Connected Cities: Your 256 billion Euro dividend

How innovation in services and mobility contributes to the sustainability of our cities A handbook
Aida Esteban Millat Sascha Haselmayer Jakob H Rasmussen

Your EUR 256 billion dividend © 2010 Sascha Haselmayer and Jakob H. Rasmussen ISBN 978-1-907342-02-8 British Library Cataloguing-in-Publication Data. A catalogue record for this book is available from the British Library. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior consent of the publishers. Published by: Design London Royal College of Art Kensington Gore London SW7 2EU +44 (0)20 7590 4444 info@designlondon.net www.designlondon.net Design: Design by Structure Ltd www.designbystructure.com

Connected Cities: Your 256 billion Euro dividend
How innovation in services and mobility contributes to the sustainability of our cities A handbook
1

Acknowledgements
This book is the result of a collaborative project between Living Labs Global and Living Labs Øresund. Strong support was provided by members of Living Labs Global, a non-profit association promoting service innovation in cities; those involved in Living Labs Øresund; and Vinnova, the Swedish Innovation Agency. Design London provided valuable resources to make this book a reality. Without the generosity of the more than 20 collaborators involved, this book would not have become such a rich resource of expertise and experience. Each chapter provides detailed acknowledgment to these experts, public leaders and entrepreneurs.

2

Table of contents
Preface

chapter 1 introduction
Mobility, mobile technology and service innovation

6 12 18 38 76 106

chapter 2 THE MARKET
Some perspectives on the market for mobility

chapter 3 THE ACTORS
Motivating the eight Actors that make or break innovation in mobility

chapter 4 SCALABILITY
What happens when you have created a new service innovation?

chapter 5 BUSINESS MODELS
The business of service innovation in cities: Roaming, Kilobytes or value-creation?

chapter 6 METHODOLOGY
Methodologies for urban service innovation

3

Preface
The imperative for innovation The battleground of international competitiveness in the 21st century is innovation and cities are increasingly viewed as the hubs of innovation, interconnected and enriching not only their surrounding regions, but nations too. More than half the world’s population is now urbanised, with existing cities growing rapidly and entirely new ones being constructed to meet their growing needs. They are being transformed not only by population growth but also by the progression towards a knowledge-based, service-led, and globally networked economy. The City: A System of Systems The paradigm shift that began towards the end of the 20th century is on a similar scale to that of the industrial revolution which created the great conurbations of the 19th century. From the City of London to Chennai, Stockholm to Shanghai, cities are growing, transforming and repositioning themselves as players on a global stage. Cities must respond to the demands of the knowledgebased economy, while facing the societal and environmental challenges that threaten their own long term sustainability. To be sustainable in the 21st Century, a city must not only embrace environmental challenges, it must also address systemic economic and societal issues. An ecocity without entrepreneurship will not maintain its economic vitality, while one that fails to engage all of society as stakeholders in its transformation, will face the consequences of social exclusion. The eco-system for sustainability involves entrepreneurship as much as environmental engineering, the development of social capital as much as the delivery of public services. And a Well Connected City is one where its citizens feel connected to their communities, the city’s institutions, and to its firms at a societal,

political and economic level, while the city itself is networked with other cities. This demands a radical change not only in the nature and quality of public programmes and services that meet all of its citizens’ needs, but also in the urban and technological infrastructure that enables that connectivity. Cities once developed at the intersections of trade routes or where geography favoured production and distribution of physical goods. These advantages were subsequently reinforced through economies of scale, and the development of a sophisticated communications infrastructure, especially road, rail and air links. But in today’s economy, where digital communication networks can sometimes seem more important than road and rail networks, cities have emerged as the command and control centres of international business, with the digital infrastructure they provide having a major influence on their capacity to attract investment and international companies, as well as creating an attractive environment in which to do business. Mobility is a key attribute of the knowledge-based economy. We are mobile, untethered from a fixed workplace, accessing information on the move, making connections that are at once physical, intellectual, and interpersonal, both at work and at play. We deliver services to others and expect to be served anywhere, anytime. Thus, a city, to be competitive, needs to host the infrastructure that enables this mobility as well as deliver its own services in this context – services that promote societal, environmental and economic sustainability. This handbook explains how cities, both large and small, are exploiting digital technologies to deliver innovative services and enable mobility. The individual case studies show that, through collaboration and knowledge, cities could generate not only a EUR 256 billion dividend but a priceless return in terms of sustainability as well.

4

A Partnership for Innovation Living Labs Global have partnered with Design London and the Ecocit Project at Imperial College London to bring you this handbook and share best practice between cities, service providers, strategists and practitioners. Design London is a new centre for interdisciplinary innovation, created by the Royal College of Art and Imperial College in response to the UK Treasury’s Cox Review: Creativity in Business. It stirs together technological innovation, creative design and business expertise from its two parent organisations and pioneers new models for designled innovation that contribute at a societal and environmental level. The Ecocit Project is a collaboration between industry and academia, led by Imperial College London, and funded by the EPSRC. Its interdisciplinary research agenda addresses the design of sustainable cities, bringing together environmental engineers, urban designers, economists and social scientists in the quest for knowledge that can inform the development of urban systems for the 21st century. Nick Leon Director, Design London

5

chapter 1 introduction

time for a break through

6

Chapter 1

Mobility, mobile technology and service innovation
When Dirk Tangemann, a strategist at a major bank, found himself stuck in traffic again on his way to work, it occurred to him all the cars around him, including his own, had only one passenger. Not only did this make no financial sense, it also caused the traffic jam he found himself in every morning, at a cost of 300 hours per year of his life. And this is where he had the idea to help people share cars; not by setting up a cumbersome web-portal, but a peer-to-peer mobile service with car-sharers earning money by sharing. Three years later in 2009, together with his team, he showcased his first iCarYou prototype at the Living Labs Global Summit in Hamburg, with a launch plan and 94% customer approval (according to market research) in his pocket. What happens next? If past experience is anything to go by, an advanced mobility solution like iCarYou will most likely get piloted in a city, and then never reach a major market beyond its initial deployment. Yet, some would argue that times are different now. For one, users have a different awareness and more intuitive devices to work with. But more importantly, iCarYou has a business model that not only works for iCarYou, but all other actors in its network to deliver the solution. Users save and even earn money, cities reduce carbon emissions, operators bill for data-usage, and iCarYou manages the transactions against a small fee. In short, iCarYou was invented as a business and service proposition, rather than a technology. What is Mobility? A paradigm shift. When, in October 2001, NTT DoCoMo launched the first commercial 3G mobile network,1 citizens around the world were promised a mobile broadband revolution. Prototype devices did not just offer mobile internet, but promised to change
1 UMTS World

our lives. According to experts, 3G roll out has cost the equivalent of 60 Channel tunnels (or EUR 300bn) this decade alone 2, making it the single biggest investment in technology by mankind. Today, we look back to the question “Have mobile services changed our lives?” and the answer is no, by most measures. A traveller arriving at Paris airport today is still more likely to be greeted by an SMS welcoming him to Orange, than lured into the city’s many facets. The elderly are still more likely to be kept in a care home than receive remote assistance in the home of their choice, despite savings of EUR 10.000 a year per patient. Whilst mobile phones succeeded in delivering voice and SMS, mobility, (the delivery of masscustomized digital services in communities), has proven to be an elusive challenge. In our definition mobility is not the latest ring-tone or twitter client. Mobility solutions are value added services, or solutions, that cannot be delivered by any individual provider. Mobility represents a paradigm shift, in which the user holds the power of choice and determines the value of any given service to their needs. In short, mobility solutions are measured by their impact on daily life or business in our communities. Mobility: the service innovation challenge. Service innovation is an emerging practice, and is widely accepted today as a high-technology and scientific field as well as a rapid-growth industry. Nothing embodies the opportunities and challenges in this field as strongly as the concept of mobility, where users are moving targets in changing environments. Mobility solutions add high value if they can meet the ever changing conditions of users, emancipated by high penetration rates of handsets and other devices. Such solutions tend to rely on a group of actors in a value-network that is able to adapt services to changing contexts, rather than the static valuechains and traditionally simplistic business models of the telecommunications industry.
2 TomiAhonen Consulting 2009, based on UMTS Forum, ITU and GSM Association numbers

7

Introduction

“WHERE ARE THE MOBILE SERVICES THAT CAN CHANGE OUR DAILY LIVES?” VERIFIED DEMAND WILL FOCUS OUR ATTENTION AND SECURE INVESTMENTS
Service innovation implies that new ideas reach a market. As this handbook will show, the market is no longer a geographic spread, but a network of city-regions able to adopt innovative services. Most crucially, the past decade has shown that traditional forms of market research have served little to assure success for entrepreneurs and investors in mobility. Instead, external conditions (such as regulatory, operator, administration, user and infrastructural perspectives) were often left disregarded rather than managed as an integral resource to achieve a common goal. Clearly proven demand may therefore be the most important catalyst for partnerships, alliances and other types of value-networks. Demand focuses attention and secures investments. However, demand also needs to be scalable across communities, as individual cities cannot offer a market for technologies deep enough to justify major investments in innovations. Hence, it is not only the providers that need to open-up and collaborate, but it is the customers and regulators also – to make it all worth-while.

