{"id":9914,"date":"2021-12-06T07:12:30","date_gmt":"2021-12-06T06:12:30","guid":{"rendered":"https:\/\/thesmartcityjournal.cibeles.net\/sin-categoria\/citytech-a-fresh-approach-to-digital-services-for-residents-of-big-cities\/"},"modified":"2021-12-06T07:20:22","modified_gmt":"2021-12-06T06:20:22","slug":"citytech-a-fresh-approach-to-digital-services-for-residents-of-big-cities","status":"publish","type":"post","link":"https:\/\/www.thesmartcityjournal.com\/en\/articles\/citytech-a-fresh-approach-to-digital-services-for-residents-of-big-cities","title":{"rendered":"CityTech: a fresh approach to digital services for residents of big cities"},"content":{"rendered":"

Can be defined as a set of state, municipal and commercial services that directly improve people\u2019s lives, the services aimed at end consumers<\/em><\/p>\n

In the Startup Barometer<\/em> report<\/strong> presented in early June 2021, the growth of digital literacy was named<\/a> the main consequence of the coronavirus pandemic. According to the authors of this study, \u201cthis threshold was crossed by many social groups and people were forced to learn to use digital services\u201d. Alexander Nugaev<\/strong>, associate partner at McKinsey<\/strong> and an expert in digitalization in the public sector, says that the crisis has given impetus to long-term changes that will continue in the coming years.<\/p>\n

\u201cThe crisis has shown the city government, businesses and ordinary residents that a lot can be done using digital services and spurred a change in behavior patterns\u201d<\/em> says Alexander Nugaev<\/strong>.<\/p>\n

The coronavirus and changes in society made it possible to look at technology industries through the prism of digital services consumption, from the perspective of users. This approach is embedded in CityTech or UrbanTech concepts, which are often opposed to the concept of building smart cities.<\/p>\n

The technologies and business models of smart city are, roughly speaking, the engineering and infrastructure side of the city and all those solutions that optimize it, Nikita Rumyantsev<\/strong>, head of the MUF Analytical Center<\/strong>, explains. \u201cIt is based on the utopian view that a city can and should be managed from a single center, this is a top-down approach,\u201d<\/em> \u2013 he says.<\/p>\n

CityTech or UrbanTech is different \u2014 it is not a \u201ctop-down\u201d, but a \u201cbottom-up\u201d approach. Some of the ideologues of this approach, including Adam Greenfield, Carlo Ratti<\/strong> and Anthony Townsend<\/strong>, say that \u201cit is necessary to make not smart cities, but cities that make people smarter\u201d<\/em>, Nikita Rumyantsev<\/strong> explains. Otherwise, cities are trapped in the large tech companies\u2019 frames, which are sold to them and become outdated even before they are implemented.<\/p>\n

UrbanUs<\/strong>, a venture fund, was one of the first to focus on this area. It describes<\/a> UrbanTech startups as tech companies that improve urban life and sustainability, and unlike Smart City, UrbanTech customers are not city governments, but people and businesses.<\/p>\n

After analyzing venture capital investments in this field for 2016-2018, Professor Richard Florida <\/strong>(who, by the way, was the first to introduce the concept of \u201ccreative class\u201d in the early 2000s) came up with the figure of $75 billion, which was about 17% of all such investments in the world. The coronavirus pandemic has slowed investment, but, according to Florida<\/strong>, at the same time, opened up<\/a> new opportunities for urban technology.<\/p>\n

If we speak only about cities and focus on B2C and G2C solutions, CityTech can be defined as a set of state, municipal and commercial services that directly improve people\u2019s lives, the services aimed at end consumers.<\/p>\n

A look at CityTech through digital services assessment<\/h2>\n

According to the World Economic Forum<\/strong>, 56.2% of the population in the world already live<\/a> in cities, and according to UN<\/strong> estimates, the number of urban residents in 2020 amounted<\/a> to almost 4.4 billion people, and the share of urban dwellers will reach<\/a> 68% by 2050. As for smart cities, according to the Research and Markets<\/strong> predictions, the global market will grow<\/a> from $410.8 billion in 2020 to $820.7 billion in 2025. At the same time, the largest share will be taken by the smart citizen services segment, which includes education, healthcare, security, smart lighting and e-government. According to analysts, these digital services improve the overall efficiency of the city and the quality of life of residents.<\/p>\n

