European cities are confronted with a rapidly changing economy. The crisis has destroyed jobs across both service and manufacturing industries, and has revealed the shakiness of the financial service sector. Jobs get lost, some businesses become obsolete, but at the same time, new growth areas are emerging.
In this dynamic economic landscape, some of the questions the URBACT workstream “New Urban Economies” explores are: what is the scope of action for cities to steer their economy? Should cities “sit and wait” for changes to come and affect them, or is there room for pro-active urban policy to grasp emerging opportunities? If so, what is in their scope for action? How to act in a sustainable/integrated way?
It has become clear now that many “traditional” tools to boost the urban economy have become out-dated or are not (cost) effective. Recipes such as investing in large landmark projects (new Guggenheims, big stadiums), generous fiscal incentives, or smokestack chasing (blindly attracting companies and investments from outside) are not very effective. Rather, cities should go for an “indigenous” approach: building on existing qualities and assets, mobilizing companies and citizens to innovate, and to engage in the discovery of promising new specializations. Local economic policy should not start from scratch and bet on silver bullets, but rather find clever ways to marry local traditions with new growth opportunities. This is the also the philosophy behind “smart specialization”, a recent innovation policy concept to accomplish the EU2020 agenda.
The URBACT workstream “new urban economies” has been set up to examine the new economic opportunities in Europe’s cities, and to search for adequate policy actions and organisational setups to “translate” them into smart, sustainable and inclusive urban growth. The workstream brings together “thinkers and doers” (academics, elected representatives, practitioners, policy receivers, etc.), to jointly reflect and build on a new generation of integrated urban policies. In the workstream, we adopt a concept of the “resilient city”, in which stakeholders, in a concerted way, are able to respond adequately to key challenges and external developments, building on the cities’ identity and competences, and without compromising weaker groups (inclusion) and future generations (sustainability).
We focus on three potential growth areas that are relevant for cities across Europe, and discuss how cities may act upon them. The first (and by far most important and pervasive one) is the digital economy. The ongoing IT and digital revolution produces a range of new economic activities and business opportunities and may fuel the urban economic engine. But also, it disrupts existing industries, and destroys jobs and companies that fail to adapt. What is the scope for urban action in this very dynamic field? A second growth area results from the emerging green economy: cities are tackling environmental challenges, and this gives rise to a range of new and promising green innovations and business opportunities in cities. How can green efforts bring new economic growth and jobs for cities? Third, we will discuss the health & care economy: what options are open to cities to capture growth opportunities resulting from increased spending on health and innovations in medical technology, e-health services and biotech?
We are also interested in the question how cities can identify and capture emerging opportunities, and how can they harness firms and citizens to do so. For each of the emerging growth fields, we will provide some examples of active and adequate city responses. What new governance models and platforms are emerging? We end with some first conclusions resulting from the workstream.
The digital economy
The digital economy is the quintessential new urban economic driver. It includes, among others, software design and programming, platform development, cloud computing, data analytics, the “app” economy, geo-location and sensor technologies, as well as digital media, gaming and content production activities, combine engineering skills with symbolic content production. The field is characterized by very rapid innovation and fast obsolescence, and its ability to enable innovation and productivity increases across multiple industries. The digital economy is a source of new jobs, but destroys many existing ones. Of the three potential growth areas we discuss in this article, this is by far the most pervasive and disruptive one. How does it impact on cities, and how can cities respond and capture opportunities?
First of all, the digital economy is a cradle of new entrepreneurship. Large numbers of new firms and jobs are created, especially in app development,, social media and software development. Places like Stockholm, London, Dublin, or Barcelona are buzzing with young people creating new businesses – often starting with little more than a laptop and a good idea. Its not just big cities that benefit: many medium-sized cities have thriving start-up scenes as well. Especially cities with a technical university are attracting and developing “tech talent”, which is the source of entrepreneurship. Examples are Tampere, Eindhoven or Aarhus. Another interesting case is Cluj, Romania, where a successful IT cluster emerged around the technical university.
What can cities do?
Local tech-communities don’t typically look for local government support: they are largely self-organising, thriving on informal networks. Nevertheless, cities can promote digital entrepreneurship in several ways:
• Supporting incubators: spaces where prospective entrepreneurs can receive all sorts of support –financial, administrative, business networks- to set up and scale up their venture.
• Buying from start-ups. cities are large purchasers of digital services, and may decide not always to procure from the “safe” large established corporate vendors but give start-ups a chance. Naturally, this requires changes in tendering regulations.
• Engage with the tech community: cities may “crowdsource” / invite tech communities to develop useful city apps, through app contests or “hackathons”, for example by giving access to municipal databases (“open data” initiatives). An example of this is taking place in Dublin, where the City Council has been curating city data (from the local government and beyond) in order to unleash new innovations that can be relevant to tackle city´s challenges (e.g. transport, planning, water management), whether by large corporations or small start-ups.
• Related with the previous, cities can steer events and facilitate new networks between formal organizations and informal tech-digital communities, with an eye to foster new business opportunities.
• Developing and “branding” specific urban quarters as hotbeds of digital entrepreneurship: a good example is the “IT City Katrinebjerg”. This neighbourhood in Aarhus (partner in the URBACT REDIS network) is located close to the university. It is home to several IT research institutes, leading IT firms and an incubator. Led by the city, the stakeholders are developing and branding the area as innovation district for IT activity.
Open data in Dublin: Dublinked
In some cases, an unconventional organisation is needed to achieve unconventional results. The Studio in Dublin is a key example.