A handbook based on experience and frustration. Scalability, or better the absence of it, is the dirty little secret of the market for mobility. Markets for services are neither open nor transparent, usually suffering from national regulation, protectionism and lack of transparency. The market for digital services in cities suffers in much the same way, only here it is not national markets but municipal borders where services are continually re-invented. Innovators do not reap the benefits: roaming-free tourism services have not been exported from Stockholm; nor have mobile parking solutions found open markets outside Estonia. This handbook tells the story of immense opportunity, markets valued at billions of Euros annually, customers demanding more services, and an absence of dominant players. Living Labs Global have several business and public leaders at the forefront to share their experiences, their insights, the evolution of their technologies and business models over time. The learning provided by these experiences is rationalised into a set of guiding principles and methodologies for practitioners of service innovation in cities. Collectively, this handbook represents the work of Living Labs Global, a non-profit association of companies, research institutes and cities with a common mission to provide a better environment for service innovation in metropolitan areas. Living Labs Global seeks to create a market for mobility, in which service innovations meet clearly articulated demand.

8

Chapter 1

A time for break-throughs. Since 2001, after more than 8 years, the mobility industry may have reached a turning point. Convergence of technologies, accessibility and penetration of devices, combined with consolidation in the less complex segments of the market have created a favourable constellation for a break-through. The wider adoption of mobility solutions still hinges on our ability to better align visions, measures and methods across many sectors. However, new actors are now entering the market, replacing earlier generations of telecommunications experts and engineers with a broader range of backgrounds, service and business concepts. Ice-breakers are needed to show the viability and value of mobility solutions, and prove that solutions can be scaled across regions. But unlike Mobile 2.0 or other high-growth technology fields, the markets for service innovation in cities is more challenging. Too many actors are involved to replicate solutions across communities, and parts of the value-network have to be recreated each time. Yet the skill of managing a network of actors and bringing a solution to the customer may emerge as the core competence in a market that has been neglected due to its complexity.

Welcome to the Market for Mobility.

9

Introduction

Entering the market for mobility The concept
Your idea for innovation in mobility.

motivating the actors
Key people you need on board to move forward.

the pilot
Testing the impact of your solution in one area.

10

Chapter 1

Early market
Deploy your tested idea in markets that are open and share your goals.

Roll-out
International roll-out into other markets – but adapting to each.

11

chapter 2 THE MARKET

THE EUR 256 BILLION DIVIDEND ON MOBILITY

12

Chapter 2

Some perspectives on the market for mobility
Mobile cellular network subscription numbers are a good indicator for the market for mobility, and their number is rising rapidly. In 2000 there were a little over 10 mobile subscriptions per 100 inhabitants worldwide, and today the number is just over 61.1 Depending on how we measure the market for mobile communications, the global annual market for voice and data traffic can be estimated to be worth EUR 444bn.2 On top of that are the purchases of services, content and costs of transactions, which might add considerable additional revenue to the calculation. However, there are still significant differences in adoption, access, pricing and conditions on the global markets for mobility to the extent that no homogenous global market for mobility exists. This is despite efforts to introduce more

competition, reduce prices, and increase interoperability of services and standards by governments around the world. OECD countries have, over recent decades, seen an ever-increasing entry of new operators in the market following the deregulations of national monopolies through the 1980’s and 1990’s. This has lead to increased competition among operators, with a growing portion of revenue harvested by new entrants, and the former national monopolies pushed into finding new markets to maintain their revenue streams. However, after an exponential growth in mobile revenue through the 1990’s, returns on voice and data traffic in the OECD countries are stagnating, implying that the markets in the developed world are becoming increasingly saturated with mobile communication. Today, the highest growth in subscriptions comes from the developing world, already accounting

Marketshare of new entrants i

Percent share of mobile revenue out of total operator revenue ii

100%

50%

0% 1984 Germany Japan Turkey United Kingdom United States

1995

2005

0% 1984

1995

2005

1 ITU, Measuring the Information Society, 2009 2 National price baskets x mobile subscriptions per inhabitant x national population for 6bn of the world’s population add up to this number in 2007 figures.

i Source: OECD ii  Source: OECD, Indicators of regulation in energy, transport and communications, 2008

13

The Market

for over 65% of mobile subscriptions worldwide. China today has over 500M mobile cellular subscribers, and is currently adding between 50 and 70M subscribers every year, while India has more than 150M mobile cellular subscribers, and is experiencing exponential growth.3 Pakistan and Bangladesh enjoy more than 100% growth.4 As a consequence, new major markets for mobile communications are emerging and countries such as China, Nigeria and Russia are entering the top 10 telecom markets measured on parameters such as size, revenue and number of subscribers. Mobile communications are thus an expanding global market, but compared with the Internet for example, they operate under very different competitive conditions. As a result, the market for mobile communications cannot be defined as a ‘free’ market as such. What constitutes a market. Two main schools of thought have emerged as to what constitutes a market. According to the first school, ‘free’ markets emerge on the basis of needs and the introduction of products and services that match those needs. Adam Smith presented the notion of the ‘invisible hand’, Schumpeter the thought of ‘creative destruction’, and Nicholas Hayek the economic rationale of free market thinking. ‘Institutional’ markets, defined by political decree, are the core notion of the second school of thought. The presence of institutions can create adverse effects, such as local protectionism, notinvented-here syndrome, or the shying away from economic synergies in globalised markets. Still, it is recognised that there can be benefits of public action to ensure that the economic framework conditions remain beneficial to economic growth and societal development. In Milton Friedman’s notion of externalities, such as air and water, resources available to production at little or no cost, can have a significant impact on a society. Acid rain was a result of abuse
3 PA Consulting Group, 2009 4 w ww.budde.com.au/Research/2008-Asia-Mobile-CommunicationStatistics-tables-only.html

of such externalities, as were polluted rivers and lakes. This notion of externalities having a broader impact can also be extended to utilities including telecommunications. Increasingly, enabling technologies – that is, technologies that in themselves enable enhanced productivity and infrastructures for other industries to prosper – are seen as resources that carry with them such significant advantages that widespread and low-cost access are paramount to overall economic growth. How markets for telecommunications are challenged by mobility. Telephone networks can be seen as such enabling technologies, justifying major infrastructure investments by their effect on societies and economies as a whole. As a result, most of today’s telecom operators in OECD countries started as national monopolies, and many developing countries still base the development of their telecommunications infrastructure on the traditional or de-facto monopolies. Cases in this book Productivity Gain Cashless Digital Tourism Visually Impaired Public Health Efficiency Mobile Parking iDoc24 - Efficiency Gains Tele Dermatology Agile Wifi Roll-out Stockholm Total Annual Dividend 58,000,000,000 2,000,000,000 33,450,000,000 57,000,000 6,000,000,000 94,000,000,000 63,000,000,000 9,000,000 256,516,000,000

14

Chapter 2

MAKING LOCAL GOVERNMENTS IN DEVELOPED COUNTRIES JUST 1.5% MORE EFFICIENT WOULD FREE ENOUGH RESOURCES TO SOLVE THE WORLD’S BASIC PROBLEMS
Today, a number of changes are taking place in the mobile industry: 1.  Operators are increasingly facing domestic competition in almost saturated markets and are seeking to expand into the developing markets, introducing new technologies and new services. 2.  Emerging markets, such as Asia, are adopting technologies such as mobile payment services at a much higher rate than the developed world. Potentially, this is shifting the frontline of mobile innovation to emerging economies in Asia.

3. S  ome countries, notably in Africa, are making use of simplified versions of existing hardware and services. New services are emerging in areas such as banking, trade, and money transfer that are lean and more accessible than advanced services promoted in developed markets. This is making emerging markets less dependent on the traditional players. 4. N  ew actors are entering the stage with access to major domestic markets and significant national backing – such as China’s Huawei. This is changing traditional industrial supply chains, and is challenging existing players and standards. With the uptake, where are the productivity gains? Studies have shown that the Internet has made the US economy approximately 4.5 % more productive since 1996. As the table below indicates, there are more than twice as many mobile phone subscribers than internet users worldwide. Why then, are we not seeing the same kind of service and productivity revolution with mobile technology as we saw with the Internet?

