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Why we need business model innovation in cities

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Innovate UK started its work on Urban Living around 5 years ago. We spoke to a lot of cities in the UK and abroad and asked them what success looked like.  They all said pretty much the same thing:

  • sustainable economic growth
  • a good quality of life for citizens and workers
  • delivering both those things whilst reducing environmental impact and increasing resilience

Well, who wouldn’t? And they also said they couldn’t deliver those things if the continued to work in the same siloed way they always had.

A man sitting cross legged in a cardboard box outdoors in a park with his laptop.

Cutting through the silos

The realities of climate change, ageing populations, obesity, air pollution, long term unemployment and more aren’t addressed easily, and certainly not through silos. And of course some of those silos are separate organisations, which makes it even harder.  We:

  • set up an urban innovation programme to stimulate and support new, more holistic approaches to running cities
  • ran the Future Cities Demonstrator programme to help councils learn what could be achieved through working in a more integrated way
  • set up the Future Cities Catapult to be a global centre of expertise in what we’re now calling Advanced Urban Services
  • ran several competitions to develop commercial solutions to complex urban challenges based on working across silos

So we’ve done a lot and there’s a lot to show. And yet, we’re a long way from having revolutionised how cities are run. There are significant stumbling blocks we need to break through.

Challenge #1 - lack of an obvious owner

If a company develops a service which, for example, cuts across health and adult social services, or builds a systematic solution to air quality, there isn’t always an obvious customer as the ownership of the problem is distributed.

Challenge #2 - lack of formal mechanisms

Many local authorities don’t have formal mechanisms for engaging with the SMEs which are developing innovative new solutions (such as those funded by Innovate UK) or seeking out innovations. Incidentally, Innovate UK offers one, the SBRI, but very few local authorities have used it. And the recent LGA report on innovation in Local Government procurement notes there’s greater licence to innovate than anyone is currently taking advantage of. That said, I do recognise there is more innovation happening in Local Authorities than most people realise. But, as yet, no revolution.

Challenge #3 -  Public sector procurement

My own experience of this from both public and private sectors is that it feels more like a defence mechanism rather than an engagement tool. After the fallout from Carillion, and the multitude of problems generated by some PFIs/PPPs, (Public Finance Initiatives/Pubic Private Partnerships) people working in local authorities will understandably be wary of business model innovation. They shouldn’t be, PPPs and outsourcing come from the old paradigm where the dominant belief is that if you break things down into small enough tasks and then focus relentlessly on delivering them as efficiently as possible, all will be well.

In cities, a new paradigm is emerging, one based on an acknowledgement of complex systems – that things are inter-related and interdependent. That demands new types of solutions and new approaches to adopting them.

If you think of a business model as how you organise to deliver value, collaborative approaches to solving distributed problems require new thinking, and new relationships, to generate value for all concerned.

Artist impression of a future green city scape with green travel, windfarms and an airplane.

Breakthrough cities workshop

That doesn’t happen spontaneously and even the carrot of an Innovate UK grant isn’t necessarily enough. So we invited Volans to work with us to extend to the challenges of cities, the work they’ve been doing for the UN Global Compact on Breakthrough Business Models for Sustainability.

We ran three workshops with them, in Nottingham, Newcastle and London, at which we brought stakeholders together to work respectively on the challenges of air quality, ageing urban populations and sustainability in the built environment.   Someone at the Newcastle workshop said...

You can’t beat getting people into a room together and just talking.

And there was certainly evidence of the value of that.  Three workshops, much research, and many conversations have resulted in a Guide to Action published on 14th May.

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Follow Niraj Saraf on Twitter @NirajKSaraf 


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