition and innovation in supply. To maintain profit margins, products and services need to be adapted by adding additional features, often produced by capabilities associated with related industry sectors.

Convergence is usually caused by the exploitation of newly availabe – or newly cost-effective – technology in response to, or in order to create, market demand. Amazon’s appropriation of consumer device technology in the form of the Kindle is an example. This convergence at the level of individual capabilities takes place constantly, in addition to the industry disruptions in my original examples. From time to time, a combination of the two effects creates entirely new markets such as search, which was captured very effectively by Google following the initial successes of AltaVista and Yahoo.

Why the Smarter City of the future will be a low carbon hyperlocal manufacturing cluster

The near-future ideas of Industry 4.0 represent a convergence between the technology, communications and manufacturing industries. To an extent they’ve been here for some time in the form of highly configurable car factories such as the Nissan plant in Sunderland, where up to 6 models have been produced from just two production lines over the past 2 years. It is the most productive car plant in Europe.

The spread of Industry 4.0 to localised application in city environments and even homes will be transformative. The carbon footprint created by transportation in the supply chain will be reduced; and new careers (such as some of those suggested by Google’s Futurist Thomas Frey) will be created to exploit the capabilities of these new manufacturing platforms.

The use of social media to turn product design into a collaborative process (as Zuda did for Comics and Threadless did for T-shirts) could be applied in the home to more physically complicated goods such as confectionary (for example using 3D printers for chocolate).

I was lucky enough this week to speak at the 3rd European Summit on the Future Internet at the University of Aalto in Espoo, Finland. Speakers such as Wolfgang Wahlster, Jean-Luc Beylat (President of Alcatel-Lucent Bell Labs in France), and Ilkka Lakaniemi (Director of Business Environment Strategy for Nokia) all spoke on themes related to the ideas in this post.

The challenge for society in the Industry 4.0 era

To temper the excitement associated with these profound changes, considerable concern was also expressed at the summit for the effects on mass employment. Whilst the “re-shoring” of manufacturing is already bringing some manufacturing employment back to developed economies as global wage differentials reduce, there’s no doubt that less people, and with considerably different skills, will be employed in the process of making things as Industry 4.0 gathers pace.

Our challenge as a society and individuals is to continue to create new exchanges of value between each other, in new forms. My observation in the UK is that hand-made products and locally sourced food are in increasing demand, for instance. And there’s no doubt that the quality of our lives would in many cases be improved if more effort were expended maintaining and improving the physical environment around us.

Indeed, there’s some evidence to suggest that growth in the so-called “DIY economy” of freelance employment across trade and professions is accelerating following the recession, supported in some cases by technology platforms for “micro-entrepreneurialism” (such as Etsy‘s online market for handmade goods). These can also be seen as examples of convergence and disintermediation.

I hope we turn out to be as innovative and determined in addressing this social challenge as we are in exploiting the advances of technology for economic reasons.

Which cities will get Smarter fastest?

Birmingham is a diverse city currently undergoing the latest of many periods of regeneration

Last week the Centre for Cities published a report that IBM sponsored giving its 2012 Outlook for Cities in the UK. The report assesses economic and demographic statistics with the intention of identifying the cities most likely to succeed in improving their economic activity and prosperity. You can download a copy here.

The report is an interesting read, and offers challenging findings for cities such as Birmingham, where I live – whilst it is the second largest city in the UK, Birmingham has significant challenges and appears near the bottom of rankings for employment and the level of skills in the workforce.

However, in focussing on statistical information, the report takes insufficient account of two crucial factors. Because the report is seeking to influence the investment of government funds in the cities it identifies as best placed to succeed, I think these important omissions should be recognised.

Firstly, it does not take into account the specific initiatives currently taking place in many cities. You only have to look at the effect on Birmingham’s retail economy of the Council-led regeneration of the Bullring shopping centre to understand how fundamentally cities can be changed. The Bullring is now one of the most visited destinations in Europe and has transformed a city centre that used to attract relatively few visitors from outside.

Steps are also being taken to address the skills of the city’s workforce. The University of Birmingham recently announced that it will open a secondary school teaching a curriculum designed to develop successful University students. And last year, Birmingham City University and Maverick Television were two of the sponsors for Birmingham Ormiston Academy, an institution that will provide vocational education in creative media and performing arts. You could see both of these as vertical integrations in the supply chain of skills for the city’s economy. Centre for Cities’ report does not take account of the effect that these initiatives will have.