Internet users versus mobile subscribers – worldwide iii

28

5

38

14

72

43

79

44

111

53

Africa

Asia Americas Europe Oceania

61

21

Internet users per 100 people Mobile subscribers per 100 people

World

iii  ITU, Measuring the Information Society, 2009

15

The Market

Let us put productivity gains into perspective. According to a United Nations estimate, all the world’s basic problems such as clean drinking water, sanitation, basic health care, and basic education, could be solved at a cost of EUR 55bn a year. Local governments in the EU alone consume 11.5% of European GDP or EUR 12,890bn. A simple calculation concludes that making local governments in the world’s major economies just 1.5% more efficient would free enough resources to solve many of the world’s basic problems. How then, do we make the world’s local governments 1.5% more efficient? Comparing the mobile phone to the PC, significant differences exist in both uptake and the sophistication of services. With only 21% broadband penetration worldwide, PCs are equipped with advanced software, allowing ordinary citizens to do online trading, banking, and run online companies – just to name a few common services. With 61% mobile phone penetration worldwide, and many countries enjoying more than 100% penetration, few advanced services beyond voice and SMS enjoy significant uptake or have considerable economic impact. With mobile phones being the most pervasive and possibly also the most democratic of all technologies, the network effects should theoretically be considerable. Haves and have-nots: Technology vs. transparency and openness. The fundamental question of the global citizen should be: if our neighbours can, why can’t we? The State of Geneva, Switzerland, has managed to implement electronic voting systems5 and so has Brazil. Two countries with very different profiles, but solving similar challenges with similar technologies. The cost savings and efficiency gains of such solutions are significant. Why are these organisational and technological achievements not adopted or advanced further in other parts of the world? There is no simple answer, but a string of related questions:
5 w ww.geneve.ch/evoting/english/presentation_projet.asp

Where are the personal electronic health care records that you can take on your holidays to remote places? Why can’t you buy a coke with your mobile phone in Frankfurt, when your operator is in Paris? Why can’t you pay your parking with the same SIM card that you used to call the local car rental company? There are no technological barriers to answer these questions. Markets tend to be national and regional by nature (and regulations), especially in services. Citizens’ needs, technological infrastructures, and other key features are nearly identical across global regions or are converging around the same standards or features. A firm developing a mobile diagnostics service tries to meet a niche demand, targeting the same user needs across national borders. These so-called “micro-markets” are often too small in any one country to sustain investment, innovation and growth. Yet, the real growth potential lies in combining such micro-markets. Very large markets can emerge on the back of aggregating international niche demand. The e-Me 6 project concluded that students in Sweden are willing to pay up to 1 EUR a week for mobile services such as getting an SMS when classes are cancelled. However, the local market of 120,000 students in Stockholm might not be sufficient to support the long-term sustainability of a company. But, targeting the micro-markets of students across national, pan-regional, and international markets combine into a EUR 680M market in Europe alone,7 from which students that share similar needs in the rest of the world can be targeted. Efficiencies in providing such services over the Internet have shown how relatively easy it is to scale such services across borders. Indeed, this has been the business model for many niche companies and for companies specialising in ‘mass-micro’ strategies, making products for micro-markets available over a large area. But entering national markets in mobile communications is not so straight-forward,
6 w ww.e-me.se 7 With 17M students in Europe, and 40 weeks of active studies every year; 17M x EUR 1 x 40 = EUR 680M annual market potential at 100% penetration.

16

Chapter 2

with pricing and purchasing structures making it difficult to communicate with end-users. Many of the basic challenges have been addressed by the Internet, with the emergence of services such as VeriSign, PayPal, and the automation of estimating transport costs by DHL, FedEx and TNT. However, today no global payment system exists for mobile applications, roaming charges are considerable and nontransparent, and high-speed access is not uniform. Mobility, as pointed out in Chapter 1, provides

further challenges to this scalability in requiring more context-awareness and mass-customisation of services that can only be delivered through partners and local market players. This, and other barriers still make it difficult to approach the markets for mobility.

Mobility services market (weekly) for students iv

EUR 1.00
SMS The concept

EUR 120,000
Stockholm The pilot

EUR 720,000
Stockholm, Hamburg, Barcelona The early market

EUR 13.1M
Europewide The roll-out

EUR 682M
Annually iv Source: Living Labs

17

chapter 3 THE ACTORS

PROBABLY THE OTHERS ARE NOT ENTHUSIASTS

18

Chapter 3

MOTIVATING THE EIGHT ACTORS THAT MAKE OR BREAK INNOVATION IN MOBILITY
As the previous chapters have shown, the opportunities in mobility and urban service innovation are untapped partly because of the complex line-up of stakeholders or actors needed to achieve results. Whilst some particularly smart or disruptive technologies or services have managed to challenge the status-quo, most advanced mobility services will require some sort of collaboration with other organisations. Management theory provides a range of methodologies and instruments to map and manage stakeholder communities.1 For the purpose of this chapter, we will broadly draw upon the main categorisation of actors according to their interest and influence, determining their motivation to support service innovations and contributions to the process. Put simply, three levels of engagement can be expected from these actors: • Enthusiasm: full and active support to achieve results quickly and motivate others. • Acceptance: recognition of value, but passive endorsement and little acceleration. • Obstruction: active or passive denial of progress or implementation. Naturally, a great number of variants to these simple categories can be found and may become particularly relevant when dealing with organisational change. For the purpose of this handbook we assume that the first step to success in implementing a service innovation is to convince and motivate a smaller circle of initial sponsors to take action.

Unlike corporate bodies, the actors involved in urban service innovation are not only driven by profit in a commercial sense, but by the social, cultural and environmental contributions of their application. Since service innovations require organisational change and some degree of risk taking, we cannot assume that actors are by default enthusiastic. A city councillor, for example, may seek greater efficiency through cost savings prior to election, but may also be weary of awarding outsiders privileges in the local economy. As a result, service and business models should take into account the different interests brought to the table and identify those core actors likely to have the motivation and influence to advance a project. iDoc24,2 a mobile service offering anyone a visual medical diagnosis within 24 hours, is working with a number of external actors to deliver its services targeting citizens and tourists anywhere in the world. The solution adds value to the healthcare system as it reduces costly visits to the doctor. Insurers may find the service an attractive and low-cost addition to their portfolio of services. iDoc24 is also attractive to mobile phone operators who gain revenue from billing services and data usage, as do application resellers like Apple’s App Store who receive a commission on selling the software or service. Clinics benefit from extra revenue by providing diagnoses based on images. Users benefit from confidential and anonymous responses to their enquiries, saving them a trip to the doctor. iDoc24 captures all these interests in a flexible business model adapting to different user conditions. As a Swede, you may receive the service for free as part of your national health coverage, whilst as a visitor to Sweden you may need to pay. At the core, the company always provides the same valuable solution, yet handles different regulatory and business cases that can help promote the service to users.

1 See for example Mitchell; Agle; Wood: Toward a theory of stakeholder identification and salience: defining the principle of who and what really counts. Academy of Management Review, 1997

2 w ww.livinglabs-global.com/mwatch/showcase/206/doctor-in-themobile-phone.aspx

19

The Actors

The Eight Actors
Eight Actors will be introduced as characters with varying interests and influence in implementing urban service innovations. Their profiles are assembled from common characteristics of real stakeholders in a variety of service innovation projects and are intended as an introduction, or reminder, of the different motivations that may turn an Actor into an influential enthusiast.

The Entrepreneur

The Service Professional

The City Councillor

The Investor

20

Chapter 3

The Operator

The User

The Researcher

The Consultant

21

The Actors

The Entrepreneur
Interest: Ultimately, entrepreneurship is about self-realisation. The entrepreneur brings a high degree of flexibility to the table, an ability to close deals quickly and bring ideas to the market while taking a dominant position in the marketplace. Time is critical and often the push for an exclusive deal shows little sensitivity to other, more institutional actors involved that may not be able to commit as quickly. The entrepreneur prefers to act within days or weeks, and is likely to push several comparable projects at the same time, until commitments are made. Quite often the entrepreneur comes with an appetite to rattle the cage and challenge complacent incumbents if they stall progress. Interest can be lost rapidly, or a trust relationship undermined, if progress is not made. Especially across communities, the investment of an entrepreneur to pursue project opportunities may rapidly turn into disappointment if progress looks unlikely. Influence: As the holder of a technology, expert knowledge or specific content the entrepreneur can bring a high degree of energy to projects, combined with a dedicated team. Prior experience may transfer valuable knowledge between markets, and the willingness to take risks is an important resource in the early stages and in experimenting with new business models.

22

Chapter 3

The Entrepreneur What is this person’s interest and influence?