In 2018, McKinsey<\/strong> analysts studied the demand for smart city solutions for the population, the use of which is every person\u2019s choice. In fact, the research involved digital services, which can also be considered CityTech solutions. The analysis showed<\/a> that even then the level of their use was very high: the rate of their use in such megacities as Hong Kong, Dubai, Moscow, New York, Singapore, etc. reached 70-80%.<\/p>\n

In Russia, digital services for urban residents are also developing outside of large cities. Also in 2018, the Graduate School of Urbanism<\/strong> and Yandex<\/strong>. Taxi<\/strong> presented a study named \u201cDigitalization in small and medium-sized towns of Russia\u201d<\/strong>, where the concept of \u201clocal digital services\u201d \u2014 services operating on a certain territory \u2014 was mentioned. According to the authors of the document, these services include delivery services, food ordering services, online shopping in local stores, buying tickets for local events, ordering a taxi online, etc. According to analysts, in 2018 local digital services were available to almost 60% of the urban population in Russia, while 21% of urban residents were practically or completely not provided with such services.<\/p>\n

Impact of COVID-19<\/h2>\n

Alexander Nugaev<\/strong>, who was one of the authors of the above-mentioned McKinsey<\/strong> report on the demand for smart city solutions for the population, believes that City Tech services have significantly helped people survive the 2020 crisis. \u201cOf course, the pandemic has accelerated the development of CityTech. It restricted the movement in the city, and even made it impossible for residents to move around the city in some places, be it a trip to the store and to work, or to the clinic and the Multifunctional Public Services Center. Many of these needs have been addressed by using urban digital solutions, both government and commercial ones. Even a law on distance sale of medicines was passed. All these services have helped people to live in this difficult period\u201d<\/em><\/p>\n

Carlo Ratti <\/strong>from the MIT Senseable City Lab<\/strong> sees the current processes as a digital version of what economist Joseph Schumpeter called \u201ccreative destruction\u201d on an urban scale.\u201cInnovation processes that would have taken years to come into effect are being compressed into weeks. People recognize that these changes have made our daily life more flexible and convenient, and thus some trends \u2014 such as smart working and reduced commuting \u2014 will continue after the pandemic.\u201d<\/em><\/p>\n

The peak in the use of mobile applications during the pandemic was registered<\/a> worldwide (40% increase year-on-year in the second quarter of 2020). According to App Annie<\/strong>, on average, a user spent<\/a> 4 hours 20 minutes daily on a smartphone. During the pandemic, a record was also set in the number of installs of new apps. After the self-isolation regime was introduced, a sharp increase in the use of food delivery applications was registered<\/a> in the world, analysts at CleverTap<\/strong> noted.<\/p>\n

In Russia, such segments as digital content and e-commerce showed<\/a> double-digit growth during the pandemic, the Russian Association for Electronic Communications (RAEC)<\/strong> experts claim. By the end of 2020, e-commerce grew by 22% and rose beyond 6 trillion rubles. The Russian B2C retail market in 2020 reached 2.7 trillion rubles; the number of orders grew by 78% compared to the previous year \u2014 it increased up to 830 million. Experts expect an average annual growth rate of this market at 34% in the next three years. Data Insight experts estimate that the first three months of quarantine resulted in online purchases made<\/a> by at least 10 million people.<\/p>\n

The services for selling tickets for transport and events experienced a decline, and the highest growth was shown by food ordering and delivery services. The eGrocery category grew by 214% and rose beyond 135 billion rubles, its turnover in Moscow and the Moscow region amounted to $81.9 billion. According to Sber<\/strong> experts, in 2020, all the largest grocery retailers launched<\/a> their own mobile delivery applications independently or in partnership with market leaders.<\/p>\n