“The Studio” is a recently established ”innovation team” within Dublin City Council (DCC). Its job is to generate and prototype new solutions by engaging municipal staff and citizens using design-thinking tools. The team consists of designers, planners, librarians, architects, among others. They invite municipal staff from multiple levels in the joint pursuit of new ideas and prototypes for old problems.
A key achievement of The Studio was the launch of Dublinked – the city´s open data initiative (focused on nurturing new IT and digital innovation opportunities in the city). The Studio played a crucial role to open up municipal data sets (the raw material for the initiative), coming from different municipal departments. The Studio team managed to convince them to participate. Not an easy job: municipal departments tend to be reluctant to share “their” data sets with others. So how did they achieve this ?
The Studio was also key to link up the City Council with communities of innovators working with open data, such as companies, universities and users. Last but not least, the Studio facilitated the day-to-day connection between DCC and other municipalities in Greater Dublin region, who teamed up to form Dublinked as metropolitan initiative and release a higher (and more relevant) number of datasets from the early beginning.
The digital economy is not just creating new types of businesses and jobs: perhaps even more importantly, it is transforming (and sometimes disrupting) existing industries. From the consumer perspective, new technology is changing the way people shop (e.g. online shops), book accommodation (online platforms like Booking.com; accommodation sharing via AirBnB); use cars (Snappcar) or fund projects (Kickstarter). Online business models have fundamentally altered –and still are altering- the music industry, advertising, banking. To quote a recent study by Niesr , “the reality is that the digital economy has spread into every sector, from architecture firms whose activities have become almost entirely digital to machine tool manufacturers who now use huge online data-processing facilities to monitor every aspect of their processes”.
The digital economy is a source of innovation, but also poses challenges to a lot of traditional companies in cities. Early victims were video rental firms and travel agencies, outcompeted by on-line business models; online banking replaced the bank offices around the corner. More recently, hotels and taxi businesses feel the heat of brand new peer-to-peer platforms. Major changes are underway in the retail business – a very important and visible segment of any urban economy. Online sales are showing double-digit growth figures, even in times of recession (in 2013, online retailing in Europe grew by a weighted average of 21%1), with deep impacts for shopping streets and malls in every city in Europe: demand for “traditional” retail space will decrease in many retail segments, while new online or “bricks and mortar” models (combining physical and web presence) emerge. A key question in our workstream is how European cities (their citizens, companies, leaders) can prepare for more disruption? How to ensure that all citizens –not just the young and tech-savvy ones- are included in the digital society? How to harness retailers or traditional SMEs that are threatened by new online businesses?
Steps towards an urban digital economy
A number of options are open for European cities to promote the urban digital economy:
• Provide particular types of infrastructure (wifi in public places, incubators, experimentation spaces); ultrafast broadband is particularly important for the development of some IT-digital businesses, but is hardly provided by the market
• Encourage ICT firms to engage with local schools or disadvantaged communities
• Promote new combinations of digital technology and other urban sectors (arts & culture, health care, tourism, sports, etc)
• Help traditional companies (especially SMEs) to adopt digital technologies, or let them help each other by facilitating peer-learning networks
• Set up training schemes to equip citizens with digital skills
Promoting the urban digital economy is a multi-faceted challenge, and requires new urban management competences and organisations. Leading cities in Europe are experimenting with new ways of working and have set up unconventional organisations that are better able to do the job. Manchester (UK), a reference city in this field, created the “Manchester Digital Development Agency”, a publicly owned organisation that develops a number of projects with a wide range of partners. One of its key aims is to put in place super-fast broadband across Manchester. In Zaragoza (Spain), the city set up the “Digital Mile” as a dedicated project organisation within the municipality. The project stimulates all sorts of initiatives that incorporate digital media into everyday aspects of the public realm: public spaces that “respond” to their users, and provide stories, information and services. The Digital Mile should improve quality of life for citizens and visitors, and bring better services, but also offers an open access platform where IT firms, architects, artists, researchers and planners develop and test innovative concepts. In Dublin, a very successful open data initiative is delivered by a new type of platform organisation named “The Studio” (see box).
Conclusions and outlook
Cities are facing constant economic change, whether they like it or not. Clearly, the cities’ economic prospering is contingent upon many factors beyond the control of urban managers, and thus their ability to “create” growth and jobs is very limited. What, then, is the scope for cities to pro-actively capture emerging growth opportunities, and mitigate the disruptive effects that change brings as well? What options are available?
What have we learned so far?
First, effective stakeholder engagement becomes ever more important. Cities can only capture growth opportunities if coalitions of relevant actors (universities, firms, citizens, NGOs) are involved in policy design and implementation.
Second, cities must learn how to connect and integrate different policy areas. They need new types of organisations/platforms that help to promote innovation and to rapidly assemble active coalitions. Examples are platforms such as Smart City Amsterdam, Mila Digital in Zaragoza, or Manchester’s Digital development agency, where stakeholders unite to build the local green or digital economy. Citizen involvement becomes increasingly relevant in the economic realm: citizens are not only “passive” consumers, end-users, or policy receivers; they are also producers (for examples as member of a local energy co-operative).
Third, new types of leadership are needed. If exploiting new growth opportunities is done in coalitions, key leading persons in the city (the mayor, or president of an important local organization, university or company) must be ready for that: they should be able to mobilize resources, to gather people behind a joint vision or strategy. Good city leaders are able to share power and engage in coalitions with others.
Finally, effectively fostering the urban economy is not a just matter of following good examples and practices. if only it would be that simple. Each city is unique and must carve out its own growth path, building on its local assets and strengths, merging tradition and innovation.