23

The Actors

The Service Professional
Interest: Equipped with a high level of expertise in the subject and processes of the service in question, the service professional is often the most critical and informed actor. Many other actors will listen to their expert opinion and a solution created or put forward by such a specialist usually finds high recognition and a more rapid implementation. The service professional often likes to participate in interesting projects, but may be risk averse given that the career path is directly associated with the project. Motivating factors for the service professional tend to be additional funding and responsibilities, the attraction of becoming part of a success story, collaboration with interesting experts and a clear focus on achievable results. Generally, efficiency gains are a key measure for a service professional, although cost reductions may also reduce available budgets. The service professional is often a career professional within an organisation, and understanding the organisation’s measure of success and objectives will help you understand the individual’s criteria for decisions. Nowadays, organisations value networking with leading peer organisations and experts in the field, with the goal of benchmarking and exchanging innovations. Influence: Normally the remit of the service professional ends in the area of responsibility and direct impact within the organisation. However, the professional dedication to the subject gives extra weight to opinions and many projects have come to a halt if the service professional is not convinced. Furthermore, the service professional is likely to have direct budgetary responsibility or a role in planning future allocations and will be able to present a strong case to most other actors. The service professional is also an important source of intelligence, if interested, and can help build a precise technical picture of processes, decision-structures, and timescales for implementation or adoption.

24

Chapter 3

The Service Professional What is this person’s interest and influence?

25

The Actors

The City Councillor
Interest: Political leaders may follow a variety of goals in promoting a service innovation in their city. For one, they may be driven by administrative pressures to reduce costs and create efficiencies. Measures to improve services and cut costs are highly valued, particularly in times of economic crises. At the same time, efficiencies may mean making the administration leaner (i.e. cutting jobs), which very few political leaders actively promote and implement. The city councillor is likely to follow both an administrative and political agenda and seek a public profile through a high profile innovation or prestige project, in which case election cycles tend to be an important external factor. Common themes for the progressive city councillor are: transforming the city towards a knowledge society, addressing climate change, promoting innovation and innovative businesses and improving services. At the same time, the city councillor recognises the effects of globalisation and growing competition to attract entrepreneurs, talent, business investments and technology to their community. This has the important effect of opening up local opportunities to outsiders, especially if local partners can be seen to gain value also. The city councillor may be highly risk averse to technological or service innovation goals, especially if barriers are found that could expose the decision as being damaging. Risks are usually taken in times of crisis, when conventional finetuning measures are not sufficient. Influence: Political leaders can give tremendous legitimacy to projects, and act as an accelerator to put ideas into action. The ability to directly influence decisions varies greatly according to regional remits of local politicians, which can be extensive in southern Europe while very limited in Scandinavia, for example. Furthermore, political backing can backfire if election outcomes change the composition of councils. As a rule of thumb, very few incoming political leaders will endorse projects promoted in previous administrations. In complex services, political leadership can help maintain a project on the agenda and accelerate complex deliberations in city councils or other forums that determine adoption. Top level city councillors are further able to trigger crossdepartmental initiatives that do not fit existing funding lines, policies or organisational structures. Beyond administrative influence, city councillors can raise public awareness, inspire citizens and mobilise media coverage. This skill and resource can put a new idea onto the map, generate outside interest and excitement.

26

Chapter 3

The City Councillor What is this person’s interest and influence?

27

The Actors

The Investor
Interest: Financial resources can make the development of new technologies and service models viable and help accelerate the overall innovation process. Yet the investor will be well aware of other opportunities and ventures in complex service innovations in particular may prove too risky. Investment in mobility services and solutions has had a mixed record, with few commercial breakthroughs living up to expectations. Real return on investment has often been made with entertainment or hardware offerings. But mobility offers important and undeniable market opportunities, which is why investors remain interested. Generally, the investor will seek either a high-growth venture with a large potential market, or an almost fail-safe but slower growth undertaking. A profitable exit is the measure of success, which is the entry ticket to raise future funds. Public-Private-Partnerships, or solutions that rely on networks of actors aligning interests, are often looked at with great scepticism by the investor, wary of externalities that may not behave as expected. The professional investor’s rigorous financial objective and perspective is often an extreme viewpoint in the overall network of actors. Subsquently the investor’s lack of patience, especially if the market was not fully understood before, may become a major risk in seeing through a slower than expected commercialisation process. Influence: Financial resources are important, so the investor may help to both define the business model with great precision and provide venture financing which allows technologies to be developed and companies to take off. Investors also like to collaborate with other investors, helping to draw in additional funds and expertise. If the investor is a business angel, a lot of personal engagement can be expected that may introduce new contacts, plus know-how on getting innovations into the market.

28

Chapter 3

The Investor What is this person’s interest and influence?

29

The Actors

The Operator
Interest: Larger companies, institutions or agencies that control operational assets such as infrastructures, networks, hospitals or transport are often governed by corporate interests. The operator seeks to maximise commercial use of infrastructures, create efficiencies and achieve growth strategically. Solutions that will reduce overheads and help improve the competitive position will make the operator listen and engage. Furthermore service innovations that support existing business models stand a greater chance of support than disruptive technologies that have too great an organisational impact. The operator generally seeks to strengthen the corporate brand and may participate, fund or enable services for that reason, e.g. by supporting a key customer in a service innovation project. Exclusivity is an important objective to assure scalability across the organisation and to minimise the risk of competitors edging in. Influence: The operator has a broad range of assets to offer, such as finance, access to infrastructures, marketing and customer reach through existing contracts, a strong brand and the ability to scale-up and roll-out across large markets. Furthermore the operator tends to benefit from peer recognition and may mobilise alliance partners – which can be of use to shut out a new, disruptive entrant from the market.

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The Operator What is this person’s interest and influence?

31

The Actors

The User
Interest: As a private individual, the user seeks improvements to make life easier, more convenient, interesting or cheaper. The user is not a professional, and has probably never thought of service innovation in any form. Priorities given to problems that services can solve may change daily, or even various times during the day, depending on the work or private context. Solutions that save time, energy, money and reduce barriers are welcome as long as they are immediate. Lifestyle concerns vary greatly, as society atomises and the user looks for compatible services that match environmental, cultural and other preferences. Health is an overriding theme, where the user navigates an often complex range of services from professional health advice to online discussion groups. Concerns for personal and family health determine many choices, as do concerns for security, privacy and flexibility. The user may fear new technologies while at the same time requesting other digital services and will tend to balance the cost-benefit of any additional deployment by way of a variety of economic and personal criteria. Influence: The user is a critical element with the power to chose where to live and work, which services to elect or reject. Hence, the user is both a voter and a consumer, and may be emancipated by taking unexpected decisions. When a user accepts a service, it may become a critical element in their life, indicating demand and applying pressure on other actors like political leaders or investors. Legitimacy by the user, especially in overwhelming majorities, is an important and undeniable asset. The user may further contribute many ideas for improvement and, as a lead user, a view into the future. Loyalty may follow on discovering that these ideas were considered and pursued. The commercial value of a user may be measured in a variety of ways, such as eyes on advertising, usage of non-commercial services, or paid custom.

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The User What is this person’s interest and influence?

33

The Actors

The Researcher
Interest: Curiosity is the main driver of research, measured in scientific publications in academic contexts, or the advancement of knowledge through applied research and development. The researcher tries to to build a personal profile and gain peer recognition in the field, an important tradable currency. In order to support the personal profile, adding prestige to the institutional profile is a second important objective as this builds trust and desirability as a project partner. Research relies on funding. Securing additional funds through either contracts or scientific research grants will add to the resources available as well as institutional standing. No – strings - attached projects are favoured to further knowledge, but project collaborations may also advance major project ideas. The researcher is increasingly under public scrutiny to assure the transfer of knowledge into industry and support innovation. In addition the new generation of researchers may well have a personal desire to become part of a commercial breakthrough. The researcher operates in an environment rewarding curiosity and exactitude, which can make it difficult to apply the same project management expectations to them as to other actors involved in delivering results within more conventional commercial or hierarchical organisations. Influence: The researcher can contribute leading-edge expertise and the latest scientific knowledge in addition to insights into peer developments. Rigorous application of scientific methodology contributes towards an important foundation for projects, and the transfer of insights can bring a real competitive advantage. Furthermore the researcher may help to secure co-financing through a variety of support programmes as well as facilitate access to laboratories and other infrastructures.

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The Researcher What is this person’s interest and influence?