According to analysts, the value of the Russian B2C online education market at the end of 2020 was estimated at 55-60 billion rubles, which is 30-35% more than in the previous year.<\/p>\n

\u201cMany industries, for example, education, healthcare, that were previously conservative and traditional in terms of user scenarios have been greatly accelerated. People simply had to use them, which helped to eliminate some prejudices (for example, assertions that online education is wrong or of poor quality) and allowed vendors to test hypotheses and adapt their solutions\u201d,<\/em> says Nikita Rumyantsev<\/strong>, Head of the MUF Analytical Center.<\/strong><\/p>\n

The expert is convinced that when people understand that it is possible to solve their problems using these tools, they will definitely continue to use them, simply because in some cases it greatly saves time and money.<\/p>\n

Many analysts are talking about the acceleration of digitalization caused by the coronavirus. The UN report notes that the pandemic has accelerated<\/a> the digitalization of the provision of services, including telemedicine and the shift to teleworking. Data Insight experts believe that new users who started to make purchases online due to quarantine would in one way or another switch<\/a> to online shopping within five years. Deloitte analysts say that, as a result of the pandemic, the consumption of goods and services through digital channels has increased<\/a>. At the same time, they also highlight consumers\u2019 focus on personal ownership and the decreasing popularity of the sharing model.<\/p>\n

According to the study conducted by BCG and Romir,<\/strong> during the pandemic, the only sales channel that showed<\/a> growth was e-commerce, and the growth was observed only in Moscow.<\/p>\n

The survey conducted by Public Opinion Foundation (FOM)<\/strong> in May 2020 showed<\/a> that a third of users ordered ready-made food online; in Moscow, this figure reached 48%. Products were ordered by 27% of Moscow residents and 19% of residents of large cities with a population of more than 1 million people. In Moscow, 86% of users ordered goods.<\/p>\n

According to Criteo<\/strong>, in the second quarter of 2020 54% of Russian users downloaded<\/a> at least one online shopping app (retail, food, groceries); 42% of respondents used food delivery apps several times a week; once a week \u2014 24%, several times a day \u2014 14%.<\/p>\n

Today, a year after quarantine measures were introduced due to the pandemic, Food tech in Russia continues to grow. According to SberIndex analysts, in the first quarter of 2021, the Russian market for food delivery from restaurants and groceries delivery from stores grew<\/a> by 78% compared to the same period last year and reached 155 billion rubles. Growth rates in both segments are comparable, but e-grocery turnover is already 2.5 times higher.<\/p>\n

\u201cIt is clear that everything, that makes user scenarios more convenient, more accessible and more diverse, will continue to grow\u201d<\/em>. Nikita Rumyantsev<\/strong> from the MUF Analytical Center<\/strong> mentioned some City Tech business models that are actively developing and are relevant for Moscow: super quick delivery (15-20 minutes), for which the assortment, customer service, and the entire back-end are changed; dark stores and dark kitchens; subscription models for renting or using anything (from cars to houses); urban mobility markets; micro-mobility and \u201clast-mile mobility\u201d solutions, etc.<\/p>\n

What will happen to CityTech after the pandemic?<\/h2>\n

Most experts agree that the pandemic has accelerated the development of CiyTech, but there are different points of view on its further development.<\/p>\n

Data Insight<\/strong> analysts believe that most new customers will continue<\/a> to shop online after isolation is over. Deloitte<\/strong> experts are convinced that people, who began to use digital services more actively during the pandemic, will remain<\/a> at this level using such services or will use them more often in the coming year. Ksenia Krasnova<\/strong>, project manager at Strelka KB, believes that the residents of the city are accustomed to new services, and it is unlikely that they will stop using them in the future.<\/p>\n

The study conducted by ICT.Moscow<\/strong> showed that Moscow residents do not intend to use services and aggregators for food delivery less often after all coronavirus-related restrictions are lifted. The greatest increase in activity is expected in urban and transport mobility.<\/p>\n