Looking to the future, the Royal Academy of Engineering recently published a paper assessing the potential and challenges for Smarter City Infrastructures to transform our cities. Several case studies have shown the benefit of applying sophisticated instrumentation and analytics to physical and information systems in areas such as transportation, water and social care. We can expect cities to continue to exploit such advances to transform themselves in new and unexpected ways.

The Centre for Cities report also fails to consider the willingness and ability of the ecosystem of political, economic and social organisations and their leaders to take effective action. Sunderland, for example, a city where I frequently work (see many previous posts in this blog, starting here) also scores poorly in many of the statistics in the report. However, a well developed “Economic Masterplan” has been agreed across organisations in the City, and the City Council has already made investments in citywide Broadband and Cloud Computing intended to move it forward. The strength and cohesion of leadership and vision across the city will be a tremendous asset in its transformation; by contrast, cities with more fragmented leadership or less crisp visions may make progress more slowly.

The 2012 Outlook for Cities does contain a wealth of important information that can help our cities understand their challenges and opportunities; and Center for Cities’ previous detailed research on the structure of city economies is also worth reading; particularly in light of one of their conclusions that I do agree strongly with – “cities with less dynamic private sectors … will find it more challenging to offset the combination of a weak national economy and the ongoing shrinkage of the public sector”.

But anyone who looked at the statistics of the technology industry prior to Steve Jobs return to Apple Computers in 1997 would have probably predicted nothing more than a continued decline for that company into a niche market for the graphic design community. So I hope the UK Government keeps an open mind and makes holistic assessments of Cities’ plans for transformation and their ability to execute them when deciding where to make investments, rather than relying on indicators of past performance.

One thing is for sure, though: we should all expect to see some surprises. History’s most reliable lesson is that it’s an imperfect guide to the future.

The economics and attractiveness of Smarter Cities

(Photo of building work in Wembley from Mick Baker)

After a relaxing break over the festive season, I’m finally back up to speed with working life. It looks like an exciting year ahead; we’ve expanded our “Smarter Cities” team in the UK, and are working with some interesting clients and partners.

I met this week with the Bartlett Institute for the Built Environment at University College, London. We discussed how cities can make themselves “more attractive” places to live and work – a common priority of cities in the process of regeneration. A mixture of factors are involved such as lighting, education, the vitality of business and retail environments, transport, public safety and architecture. Technology isn’t central – but it’s going to be interesting to me as a technologist to see how it can play a role.

I’ve also been looking at how investment cases for Smarter Cities projects and transformations are constructed. A business partner commented recently that a good number – perhaps a majority – of Smarter Cities initiatives have been pilot projects rather than full-scale implementations; or have been part-funded by Government or EU Research programmes; or both.

There are exceptions, such as the London Congestion Charge scheme; that has an interesting mix of short-term return (it generates revenues that cover both investment and operating costs); longer-term economic benefits (by reducing congestion it lowers barriers to productivity, economic growth and job creation); and improvements to the city environment – it was an enabler for pedestrianisation in some areas.

A colleague of mine told me about the healthcare trust in Durham and Darlington that helped its local council pay for pavements to be gritted. It was “common sense” that by doing so they prevented people from slipping and thereby improved wellbeing and lowered treatment costs. Not everyone agreed with the practise – and one trust governor resigned in protest, particularly as there was no model to quantify and prove the benefits. Perhaps for the same reason, the practise has now stopped, a victim of public sector spending cuts.

It’s clear that we need new models and tools to calculate the financial, social and environmental costs and impacts of “Smarter” projects, so that we can build business cases and commercial vehicles for investing sustainably in them. Some of my colleagues were involved in a project to create such a model in Manchester – you can download a report on that project here after registering; and I spoke this week to another business partner who has been developing financial models in a similar space.

The UK Smarter Cities community is eagerly awaiting a decision by the Technology Strategy Board as to whether it will approve funding for a “Future Cities” Catapult centre; I have argued that a capability to construct such financial models should be a focus for such a centre if and when it is approved. I have my fingers crossed, and am hoping to hear news soon.

Building these models will bring challenges. For example, the pollution created by traffic congestion in cities has a measurable effect reducing life expectancy (see the reports here  and here ). So congestion charge schemes such as London or Stockholm should increase life expectancy. That’s clearly a wellbeing benefit – but financially speaking, it increases the costs of supporting the city’s population as it lives longer.

If we can get the models right, though, and evolve them to be usable by different cities for different Smarter City initiatives, then we may finally see the explosion in full-scale projects that we’ve been expecting – and that we’ll need to face the financial, demographic and environmental challenges facing us.