35

The Actors

The Consultant
Interest: Specialised consultants have emerged to support service design and –innovation, providing at times inter-disciplinary skills to advance projects. The consultant will typically look to apply skills in interesting projects that generate high-profile references and that are wellresourced and therefore profitable. A portfolio of success stories and break-throughs opens the door for even more interesting projects. As an external agent, the consultant may have a vested interest in maintaining motivation among actors and participants in order to lead the project to an outcome and extend participation into future phases. In addition, the consultant may aim to learn and advance methodologies through each project. Influence: The consultant can bring a number of assets and resources to a service innovation project that can range from expertise, experience in similar projects, and the introduction of new methods to a particular skill, such as driving and motivating teams and delivering results. In service innovation projects the consultant is often seen as a reliable resource that would be hard to recruit otherwise, as organisations may not sustain sufficient internal opportunities for service innovators. The consultant may also be willing to share risks early on in return for equity or longer-term contracts at later stages. Moreover, the consultant may maintain relationships to actors in other sectors who can be brought in as collaborators or as customers. Finally, the consultant may stand above internal or other relationships as a rational agent for change.

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The Consultant What is this person’s interest and influence?

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chapter 4 SCALABILITY

WHY DO so many SERVICE INNOVATIONS NOT Succeed?
Contributors Arho Attila Elisabeth Dawidson Heiko Kunert Friederike Linsenhoff Josep Maria Llop Johann Padutsch Erik Pazzi Tilman Sobek Julia Haselmayer

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WHAT HAPPENS WHEN YOU HAVE INVENTED A NEW SERVICE INNOVATION?
Sadly, no matter how unique it is, it is a struggle to conquer the world. This is the lesson the inventors of mobile parking in Tallinn (Estonia) are learning after a flying start in 2000. It was a textbook case of what mobility can do to transform communities. However, the actors (introduced, in the previous chapter) are a hard group to align, and replicating initial success is often a different matter when tackling new markets. Market failures in mobility can be found at two basic levels. Firstly, the existance of fundamental flaws in the organisation of the market, typically dating back to the age of telecommunications. Innovative services and business models remain undermined by rigid market and institutional structures that help to frustrate any progress in delivering high-value mobility services to users. Secondly, urban service innovations tend to be local and are often not designed and accepted as scalable solutions. Commercialising a service innovation from one city or region to the next can pose a major challenge, however much efficiency it brings. This is in part due to the complexity of applying business models that have motivated one local set of actors to another. In this chapter, we will examine four cases which show great potential but where the market has failed to connect supply and demand. 1.  Mobile Parking. One of the killer applications and early success stories which illustrates all that can go right: Satisfied users, efficient cities and benefits to the local economy. But entry into a new market can be costly. Mobile City and Now! Innovations, two pioneering companies in mobile parking, contributed their first-hand experiences and data to this chapter.

2.  Tourism. One of the largest markets for mobility solutions. Users are pressed for information and support while cities are competing for innovative and attractive offerings. As a result a large number of innovative start-ups is lining up to respond to the emerging opportunities. The biggest application killers for this killer application are roaming charges and the irrationality of cost and service structures. 3.  How do you put a value on freedom and independence? This is the fundamental question in most aspects of innovation for the visually impaired and blind. Mobility solutions can have a life-changing impact as well as create efficiencies and commercial opportunities. We will review how new business models can offer value to a range of actors, measurable in economic benefits and objective goals. 4.  P ublic health. Not often discussed in literature about mobility and yet more than 70% of Europeans fear the technology they love. What is a political time-bomb is also a major commercial opportunity to rationalize our use of resources and invent new business and service models for mobility. Our objective, in presenting these cases is to highlight not only the many facets of the market for mobility, but also some common themes. Across cases we see that these markets can be presented from different angles and that often what looks like an unbeatable opportunity may reveal a major barrier from the other side. Markets for mobility are rarely a linear deployment of a good idea, but a shake-up of existing structures that has to coincide with a broader incentive for change. Entrepreneurs, experts and public leaders remind us of their background motivations and experiences in launching service innovations. Contributors were chosen to reveal both the enthusiasm and the challenges that define their roles in the market for mobility.

39

Scalability

THE CASE OF MOBILE PARKING
Arho Anttila writes in his article about mobile parking (see page 44) that “the ease of the [mobile parking] service becoming a winner [in Tallinn, Estonia]… led some to assume mistakenly that the same solutions can be immediately exported”. He is referring to the first commercial implementation of a mobile parking service in Tallinn, in which he participated in the year 2000. The story of mobile parking is one of the great illustrations of how innovative and relevant mobility solutions can be, while at the same time the market for these services is highly challenging. In this section, we will show the great opportunity that exists in the market for mobile parking, the underlying dynamics and value created, and the barriers facing rapid roll-out. We also present the experience and learnings of some of the pioneers in this market over the past decade. What is mobile parking? Since the 1950’s, with the spread of the automobile, parking has become a source of revenue for cities and private operators, and a value added service for hotels, restaurants and retail. Most cities today have commercial parking services to manage congestion and car usage, to generate revenue for public or private operators, and to provide added security or services to cars. As personnel costs rose and security became automated, parking attendants were replaced by systems such as automatic barriers, parking meters or locks. For on-street parking without barriers, payment relied on an upfront calculation of your likely parking time, creating a global culture of managers running out of meetings to drop extra coins in the meter or drivers racking up fines for non-conformity. Parking fines alone are big business, with London councils collecting about EUR 300m1 per year in fines.
1 BBC, 2008

Mobile parking services, by which the on-street parking meter is replaced (or complemented) by a service delivered through the handset, promise to improve parking management significantly for all stakeholders. Services are delivered via SMS and local or free-phone voice transactions. In some systems, the user buys a pre-defined contingent of time (e.g. 15 minutes) and is reminded shortly before time is up to either increase the duration or return to the car. This replaces the run to the car to fill up the meter with sending an SMS. Other systems ask the driver to call a number indicated at the parking slot, and call again on leaving. Parking is billed by the minute, reducing costs to the consumer by cutting unused paid time. Typically a number of actors are involved in delivering mobile parking services in a city, including the municipality, parking operators, commercial centres, and mobile operators. If service offerings are extended to include, for example, local commerce loyalty schemes the circle of actors grows rapidly. What is in mobile parking for these different actors? Cities: • Linking mobile parking to local commerce, such as loyalty schemes, vouchers etc. • Satisfied citizens •  Operators offer a number of additional tools to manage parking, including supervision. •  High quality statistical data •  Additional functionalities could add public services •  Ability to segment parking fees further, e.g. for low-emission cars, utilization, exemptions etc.

40

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Users: •  Efficiency & Comfort •  Ease of use •  Accurate timing / pay by minute •  Easy top up of parking meter (depending on service model) •  Cashless transactions for operators •  No need for change •  Transparency on parking spending through monthly billing Existing parking operators: • Improved customer service • Cashless transactions • Efficiency increase Mobile phone operators: • Additional voice, SMS and data traffic • Significant billing fees if charged to phone bills • Customer loyalty through value-added services Local commerce: • Replicate offering by most shopping malls and department stores to cover parking costs if purchases are made. • Ease of use lowers barrier to arrive by car. • More spending power if consumers lose less in overpaid fees.

Mobile parking today. Globally, about 250 municipalities2 have implemented mobile parking services today. Perhaps 100 have mobile parking only in limited parking lots while the remaining 150 municipalities offer mobile parking services throughout the city. A conservative estimate would be that at least 500 municipalities are currently seriously considering an implementation of mobile parking services. Given the typical lead time for implementation, it can be estimated that by 2011 about 750-1,000 municipalities around the world will offer mobile parking services, up from 1 (Tallinn, Estonia) in the year 2000. Today, there are about 40 mobile parking operators, with 10 in Germany alone offering solutions in 31 municipalities. Cities opt for one of two models of service provision, by either nominating a single mobile parking provider (e.g. Tettnang, Germany) or by offering a mobile parking gateway to several competing providers (e.g. Hamburg, Germany). With more than 30 municipalities in Germany offering mobile parking services the country can be considered a relatively mature market. Typically 5% of the transaction value goes to the mobile parking operator and an additional percentage (0.05-10%) is charged as a payment transaction fee, depending on the mode of transaction. In other markets, the total overhead for mobile parking can be around 25% of a small transaction. According to Now! Innovations, the global market for parking transactions can be valued at EUR 30bn per year, which by way of a simple calculation shows a possible revenue of EUR 1.56bn annually if charging a 5-20% fee on the total transactions. If Germany can be considered a mature market, it is most likely that mobile parking operator fees will settle at about 5-10% especially after initial contracts are re-tendered. Additional

2 Now! Innovations

41

Scalability

services, such as inspection, may increase this percentage but are also highly capital intensive.

• Fee for invoice (online free, by post EUR 1.00 in Germany) • SMS Reminder (EUR 0.00 – 0.16 per SMS in Germany)

Global market for mobile parking in EUR i
30 Bn

• Fees from municipalities • Percentage fee of turnover With margins being pressed through competition, mobile parking is tightly integrated and dependent on the evolution of mobile payment systems, with the fundamental issue being the role of the mobile phone operator as a billing partner. The easiest option for users is to have parking charges billed directly to their phone bill. Alternative models via pre-registration to use credit-card or direct debit payments are considered the biggest downside of the service experience by users, with all other aspects rated “very good” or “good”.