Konstantin Sokolov<\/strong>, an expert on smart city international issues at the DIT<\/strong> of Moscow, suppose that the high rate of introduction of new and improvement of existing digital services will continue or even increase after overcoming the COVID-19 pandemic.<\/p>\n

\u201cIn my opinion, in the post-covid perspective, this trend, which gives tangible user, management and resource benefits, will only accelerate and, I hope, will lead not only to quantitative but also qualitative changes in the structure and patterns of digital consumption\u201d<\/em>, says Konstantin Sokolov<\/strong>, expert of the Moscow DIT<\/strong> on international issues of SmartCity.<\/p>\n

The study conducted by ANCOR<\/strong> company in May 2020 showed<\/a> that 71% of Russians will continue to use grocery delivery services after coronavirus-related restrictions are lifted. At the same time, 29% of people see groceries delivery as a temporary measure, and after the pandemic, they plan to return to their usual shopping habits.<\/p>\n

Sber<\/strong> experts also believe that a steady redistribution of spending in favour of online purchases has occurred in a group of consumers who, even before the pandemic, sometimes used online shopping and electronic services. Those who did not use online services before the pandemic, after a forced break, quickly returned<\/a> to their habits.<\/p>\n

Why do citizens choose CityTech?<\/h2>\n

According to the ICT.Moscow<\/strong> study, Moscow residents appreciate CityTech services because they help, firstly, to save money (78%), secondly, to save time, and thirdly, because they are available anytime and anywhere. A 2019 survey that involved Moscow residents and was dedicated to the use of services in large ecosystems showed<\/a> similar results, but back then the respondents named time-saving as the key advantage of using digital services.<\/p>\n

\u201cCityTech is not only about saving time and money, but in general about convenience and new values. This is a higher level of customer experience: not only you no longer stand in queues \u2014 you no longer have to leave the house. Even government services are becoming very customer-centric. They can be quickly developed and changed, and that improves customer experience. Companies began to create such services a little earlier, and now the state is trying to catch up to their level,\u201d<\/em> continued Nugaev.<\/strong><\/p>\n

It is not only about improving services (for example, both food and a taxi could be ordered earlier, but by phone), but also about completely new services, Alexander Nugaev<\/strong> says. As an example, he mentions a car-sharing service, which is integrated into the city\u2019s transport infrastructure, or a service that allows users to put their own cars up for car sharing. \u201cPreviously, such opportunities did not exist, and modern services in the state-commerce framework allow to create those opportunities from scratch,\u201d<\/em> \u2013 the expert says.<\/p>\n

Nikita Rumyantsev<\/strong>, Head of the MUF Analytical Center<\/strong>, mentioned another advantage of digital services \u2014 the possibility to compare alternatives and make a qualified decision when choosing a service or product. <\/strong><\/p>\n

Ksenia Krasnova<\/strong>, Project Manager at Strelka KB<\/strong>, summarizes the reasons why the importance of urban digital services is growing: \u201cUrbanTech solutions deal with different aspects of people\u2019s life in the city, so it would be correct to say that different services are used for different reasons. People use groceries delivery services because it is convenient and saves time, although sometimes it can be more expensive than going to the store. And car sharing, on the contrary, is used because it is cheaper, although it is not always more convenient than a taxi\u201d.<\/em><\/p>\n

CityTech in digital ecosystems<\/h2>\n

Despite the pandemic and the increased demand for CityTech services, in 2020 the e-commerce niche has become less interesting for venture investors, authors of the Venture Barometer<\/em>, a study of the Russian investment market, claim. Experts say<\/a> this was caused by the fact that \u201cthe place of business angels and VCs was taken by the largest companies building ecosystems and e-commerce platforms\u201d.<\/p>\n

According to the concept<\/a> of ecosystem regulation prepared by the Ministry of Economic Development, \u201ccustomers choose ecosystems, because classical business models are inferior to ecosystems in terms of convenience, choice and price for customers\u201d. According to McKinsey forecasts, ecosystems could account<\/a> for about 30% of the global GDP ($60 trillion) by 2025.<\/p>\n