Localism and economic regeneration in cities

(Photo by Jorene Rene)

Through the course of this year, I’ve spoken with stakeholders from a lot of cities in the UK about their goals for economic stimulus and regeneration. Often, those discussions start around how cities can use technology to boost economic growth, particularly for small and medium enterprise – in Sunderland, for example.

In very many cases, cities today have a focus on the “digital economy” as a source of economic growth. That’s not at all surprising given the digital economy is a significant and growing part of the UK’s GDP.

However, the digital economy is a very transferable economy; in his frankly titled 2007 paper “How Many U.S. Jobs might Be Offshorable?“, Alan Blinder of Princeton University concluded that “computer programming” was the easiest form of work to transfer from one physical location to another. So if cities want to build sustainable economic growth in the digital economy, we clearly need to think carefully about exactly what forms of “digital” activity that entails.

There are a number of ways to do that; for instance I  met a very interesting company recently, Lamasatech, who provide multi-touch screen solutions. Their technology is slick, exciting and leading edge. And whilst they do provide software, they also provide unique hardware technology. Their multi-touch surface is much more flexible and portable than other solutions I’ve seen. Access to science and leading edge manufacturing and materials are important elements of a successful digital economy.

In a similar vein, there’s a very interesting cluster of wireless technology expertise in Cambridge, epitomised by the Cambridge Wireless Network, and that encompasses science, design, engineering and technology. Some of the developments they’re working on in low-power, long-range wireless communication technologies such as the proposed “Weightless” standard could have a dramatic effect on the cost and feasibility of Smarter City and Smarter Planet solutions.

What’s particularly interesting about the Cambridge example is that it represents a self-reinforcing regional cluster; the critical mass of expertise in the region leads to innovative interactions which continually generate new value. Any other region attempting to stimulate economic growth in the same area of technology would have a significant challenge in developing to the point where it could compete against the Cambridge cluster.

Jay Bal from Warwick University wrote a very interesting paper in 2007 describing his work building online marketplaces to stimulate the formation and growth of such clusters. His West Midlands Collaborative Commerce Marketplace now drives contracts worth billions of pounds sterling every year into a cluster of small and medium enterprises in the West Midlands.

What’s key in Cambridge and in the West Midlands example is that one way or another the specific capabilities available in a particular region are being brought together in ways that create synergies. By design or by history, such regional clusters also have synergy with their physical environments, nearby academic institutions, the skills base created by the local education system, and other factors to do with “place”. In Sunderland, for example, there’s a long cultural tradition of social enterprise which will probably influence the future economic development of the city.

An interesting organisation seeking to exploit and enable these local synergies is Addiply. Addiply offer online advertising content – but they do it by enabling local businesses to sell online advertising space to other local businesses with whom they share complimentary markets and customer bases. By using advertising to create those local linkages, Addiply’s approach is one way to stimulate synergistic growth in local economies. Addiply’s CEO, Rick Waghorn, recently blogged about how he came up with the Addiply model, and how he thinks Addiply can compete against the big players such as Google Adwords by offering a more focussed value proposition.

As we go into 2012 with no let-up in sight from the tough and competitive economic environment we’ve been in for some time, I think these ideas will be crucial in shaping successful economic strategies in our cities and regions. It will be important to all of us that the cities that we live and work in use them well.

Smarter Cities need Smarter Social Enterprises

The SES “Container City” incubation facility for social enterprise in Sunderland

I’ve just been at a great workshop with a variety of social enterprises in Sunderland, hosted by Sustainable Enterprise Strategies (SES). The objective of the workshop was to identify ways in which social enterprises might harness new technologies to help them respond to – and exploit – the dramatic changes coming to social care and health in coming years – such as personal care budgets, Big Society, Open Public Services and GP commissioning of health services.

Mark Heskett Saddington, Director of SES, started off the day with some striking statistics about Social Enterprises – which include co-operatives, employee-owned companies, mutuals, charities and other such organisations. Mark’s team alone support 100s of traditional and social businesses in Sunderland, employing 1000s of staff, mostly from deprived, high-unemployment areas. Their combined annual turnover is in the tens of millions of pounds sterling.

Across the world, the figures are even more striking. 4 in 10 residents of the USA– the world’s flagship private enterprise economy – are members of a co-operative, including 87 million people who belong to a credit union. 13% of Sweden’s GDP and 21% of Finland’s GDP are created by social enterprises. Worldwide, social enterprises employ over 100 million people with a turnover of £1.1 trillion. That’s big business.