6 Bn 3 Bn 1.5 Bn

Global market for parking

Revenue at 20% fee

Revenue at 10% fee

Revenue at 5% fee

The share of mobile parking is still less than 1% of the global market for parking, meaning that the 40 or so mobile parking operators are likely to share about EUR 15-60m in annual revenue. With an average lead time of about 18 months (see below) in entering new international markets (down to 12 months in more mature markets like Germany) and acquisition costs of about EUR 150.000, this means that the average company has about EUR 0.75-1m in revenue to finance operations and expansion. Today, mobile parking operators apply the following generic revenue models: • Fees from users • Registration fee (typically free) • Monthly fees for users (EUR 0.00-1.00 in Germany) • Service charge per transaction (between EUR 0.12-0.18 in Germany)

User evaluation of different aspects of mobile parking ii
3.33

1.64 1.36 1.38 1.23 1.18 1.33 1.18

Monthly billing

1 = Very good 3.5 = Below average

Registration

No extra costs

Simple to use

Cashless payment

No pre-determined parking period

No phone charge on registration

Billing by minute

i Source: www.nowinnovations.com

ii  Source: www.mobilecity.de

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Chapter 4

Billing to the mobile phone depends first of all on regulation, with unclear European legislation creating some national markets in which billing of parking services to the mobile phone bill is allowed (e.g. Belgium, Germany), and others in which it is not (e.g. Scandinavia). Comparative data on user-uptake of mobile parking services after 2 years between regulated and deregulated markets for mobile billing show the clear bottleneck in usage between Scandinavia (regulated) and Belgium (deregulated): Uptake of mobile parking service in regulated/deregulated markets after 2 years iii
35%

charge 10% for a transaction – irrespective of whether it is EUR 1 or EUR 20.

Cost of mobile payment options in parking in Germany iv
2.50

1.50

0.00 5% Mobile Phone Bill (Incl SMS charge) Mobile Phone Bill Credit Card Direct Debit

2.00 EUR Transaction 10.00 EUR Transaction 20.00 EUR Transaction

Belgium (No pre-registration)

Scandinavia (Pre-registration required)

However, mobile parking does not by default flourish by deregulating mobile billing frameworks, as the transaction charges by mobile phone operators for mobile billing are a heavy burden on the service costs and mobile parking operator margins. A look at different payment methods offered to mobile parking users in Germany shows the implications of charging up to 20 times as high a transaction fee for the most convenient payment method that requires no tedious pre-registration. Instead of the 0.5-1.5 percent charged by direct debit, mobile operators

Why do operators undermine a very profitable business opportunity? Telecommunications to a large extent, operate using business models designed for utilities. As an owner of infrastructure, operators hold strong control over pricing and effectively corner the user and other business partners to accept exorbitant fees. When it comes to municipal services like mobile parking, the full extent of this model becomes visible. Instead of large user-uptake of mobile parking services like in Tallinn (70%) or Antwerp (35%) which trigger a number of efficiencies, cost reductions, time- and productivity savings, German users have to either accept higher costs or tedious registration to use an automated process, which in this case is effectively a public service.

iii Source: Now! Innovations

iv  Source: Mobile City

43

Scalability

Operators are not so much eyeing the market for mobile parking, as the market for mobile payment, which is an enormous market to enter. The difference between charging 0.5% or 10% per transaction is effectively a twentyfold increase in profitability. The numbers are staggering when looking at the market for mobile payments in Europe in direct monetary terms and potential productivity gains. European Mobile Payment Market v
2500 bn

consumer transaction. Such a model is deployed in pre-registration systems in various mobile parking services, but also in iCarYou as a cashless transaction system between passenger and driver. Here though, many questions on interoperability among different models remain that may undermine, in the short-term, a high degree of diffusion comparable to the 100%+ penetration of mobile phones in many countries. Mobile Parking is a good example of the opportunity and the complexity involved in achieving the simple vision of using a readily available technology to provide a highly valued solution. We have looked at the challenges to growth in particular relative to the unresolved mobile payment issues as well as the long lead times to implementation, especially upon first entry into a market. This is a major bottleneck for companies and users, yet for the municipalities embarking on implementing such a service, the process implies a number of administrative stages. We can look at the example of a European city with about 80,000 citizens that is currently planning a first pilot for mobile parking, and not yet a full implementation. The municipality has chosen to pilot the service in new residents’ permit areas, as these do not have a legacy of contracts and operating services. The initial step is for the city council to approve the creation of these permit areas, but the date has yet to be set for that vote, meaning that the entire process has no fixed timeplan. A complex stakeholder constellation has to be aligned in parallel to the political decisionmaking process. Stakeholders include: • T he parking fine authority • T he concession holder to control parking zones, already using their own mobile devices and software • T he mobile parking operator, providing the IT & software solution • Various municipal departments

250 bn

250 bn 1.25 bn 250 bn 1 bn 20 bn

58.13 bn

Productivity gain if avg coin handling was reduced to 6 minutes per day by mobilepayment

Market for transaction 10% fee (what German operators charge)

25 bn

Market for Market size transactions per year at 0.5% fee

European Market for small mobile payment transaction EUR-20 Meduim transactions EUR 20-40 Other applicable money transfers

Depending on which actor’s perspective we take, the above table is very promising (mobile phone operators), disconcerting due to the lost productivity by not having uptake of noncash micro-payments (local government), lost efficiency (parking operator, local government), and lack of turnover (mobile parking operator). Alternative mobile payment models exist that may be more disruptive. Peer-to-Peer services in particular can be disruptive as they offer a direct business-to-business or consumer-to-

v Source: McKinsey, Eurostat, VISA

44

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Chapter 4

In parallel to the political process, a working group advances the technical aspects of the project, success measures and contractual terms of provisions. All actors are enthusiastic about participating in this pilot. It is likely that from the first contact with the mobile parking operator to the pilot at least 12 months will pass, with a team of 3 people working full time throughout this period in the mobile parking operator to advance the project. The pilot itself will not generate any major revenue and it is expected that the success of the pilot will lead to a full adoption of a mobile parking solution. However, with European contracting regulations, no guarantees can be given to any one provider, meaning that the company investing three years of work into the pilot will have to bid for any extension of the scheme. Different strategies have been adopted by mobile parking operators on how to deal with this challenge. Mobile City, for example, focuses primarily on the German and German-speaking market and has built a strong platform for national roll-out by merging with a company providing parking attendant’s PDAs to over 650 municipalities. Firstly, this has added a complementary revenue-stream based on any type of parking enforcement, and secondly the established relationships can possibly be scaled up to cover the national market rapidly. This is reflected in the relatively short acquisition time of 6-12 months, which is likely to progressively shorten as adoption processes accelerate. Germany is the largest European market for mobile parking and comparatively mature to other national markets, so scaling up should be possible. At the same time at least 10 existing providers are active in the market already, leading to increased competition and probably relatively low margins for service providers. Now! Innovations, as illustrated in the article by Arho Anttila below, quickly saturated the small Estonian market with a population of 1.3m, and had to embark on an international expansion. The company has built up operations in Belgium,

Slovenia, Ukraine and the US over the past decade, reflecting the search for advanced markets that are open to an outside provider and scalable as early markets to consolidate the business. In all these countries, Now! Innovations operates in only one city except in Belgium where the market has proven to be more scalable than in other countries. Today, Now! Innovations operates in at least nine Belgian cities. This internationalization strategy comes at a higher cost for acquisition, with lead times averaging at about 18 months, at times up to almost 3 years. It appears, that Now! Innovations pays a price of 6-12 months in extra acquisition time by not being a national provider like Mobile City. If we calculate this time in financial terms, this may represent a premium of about EUR 100-200.000 in additional acquisition costs per city in a new market, with not much difference between the single European or global markets. Naturally, each company strategy has its advantages, and will in turn create an adapted process model to either explore international opportunities or unfold in a national market. Overall, the case of mobile parking has brought some interesting insights: • Mobile parking showed how a highly effective service, appreciated by all actors, can gradually become a solution adopted by many cities. • T he case showed the distinct strategies used by two companies in this field: internationalization vs national roll-out. • Mobile payments appear to be a key determining factor for mobile parking, which is a major strategic market, and mobile parking appears to suffer from the larger strategic moves in payment. •T  he case shows the municipal process to be a pioneer in the application of urban service technologies, and the complex political and technical alignment of actors that needs to converge around the goal of implementing services. It is unclear how much this enthusiasm could accelerate decisions further to shorten acquisition times for companies.

