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Social Innovation

Social Innovation and mega cities: what is the opportunity for business?

How do we make mega cities more inhabitable for the people who have to live in them?

Research reveals that by 2020, 56% of the world’s population will live in urban areas and more than 35 cities globally will grow to become ‘mega’ or ‘smart’ cities by 2025.

But this raises an important question: how do we make these cities more inhabitable for the people who have to live in them?

Research, conducted by Frost & Sullivan in partnership with Hitachi Europe Ltd, says the major challenge is that mega cities run the risk of becoming uninhabitable spaces. The trend towards urbanisation is leading to more strain on infrastructure such as power distribution, sewage, water systems, transport, education, policing and welfare.

Cities of the future will have multiple downtowns and transit-oriented development, but will also witness a re-distribution of wealth which will create significant economic divides within cities.

The term ‘smart’ or ‘mega’ city has become a popular concept to describe how the world can address issues of urbanisation, population growth and resource depletion. Mega cities develop as core city centres merge with suburbs to form mega-regions, mega-corridors and even mega-slums. Cities of the future will have multiple downtowns and transit-oriented development, but will also witness a re-distribution of wealth which will create significant economic divides within cities.

What is the solution?

Dieter Rennert, Chief Executive for Europe, Hitachi, says the solution lies in Social Innovation to make cities as smart as possible. This will be crucial to the success and improved quality of life in the age of mega cities. These spaces will be the epicentre of people, ideas, challenges and opportunities in the future.

So what does this mean for the sectors that will drive the development of such cities? According to the research, the financial and investment potential is significant. In South Africa the opportunity is worth $15 billion per year, by 2020. Globally estimates show that there is a $2 trillion Social Innovation market opportunity in 2020 for business, industry, investors and governments.

He says a shift in thinking is needed to encourage Social Innovation in green product development, mobility, energy and infrastructure. “In the future, profitable growth will come for those companies that can innovate to maximise the welfare of society with the right balance of information, infrastructure, technology and new business models,” he says, adding that if people can see the improvements to their lives, environment and society, they will see the value of investing in it.

Smart is the new green

Rennert points out that there will still be a demand for green products and services, but if they can’t cater for changing consumer demands there is a risk that they could be replaced by smart products and services. Now that the Internet can connect over 80 billion devices globally, digital intelligence will be the key driver of efficiency and sustainability.

Smart and sustainable cities will be built from scratch, using the latest intelligent and green initiatives to reduce energy consumption and improve efficiencies in all facets of daily life.

Future of energy

The energy debate is no longer only dominated by fuel choice. Energy consumption will increase as we grow as a global population. The question is how will we respond and manage this. There is a great need for solutions that can meet climate change and carbon emissions standards, but still reliably keep the lights on for citizens and business.

Rising energy costs and a focus on environmental performance has triggered the need for innovations to manage energy efficiently through technologies such as smart grids. These can offer more control and visibility, which results in cleaner, reliable and smarter energy.

Governments of developing countries are focusing on growing their infrastructure as quickly as possible in response to greater demand and an increased population.

South Africa is currently facing a critical energy shortage, but there is strong government commitment to nuclear power expansion to fill capacity gaps. The goal is to deliver 9.6 GW of nuclear power within 20 years. Decisions regarding nuclear power stations will also be taken in the short to medium term to provide for the long lead times coupled with economic growth requirements.

There is also a drive to include renewable energy into the generation mix, with more than 64 projects being launched in the last decade, and more to come. The dominant technologies are wind and solar.

In Mozambique recent gas finds could launch this country to a global top five gas player, and this could have a major impact on South Africa. The potential exploration of shale gas is also expected to be a game changer for the South African energy landscape.

Future of mobility

One of the biggest challenges facing smart cities is that people need to get around – individuals must get to work, businesses must deliver goods and industries need to transport materials.

The research says that connectivity and urbanisation will have a profound impact on personal and freight mobility. There is a big Social Innovation opportunity here. Companies that look at cities as customers and position themselves as partners and solution providers will benefit from business and investment opportunities.

By 2020, it is expected that nearly one million parking spaces will deliver real-time parking information with the help of sensors and there will be 26.2 million car sharing members and 450,000 car sharing vehicles.

Look at these statistics: By 2020, it is expected that nearly one million parking spaces will deliver real-time parking information with the help of sensors and there will be 26.2 million car sharing members and 450 000 car sharing vehicles. Between 2010 and 2020, over $500 billion will be spent globally on high speed rail projects with over 70,000 km of high speed rail track in use. High speed rail will connect not only cities and countries but also continents. In 2035, one will be able to travel from London to Beijing using the global high speed rail network.

Rennert says developments in mobility infrastructure are already underway in Africa. A new rail line from Swaziland to South Africa is expected to be completed by 2017. Swaziland railways are expected to have the highest growth among African Nations by 2020.

Making a case for Social Innovation

John Raspin of Frost & Sullivan believes that innovation and business together have an important role to address human challenges. “Business and industry has woken up to the reality that innovation is no longer just a simple strategic option for financial gain but an opportunity to address human challenges,” Raspin said.

He says Social Innovation can have a tremendous impact on bringing a better quality of life to the end-user, not to mention the wider implications for the environment. “This is what will really tip the scales in favour of Social Innovation – when innovation truly answers individual citizen’s deep felt problems.”

There are many ways to achieve effective social innovation. Some companies take a partnership-driven approach, working with NGOs and civil society through independent programmes. Others leverage innovation for community development.

The research identifies convergence as the common theme. “That means convergence of technologies, industries, products and business models. Sectors that were seen as separated in the past are converging into new products and services to provide innovations that will help provide breakthrough changes for society,” he says.

Rennert cautions that smart cities must not be just a short-term reaction to current trends. Managing the lifecycle of cities, improving economic performance and enhancing competitiveness will all be key to long-term prosperity. Focusing and managing these factors will provide lasting solutions to issues pressurising countries today and ensure that smart cities are friendly, economical, sustainable and resilient.