People in the social enterprise community are – not surprisingly – passionate in focussing on the needs of their customers, or “service users”, to whom they are often providing some form of care or support. But they’re also passionate about their business model (though not all of them would call it that).

For example, Margaret Elliot told us how she first started a co-operative in Sunderland in the 1970s, a home care provider called “Little Women”. At the time, it was born of necessity: her and some friends, all mothers, needed to work; but needed to look after pre-school children too. So they started a co-operative and ran a nursery in their office premises. More than 30 years later – and now leading an organisation that is franchising itself across the UK and that employs many hundreds of people – she described social enterprise as “a bug” that people catch. She spoke of the power of giving people ownership of the organisation that they work for; and described how it focuses organisational decision making on delivering value to the end users of services.

The changes coming to local public services, social care and health are going to create a new, transactional market in which social enterprises will need to participate, and in which they’ll need to behave in some ways more like private enterprises do today. For instance, many organisations, such as social landlords, that are currently funded by regular grants, will in future have to compete for individual service delivery transactions paid for by individual end users. That’s a dramatic change; and one that will require new processes and new infrastructures that those organisations don’t have access to today.

In a world that is “digital by default”, it’s tempting to think that existing marketplaces – such as Amazon and e-Bay – provide a model that can be emulated. But the language and models of those marketplaces tend to emphasise products and cost, not what social enterprises value – the quality of outcome for the end user of a service.

For example, if you search for branded batteries in the Amazon Marketplace, you’ll find some very, very cheap batteries which have what appear to be high review ratings. If you look a bit closer, though, there are a lot of 5 star reviews that simply state “the batteries were really cheap and arrived quickly”. There are a smaller number of 1 star reviews that warn “I only used them for a week, and then they ran out. They’re obviously fakes!”.

In social care, that sort of information simply can’t be hidden at the end of such a long trail. For all its merits and success, Amazon is clearly not a market that balances economic and social outcomes in the way that Social Enterprises will need. Of course, it was never designed to be, so that shouldn’t come as a surprise. Whilst existing online marketplaces provide rich experience we can learn from, they don’t yet provide the answer.

What I’m sure will happen is that social enterprises will co-create their own markets that strike a better balance. Early examples such as “Shop 4 Support” already exist, though the social enterprises I spoke to yesterday told me that the transaction prices in that market are currently often too high for small social enterprise service providers to bear. There will be considerable challenges along the way – dealing, for instance, with managing online identities and personal data in a way that’s appropriate for sensitive services, perhaps exploiting the initiatives announced recently by the Cabinet Office and Technology Strategy Board on personal data stores and identity.

It’s going to be a period of great change; and of great innovation in the use of technology. And, I hope, of exciting new opportunities to deliver improved outcomes for Social Enterprise.

For me, this is very much part of Smarter Cities. It may not involve instrumenting physical systems such as transportation and water; and it may not in the first place require the application of big data technologies (though I think the need for them will come); but it does represent a striking change in the way city systems will work. In particular, it’s about dramatic changes in the interactions that involve some of the people who need the most help.

But if cities can repeat Mark’s success with SES in incubating successful social enterprises creating new jobs in areas of high unemployment, it’s also an opportunity for economic growth. And whilst the focus of most of this post has been on social care, that’s far from the only sector in which social enterprises are active. Lydia’s House, for example, are a co-operative in Sunderlandwho train local employees from vulnerable backgrounds to produce artistic home furnishings with potential for export from the local economy.

In a previous post, I blogged that growing city economies whilst consuming less resources was the number one concern of city leaders today. If helping people to help themselves in local communities isn’t a resource-efficient way to create value, I don’t know what is. That sounds like the sort of Smarter City we’re looking for.

Smarter Cities: Doing More for Much Less

Most of my time this week was spent in two very interesting meetings. The first, on Monday, was with a team from the UK Technology Strategy Board shaping a proposal for a Technology Innovation Centre (TIC) focussing on “Future Cities” (the transcript of David Cameron’s announcement of the £200m TIC investment programme is here). The second, on Wednesday and Thursday, was the annual general meeting of SOCITM – the society of IT Managers in local government. I’ll come to the themes that meeting addressed shortly.