45

Scalability

Article by Arho Anttila Mobile parking was first introduced commercially in Tallinn, Estonia in 2000 by two Swedishowned mobile operators (EMT and Tele2). It was promoted as a value added service for subscribers. The Tele2 mobile parking system represents the origin of NOW! Innovations’s ParkNOW! It is easy to see why mobile parking started in Estonia: on the one hand there was almost no parking infrastructure in place, but the market was ready for paid parking in general, whilst on the other hand the largest coin was worth just 0.03 euro cents. And importantly every driver also had a mobile phone. The service took off quickly and today over 70% of all parking payments in Tallinn are made with a mobile phone. The ease with which the service became a winner without practically any promotion led some to assume mistakenly that the same solutions could immediately be exported and go on to conquer the world. However, it was not that simple due to a number of reasons: what worked in Estonia, was typically not suitable for any other market due to technical, legal and cultural differences; existing and working infrastuctures increased the threshold for consumers to try something new; and above all, the need to register separately to a mobile parking operator service seemed to be a show stopper in many markets. In Estonia, however, any subscriber to the mentioned mobile operators could start using mobile parking without any additional steps. Also, another major factor found to lie behind the success in Tallinn was the municipality’s willingness to promote mobile parking as a costefficient, fraud-free option which additionally would increase revenues. For the above mentioned reasons the development of mobile parking in the rest of the world was slow in the first part of this decade, the most notable exceptions being Austria and Croatia. Scandinavia was also among the pioneers of mobile parking,

but success was much more limited, probably mainly due to the lack of mobile operator billing and active support from the involved municipalities. Only in 2006 did NOW! Innovations first expand outside of Estonia when it was chosen to provide the mobile parking service in Antwerp, Belgium. In close co-operation with GAPA, the parking authority, and Proximus, the leading mobile operator in Belgium, the Estonian business model was adapted to the local circumstances with equal success – after just two years already 35% of the payments were mobile, despite Antwerp possessing a highly developed network of parking meters. Since then more than 10 other Belgian cities have joined the service. In Belgium, NOW! Innovations also learned about the importance of parking know-how in creating mobile parking solutions. Most mobile parking systems in the world are based on a mobile communications and mobile payment philosophy, almost fully neglecting the concrete every-day needs of parking operators, without whom mobile parking solutions will not be adopted. ParkNOW! today is very different from what it was years ago thanks to extremely useful feedback from global leaders in the field such as APCOA and Vinci Park, with whom NOW! Innovations has developed new services for the Belgian market. But as said above, each market is different. NOW! Innovations has learned that the main challenge in some countries, like Ukraine, is to get consumers to accept paid parking in general. In such markets NOW! Innovations works together with the municipalities in order to develop legislation and parking policies. In some other markets, like the USA, the main issues are related to the mobile operators, who see mobile parking as an alternative payment method threatening their territory, and for that reason don’t allow SMS messages to be used for parking. Yet, without SMS it is difficult to indicate one’s car license plate number, which means that only systems with pre-

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NOW! Innovations: Mobile Parking

Estonia Tallinn Ukraine Belgium Kiev Antwerp Slovenia Bruges Velenje Diest Hasselt Leuven Lokeren Schaarbeek Tienen Turnhout Wettern

USA Decatur

registration are feasible. Besides, US consumers in general seem to be years behind in adopting such advanced services as compared to Europe, not to speak of Asia. In Western Europe, the biggest issue has been legislation forbidding mobile operator billing for “physical services”. This EU regulation made open system mobile operator billing impossible in countries such as the UK, Italy and Holland against the wishes of many mobile operators, although the same normatives were at the same time interpreted in reverse in the countries already mentioned, Austria, Belgium and Estonia. As of today, it seems that the open interpretation is, however, fortunately winning ground.

Despite the many challenges listed above, even in the so far sceptical markets, such as the US and Germany, it is by now clear that mobile parking is a winning solution. It seems evident that together with credit card payments it will sooner or later make cash obsolete in parking payments and grab a large share of the some 30 billion euro annual global parking market, in which the share of mobile parking today is still less than one percent of the total. But what remains to be seen is how much of that will be through SMS, IVR, mobile internet, NFC, or some other technology; in any case NOW! Innovations is ready for whatever it takes to satisfy the market. Arho Anttila CEO of NOW! Innovations.

47

Scalability

THE CASE OF TOURISM
Mobility solutions for tourists are considered one of the highest value-adding services that can be traded at great volume today. The top 150 cities world-wide for international tourists alone have generated 253,744,000 visits in 2007.1 Tourists experience a number of challenges that have traditionally been resolved by a combination of concierge services, tourist guidebooks, phrasebooks, tourist offices and increasingly in recent years, the internet. Tourists are also a burden on the environment, typically using 1.5 paper maps 2 per visitor leading to staggering volumes of paper produced, which for London, as the world’s leading tourist destination, equals 1,300 tons of paper or about 20,180 trees. For Barcelona, a Top 20 tourist destination, maps collected amount to 394 tons of paper. Together, the Top 150 tourist cities consume the equivalent of 327,390 trees worth of paper.

In short, both users and society should value highly digital mobility solutions for visitors. Over many years of emerging world tourism, business models have emerged to facilitate for example, the distribution of maps to visitors. In Barcelona it is estimated that 80% of maps are handed out free to tourists, sponsored by tourism associations, local commerce and others. Hence, business models have been established to meet the tourists needs in a spectrum of low value-added, free mapping material and advanced, costly services ranging from guidebooks to premium hotels. A look at the economic turnover of tourists in only a small number of global cities shows the attractiveness of the sector to service providers. The range of volume markets (like Tokyo) and high value-added markets like San Francisco lend themselves for a range of service and business models.

Volume and spending by visitors in selected global cities i
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Tourism also remains an important local economic factor in the cities reviewed, contributing an important cash injection to the local service economy. Correlating the economic impact against the consideration of overcrowding, shows that cities like Copenhagen are extremely effective at creating a high margin on tourism without inundating the city, unlike Hamburg which as a day-trip destination has very high volumes but relatively low economic impact in return. When volume is high and returns are low, city centers may become deserted, making way for pure retail and touristic activities. Over-crowding by low-cost tourism poses a particular challenge, and many destinations are counting on mobile tourism services to help visitors discover new areas, to help spread tourists over space and time and sustain a more even distribution of tourism.

City Tourist maps In trees/ year London Barcelona 23,460,000 7,042,500 20,179 6,057 327,391

Top 150 Cities 380,000,000

Local impact and value creation by visitors in selected cities world-wide ii

b5,500 b1,100

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Scalability

Yet, despite the fact that the visitors of these global tourist destinations are highly mobile and most likely to have at least 100% mobile phone penetration, it is surprising that to date the global market for mobile tourism services remains largely untapped. Roaming charges are a profitable business, delivering billions in revenue to operators and bolstering their balance sheets with doubledigit contributions. Pricing policies balance the temptation of the user to use services against prohibitive business models. In the case of mobile data roaming, our sample of global mobile phone operator charges found an average cost to the user of about EUR 18.20 per Mb, although charges vary widely (adding to the insecurity of the user). So instead of replacing the paper map with a mobile phone, generating substantial environmental and quality benefits, users continue

to avoid data services, however useful. To show the impact of charges, we can apply the return in mobile value to different percentages of average tourist expenditure in leading global destinations. Spending 0.5% of your average daily budget as a visitor in Hamburg will buy you 0.38 cm2 a look at Google Maps on your iPhone screen. Due to the higher destination costs, 1% will buy you 4.78cm2 in San Francisco. To take a look at the full screen on your iPhone, will in return cost you approximately 11% of your total daily expenditure in Hamburg, or 1.4% in San Francisco. A look at a single screen of a mobile map can therefore set you back an average 3% of your visit to a foreign city. Naturally, such a 258kb download delivers close to no value to you, as the interaction will only start here. So with a handful of transactions, you may have doubled your daily expenditure. Things get tricky if you want to take

Traditional paper map vs. mobile map

70x100cm

1:20,000

mobility costs 1,011 times more than paper
HAMBURG

50

Chapter 4

1% of visitor spending per day and per stay (EUR) iii

2.2

2.0 Tokyo

9.5

3.3

7.8

2.0

4.3

2.2

4.8

1.8

17.5

4.0

Hong Kong

London

Dublin

New York City San Francisco

9.5

3.7

3.4

1.7 Greater Copenhagen

4.3

2.2

0.9 0.5 Hamburg

2.8

1.0 Barcelona

Stockholm

Washington DC

1% of spending per day 1% of spending per stay

Download cost vs. cost of stayingiv
2.20 �2.000 4.40 2.25 3.60 2.80 5.90 5.40 2.10 3.60 0.70 1.70 cm2