Nikita Rumyantsev<\/strong>, head of the MUF Analytical Center, says that the logic of ecosystem approach is \u201cabsolutely understandable\u201d. According to him, large tech companies are trying, on the one hand, to collect as much data about the client as possible and then use it for marketing and product development, and on the other hand, \u201cthis is the only way to achieve payback for individual services (or spot a lack of cost recovery, and use them as data sources)\u201d. The expert says, that, unfortunately, markets for individual solutions for individual cities are often not large enough to be attractive from a business point of view.<\/p>\n

But the expert is cautious in assessing the impact of the ecosystem model on the development of CityTech services and cities. It is difficult to say whether the ecosystem hinders or helps the development of the city. This is developing this way, and it is not possible to understand how it can develop in a different way, since this is highly influenced by economic and technological factors. So far, the companies that follow this path are growing and seem to provide better customer service. But we do not know how they will survive and affect the city when the technological platform or the economic situation changes\u201d, keep affirming Rumyantsev.<\/strong><\/p>\n

Carlo Ratti<\/strong> says that the collaborative approach is one of the positive aspects of ecosystems. However, the Director of the MIT laboratory and founder of the international design and architecture office Carlo Ratti Associati<\/em><\/strong> also mentions the potential risks, first of all \u2014 the formation of monopolies around the collected data. <\/em><\/p>\n

Ksenia Krasnova<\/strong> from Strelka KB<\/strong> also speaks about the problem of competing with ecosystems. \u201cCompanies developing digital ecosystems that are used by citizens (for example, Yandex) work in the UrbanTech (or CityTech) niche. For city residents, the spread of UrbanTech solutions is undoubtedly a good thing: they can quickly access new services that make life in a megacity even more comfortable. However, entrepreneurs who want to enter this niche and create UrbanTech solutions from scratch will find it difficult to compete with large companies that have already created their own ecosystems\u201d.<\/em><\/p>\n

GovTech trends<\/h2>\n

The pandemic also had a positive effect on CityTech services related to state and municipal services. According to NAFI research center, 22% of Russians started to use<\/a> or have improved their skills in using state electronic services, including the Moscow platform mos.ru.<\/p>\n

According to the statistics of the Ministry of Digital Development<\/strong>, in 2020 the number of registered users on the federal public services portal increased<\/a> by 12 million people and exceeded 78 million citizens (almost 2\/3 of all citizens over 14 years old). The number of citizens who used the services of the unified portal almost doubled in 2020 and reached 56 million people. Last year, more than 40 new services became available on the portal. Users can access these services without visiting the offices of government agencies or Multifunctional Public Services Center in person.<\/p>\n

In Moscow the trend of switching public services and also various additional GovTech services to online format is visible. For example, the most popular services<\/a> on the city portal are the electronic diary (accessed over 830 million times in 10 years), the second and third places are taken by services for sending water meter readings (accessed over 237 million times) and checking car fines (accessed over 164 million times). In total, more than 380 electronic services are available on the mos.ru portal, and there are more than 13.9 million accounts \u2014 according to statistics, this is more than the number of people who live in Moscow. In total, the capital\u2019s GovTech services have been used<\/a> 2 billion times since 2011.<\/p>\n

\u201cWith regards to changes in GovTech, two trends can be highlighted here. On the one hand, modern cities and states strive to reduce the administrative burden on people, to minimize the unpleasant routine processes. They help save time by integrating information and services in digital form \u2014 for example, combining ten public services in one click. On the other hand, the government tries to create new value offers, for example, a service for the elderly, through which they can receive information about benefits, services or socialization opportunities,\u201d<\/em> opines Nugaev.<\/strong><\/p>\n

Nikita Rumyantsev<\/strong> says that he shares the idea that the state and city authorities will increasingly act as a platform. He expects that they will formulate a request and a problem, which is important and needs to be solved, and hand it over to other players that will find a solution. At the same time, they will sometimes act as a provider of data, investments, or something else, but they will not solve these problems on their own.<\/p>\n