Before I do that: just over 2 years ago, I wrote a blog post inspired by the October 2008 issue of New Scientist magazine titled “The Folly of Growth”. That magazine – written in response to the 2008 financial crisis – challenged the assumption that the world’s economy could continue to grow at the rates it has historically. It’s basic point was that such growth simply could not continue based on the current level of environmental resource usage per dollar of GDP created, because there simply aren’t enough resources on the planet.

In Monday’s TSB meeting, representatives from Academia, City authorities, construction companies and technology companies all agreed that City leaders – both Council CEOs and elected Council leaders – had a single overriding priority: maintaining and growing their Cities’ economies, whilst using less resources to do so. Three years down the line from the New Scientist’s seminal magazine, that’s a real vindication of their thesis.

At the SOCITM AGM on Wednesday, Martin Reeves, CEO of Coventry City Council and the incoming president of SOLACE, the society of local government CEOs, gave a visionary plenary speech echoing similar themes.

Martin referred to the very, very challenging financial pressures facing local government (and all of public sector) that were magnified by George Osbourne’s Autumn Statement this week which predicted 100,000s more job losses in public sector.

But Martin said that the real priority was not dealing with cost pressure. He said that the real priority is to carry out a radical transformation of local public service delivery in support of the most challenging policy agenda we have ever seen.

I couldn’t have agreed more.

As well as the unprecedented financial pressures created by the realisation that we have long been underestimating and mis-managing risk on an international scale, we also face global competition between city economies to a previously unforeseen degree. More locally to the UK, GP commissioning, personal care budgets, open public services, “Big Society” and several other central government policy initiatives are forcing enormous changes into local public sector organisations.

The changing role of local government of Cities and Regions is, in my view, the most critical challenge we face today. City and Regional councils are not only the organisations concerned most urgently with the local business development and economic growth strategies that create employment; they are also challenged to deliver increasingly complex services to vulnerable, hard to reach communities at lower and lower cost, whilst working with an increasingly diverse base of suppliers and service providers to do so.

I personally believe that – properly and sensitively applied – technology can be a tremendous enabler of successful change in this context. But we are still in the very, very early days of understanding how to make that work, from the technology challenges of assuring identity in a world of open digital services to the financial and governance challenges associated with defining successful models for shared service delivery.

Trial and error is the only model for moving forwards with this agenda. Doing nothing is not an option – it will result in dying cities, following the unfortunate path taken byDetroit.

And no amount of analysis will reveal the “ideal” or “right” approach. We have never faced these challenges before, so there is no proven “blueprint” for success. We will only learn how to face them successfully by trying the best solutions that we can imagine; and constantly changing and adapting them according to the results that they deliver.

Smarter Regional Priorities in Mature European Economies

(Photo of Sunderland Civic Centre at night by Paul Boxley)

I’ve spent a lot of time in recent weeks thinking about “Smarter Regions”. Smarter Regions are similar to the “Smarter Cities” concept shared by IBM and many other organisations; but they’re different in one obvious way and one not-so-obvious way – particularly in mature economies such as those of Western Europe.

A lot of the focus in Smarter Cities is concerned with instrumenting and interconnecting physical systems – such as utilities, transport and buildings – with the intelligence represented by IT systems, especially operational control and decision support tools. Solutions based on those ideas can deliver tremendous benefits, such as the congestion charging system that IBM and our partners have implemented for Stockholm.

However, in European cities, the business cases for investing in such systems are complicated, to put it mildly. Transportation, utilities and buildings are often operated by private sector organisations subject to a plethora of contractual and franchise obligations and oversight regimes; whereas the benefits of such systems – for example, reduced environental impact of city systems, and reducing the barriers to economic and productivity growth – often relate to medium to long term goals of local government organisations. Those cities – such as Stockholm and London – that have made such investments tend to be driven by what could be called “survival” concerns. They have identified a clear and pressing threat to their city systems and economies – in these cases, severe traffic congestion limiting economic growth – that must be addressed.

Smarter Regions are similar to Smarter Cities in that they seek to exploit advances in our ability to integrate and analyse information from a rich variety of systems and sources. But they are different in two ways:

  • Firstly, and obviously, whilst all cities are regions, not all regions are cities. Regions are broader, more diverse economic, geographical, political and social systems.
  • Secondly, in mature economies at least, regional priorities are concerned with a different set of systems. Their priorities are often economic growth; supporting ageing populations; and reducing the cost of their administrative, financial and public service operations whilst improving the outcomes that they deliver

Examples of initiatives addressing these priorities include IBM’s work in Bolzano, Italy, providing remote home monitoring and healthcare services in sheltered accommodation; our work with Medway Youth Trust in the UK, helping them to transform youth services to a predictive, preventative model; our “Smarter Cities Challenge” project in the city of Glasgow investigating fuel poverty; the Municipal Services Cloud that IBM Research developed for the State of New York to help small councils across the State reduce costs and implement “joined-up working”; and, of course, the Cloud Computing platform that IBM and Sunderland City Council announced last week, that will be used to deliver services and capabilities to stimulate growth and innovation in the City’s economy and public services, and that I blogged about recently.