Does CityTech need support from the city?<\/h2>\n

According to the representative of the MUF Analytical Center<\/strong>, the creation of a showcase of requests and problems of the city is one of the necessary forms of support for CityTech. According to the expert, for this purpose, acceleration programs for closer communication with city representatives can be launched.<\/p>\n

The expert says that data opening is the most difficult task. At the same time, \u201ccities work not only with their data, they form associations of key data holders: telecom companies, banks, retail companies, etc., so that they also open the data and provide universal products\u201d.<\/p>\n

Another popular form of CityTech support from the city government is developing regulation that allows to test and scale new mechanisms, Nikita Rumyantsev<\/strong> says.<\/p>\n

\u201cThe ‘regulatory sandboxes’ are becoming more widespread: certain territories are allocated in the city with a more relaxed regulatory environment, where new approaches and solutions can be tested, despite the fact that these solutions can be formally prohibited or have not been standardized\u201d.<\/em><\/p>\n

Carlo Ratti<\/strong> believes that the city government can significantly help the development of CityTech by allowing more experimentation to take place. He claims that the municipal authorities should somehow \u201cturn cities into living laboratories\u201d.<\/em><\/p>\n

Ksenia Krasnova<\/strong> from Strelka KB<\/strong> assumes that the development of CityTech services could be stimulated by \u201ccreating a regulatory framework and defining KPIs at the city level\u201d.<\/em> \u201cAnd of course, digitalization should be developing in parallel with the process of increasing the digital literacy of citizens,\u201d \u2013 she says. \u201cThis indicator indirectly affects the number of emerging services and simplifies their implementation\u201d.<\/em><\/p>\n

In 2018, McKinsey<\/strong> analysts pointed out that the use of digital solutions for urban residents is not related to per capita income. Carlo Ratti<\/strong> of the MIT Senseable City Lab<\/strong> says that he recalls many examples of innovations that originated in developing regions and then spread to their more advanced counterparts. \u201cTo give you an example, Africa had been lagging in telecommunications. It took a couple of decades for mobile phone to reach the continent but since then, various African countries have harnessed its potential to forge creative solutions to local problems, such as mobile banking and tracking crop information in real time. As such, they have surpassed their western counterparts and assumed a leading role in the field\u201d.<\/em><\/p>\n

However, Nikita Rumyantsev<\/strong> believes that \u201cGDP per capita is still important because in richer countries the demand is higher and segments are growing faster, these markets are more interesting for companies, there are more investments, more projects and offers in the long term, and more capital intensive innovations are emerging there\u201d.<\/em><\/p>\n

But Nikita Rumyantsev<\/strong> agrees with another idea from the McKinsey report<\/a>, according to which such services can rocket in the areas where there was no similar \u201cconventional\u201d solution before: \u201cThere is a problem of transition to a new technological platform and new infrastructure. In many respects, this is what economists call the \u201cpath dependence effect\u201d. It is reflected in the fact that it is more difficult and more expensive to introduce new technologies in developed countries and cities. Firstly, it is necessary to rebuild the existing infrastructure; secondly \u2014 to admit that it is outdated and write off part of the investments as losses (since it has not yet fully depreciated), and thirdly, there are understandable problems due to the fact that big players just don\u2019t want to change and lose markets\u201d.<\/em><\/p>\n

Nikita Rumyantsev<\/strong> mentions several examples. He says that in California and in America in general, the quality and speed of the Internet is worse than in other countries, including India and Russia (despite the fact that, according to BCG estimates, half of the top 50 innovative companies in the world in 2020 are based<\/a> in the USA). The next example is the level of banking services in Russia and Ukraine, which is significantly better than in Israel, Switzerland or France. This can be explained by the fact that these countries have huge players who do not want to change, and there is a regulation that suits them. Another example is Germany, where the fax is still the main tool of internal communication in large corporations.<\/p>\n

Source: ICT.Moscow (pr@ict.moscow<\/a>)<\/em><\/p>\n

 <\/p>\n

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