In recent years, we’ve seen terrific pressure on regional administrations in the UK driven by the overall cuts in public sector budgets. Financial pressures in the Eurozone  area create similar drivers on the continent; and in the US the rising costs to public organisations of healthcare and pension liabilities to past and current employees created by ageing populations cause huge cost pressure too.

Despite all this, global competition for private sector investment and job creation are causing regions to seek ways to invest in addressing these challenges. Slowly but surely we are learning how to build business cases to justify those investments – often based on technologies that can both reduce internal operational costs and enable improved external outcomes (see this set of examples from IBM’s customers, for example).

There’s no panacea or silver bullet here; every region is different in its economic, social, political, financial, geographic and environmental characteristics (not to mention others that I’ve forgotten). All of those have to be taken into account when constructing business cases for Smarter Regional solutions.

But I have a sense that we’ve passed a tipping point in the build-up of momentum in this area; and I think we’re going to see a lot more exciting projects and initiatives announced by Cities and Regions in Europe over the next year.

It’s a great time to be a technologist working in local government.

For sale: one economy, slightly used

In a couple of previous posts (here and here), I’ve written about the effects I expect to see social media have on the financial services industry – particularly retail banking and insurance – this year. The reason I expect to see companies in the industry explore social media is the need to re-establish themselves as being trustworthy by interacting with their customers in an open and trustworthy way – something social media can be perfect for (See Christophe Langlois’ discussion of VanCity’s “Change Everything”, for example).

However, there is a deeper question to ask concerning not just how financial organisations regain trust, or even how to regulate their behaviour to avoid a similar crisis in future:  the question is whether our current economic system is set up to achieve the right objectives at all. My previous posts contained links to some articles exploring this theme, but Umair Haque at the Harvard Business School has just posted a much more direct call for a “Smart Growth Manifesto” on his blog.

Umair’s post echoes a special issue New Scientist magazine ran back in October on the theme “the Folly of Growth”. Articles in the magazine argued that current expectations of continuous economic growth (a trend that, until now, has withstood periodic recessions) cannot reasonably continue, on the following basis:

  • Each dollar of GDP value can be associated with an estimate of the resource consumed in its creation.
  • Even assuming a relatively modest rate of future growth, at the current level of resource usage / $ of GDP, and at the current level of reduction in that figure, we will rapidly run out of resources.
  • If the expected rate of growth is increased to reflect one of the benefits of growth often cited by free-market economists – i.e. an improvement in living standards in emerging and developing economies driven eventually by growth in developed economies), then we run of resources incredibly fast.

One of the New Scientist articles went on to calculate an answer to the following question: if we want to drive economic growth at that level, how much more efficient do we need to become at utilising natural resources to achieve it?

The answer (based on their assumptions) was frightening: 5 times better to achieve modest growth; 50-100 times better or more if our goal is to lift the entire world to an equivalent standard of living to that enjoyed in today’s United States.

There are, of course, a huge number of assumptions behind those figures, not to mention questioning the basis on which “standard of living” is measure (i.e. to what degree is the quality of life of someone in the U.S. or anywhere else determined by their consumption of economic or environmental resources?).

However, to me the message is clear, we must be driven by goals that are not entirely based on monetary growth. As individuals, of course, that’s true already (Mr. Madoff and his like excepted); what we need to see now – as Umair has pointed out – are economic systems that reflect that.

This week’s reading: the future of banking

I’ve been spending time recently speaking with clients and colleagues about the ways in which some of our banking and finance customers might seek to exploit technology this year in the wake of the credit crunch. The Finanical Services blog, FSA and others are predicting a string of measures to reduce costs and implement compliance to new regulatory requirements – all of which will involve expenditure on technology. Some of the same sources are also predicting a simultaneous exploration of social media or other innovations exploiting new technology aimed at re-building trust with consumers and increasing business in new channels.

I’m expecting to see both those things happen, and hope to help some of my customers along the way. Here are some of the articles I’ve found interesting in that area this week:

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