�1.000

0

in

o

on

en

yo

m

ng

DC

sc

rg

ty

Du bl

Ci

ol

To k

nd

nh ag

Ko

ci

bu

kh

k

n

am

Lo

an

Yo r

on

ng

oc

ew

W as hi

H

N

Sa

Cost to download Lonely Planet Guide 20.9Mb in roaming (excl EUR 12,99 purchase) (EUR) Expenditure by visitors (EUR) 1% of Spending per day in cm2 Google maps on iPhone

iii Various regional tourism agencies, operator data in US/Europe/Asia iv Various regional tourism agencies, operator data in US/Europe/Asia

Gr e

at

er

Co

n

St

Ba

Fr

pe

H

rc

g

to

el

on

a

51

Scalability

saving 1% of the average tourist’s daily expenditure would equal
advantage of a full interactive tourist guide on your phone, such as the Lonely Planet guides offered on various platforms today. With the exception of the most expensive global tourist destinations, you will find that a single download of an interactive travel guide (excluding the purchase price) will set you back more than the entire cost for an average stay in the city. Most of us have heard stories of such outrageous roaming charges and avoid using the advanced navigation or interactive features on our devices. Whether mobile phone operators create shortor long-term value by imposing such data tariffs is questionable. Instead of becoming active stakeholders in the global tourism industry, they are more likely to end up cornered by regulatory measures, get sidelined by alternative technologies (e.g. WiMax in Asia), or users abandoning the market. What if 1% was more than 0.76cm2 Let us, for a moment, forget the outrageous calculations that roaming imposes on us and consider the opportunity of dedicating a small percentage of tourism spending to interactive services. Like the free maps, that are so highly appreciated by visitors that they take 1.5 each and that are funded by local stakeholders, we should be able to dedicate a percentage of spending on digital services. Roaming gave us only 0.38m2 of a screen to look at for 0.5% of daily spending by a tourist in Hamburg. Yet, in monetary terms this amounts to

EUR 2bn to invest in the digital visitor experience across eleven destinations
EUR 1.7m per year, EUR 101m in London, or EUR 977m across the eleven cities presented. At 1% the average daily cost per day would amount to EUR 2.14 per day and tourist across these destinations with an annual budget of EUR 2bn to invest in the digital visitor experience of just eleven destinations. In Europe alone, with 1bn nights booked at hotels 3 annually, at an average of about EUR 100, EUR 2.14 applied to 24 hours would generate service revenue not realized before. As our introduction to the opportunity in tourism showed, all stakeholders have learned to recognize the significant market potential and in the face of increasing competition and other challenges are looking to maximize efficiencies. Regrettably, 1% will not buy much roaming, even if local actors were to subsidize it. In Stockholm, replacing the 85 hectares of paper maps produced for foreign visitors a year with a comparable mobile offering would incur roaming costs of EUR 6.8bn, or more than twice the total annual expenditure by visitors in the city. If we applied the local data charge of EUR 0.10 / Mb for a prepaid customer in Spain to this model, costs to provide all paper maps in their digital form would amount to EUR 462,923, or 0.02% of all annual tourist spending in the city. For London, the corresponding figure would be EUR 7,218,461, saving 1.313 tons of paper. Visitors would be able to take 1.250 looks at Google Maps during their stay.4

3 Eurostat 4 Calculations are based on the physical size of maps, meaning that 1.250 x 8m2 (screen-size) amount to 1m2 = 1.5 average tourist maps at 0.7m2 each.

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Returning to Stockholm, this business proposition is compelling. 1% of tourism expenditure would represent EUR 27m as a resource that could be mobilized by local commerce or, like in Barcelona , through a shared, profitable service offering like the tourist bus. Such a budget would leave ample room for agreement on data roaming for incoming travelers. A precedent was created in the city in 2006, when a service called “Talk of the Town” was offered in which foreign visitors could use their mobile phone as a roaming-free audio guide. The model worked by hedging the 24-hour flat fee for the service against call rates to special numbers negotiated with the operators. Naturally, an individual service will find it hard to sustain itself and Talk of the Town5 today has resorted to renting out memory cards or mp3 players. 1.  T his section has shown the immense potential in the market for mobile tourism but also highlighted the dominance of data roaming charges as the principal barrier to uptake. 2.  We have presented an alternative to the fragmented approach to mobile tourism prevailing today, by building on the business model of existing tourist associations and local commerce in order to dedicate 0.5-1% of tourist revenue to enable a roaming free digital service environment. 3.  Roaming charges are not a law of nature, but a choice. As shown in the “Talk of the Town” precedent in Stockholm, it is possible to offer selected services free of roaming charges and unlock significant efficiencies in services to visitors.

4. A  ll stakeholders are set to gain from such an approach to destination management. Users will gain a higher quality service experience; cities more revenues, customer satisfaction and more control over the urban geography of tourism; local commerce will gain greater efficiency and targeting of marketing services; and operators will gain access to a 2bn EUR market (if taking into account only eight global destinations.)

5 www.talkofthetown.se

53

Scalability

Article by Tilman Sobek Tourist destinations deal with a number of challenges today: growing national and international competition, decreased customer loyalty, and shorter average stays. They need to improve their brand experience and customer service continuously. At the same time, reaching customers becomes increasingly difficult. Guests use a multitude of channels – such as mobile phones, social communities, and web 2.0 services – and they demand prompt and accurate information anytime anywhere. These developments are irreversible. Hence full accessibility of information and services at all times is key for a destinations’ long-term success and competitiveness, i.e. increasing the per capita turnover of the once won guest. Mobile services, available anytime and anywhere, can play an important role in reaching this objective. We at 5C-Mobile therefore developed ‘PINA’, the mobile and social destination marketing platform that delivers the desired information instantly across all channels. All information about activities, services, offers, news, and local conditions is posted only once by the destination and is immediately available for guests on mobile phones, in browsers (iGoogle, Windows Live, Yahoo!), on the PC (Vista and Opera Widget), Mac (Apple Dashboard), as well as in social networks, such as Twitter, MySpace, and Facebook. Challenges on three levels have prevented the ubiquitous adoption of mobile services in destination marketing so far. These are: content, technology, and communication. In contrast to classic information material locationbased services (LBS) are far more focused and specific. Very often destinations have not yet organized their information as detailed as necessary for them. This inherent prerequisite to reach the full effectiveness of LBS conflicts with

the desire to control cost especially in the beginning when adopting innovative solutions. On the technical level the spread of mobile services has been hindered in the past by limited capabilities of mobile devices (e.g. processor speed, screen size, memory size). Falling production costs allow better mobile phones today. Yet true LBS rely on GPS-enabled mobile phones, which are not yet wide-spread. By 2012 38% of all mobile devices in Western Europe are forecasted to be GPS-enabled. This spread of the technology on the consumer’s side will certainly benefit the adoption of mobile services in tourism. Finally the horrendous costs associated with using mobile data services (not to mention roaming) still constitute an enormous problem for the widespread use of mobile services. Recent regulation by the European commission will certainly help, yet the problem is in part a psychological one. It will take time until all consumers adopt their mobile phones as the multi-functional mini-computers they are and use mobile services naturally. Implementing PINA in the Alps 5C-Mobile proved that integrated promotion of mobile services in tourism is central for their success. In the past winter usage at all destinations was much better than expected – at some 100 % above plan. Taking the challenges and lessons learnt into consideration, it is obvious that mobile services will not prove a panacea for destinations. They provide a new, sometimes revolutionary means of communicating with the guest, improving marketing and driving sales. Embedded in a clear long-term marketing strategy they result in more successful customer acquisition and retention as well as improved creation of added value from existing customers. Tilman Sobek Managing Director 5C-Mobile

54

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City London Bangkok Paris Singapore Hong Kong New York Dubai Rome Seoul Barcelona Dublin  Bahrain Shanghai Toronto Kuala Lumpar Istanbul Madrid Amsterdam Mecca Prague Moscow Beijing Vienna Taipei St. Petersburg Cancun Macau Venice Warsaw Mexico

Cost if tourist maps were delivered in roaming (EUR) 106,743,000,000 70,638,750,000 66,202,500,000 64,851,150,000 55,548,675,000 42,444,675,000 41,769,000,000 41,175,225,000 33,579,000,000 32,043,375,000 30,500,925,000 30,152,850,000 29,449,875,000 28,392,000,000 28,153,125,000 27,259,050,000 26,760,825,000 26,624,325,000 25,935,000,000 25,266,150,000 25,218,375,000 24,522,225,000 22,788,675,000 22,386,000,000 21,840,000,000 20,980,050,000 20,966,400,000 19,976,775,000 19,963,125,000 19,266,975,000

Cost of tourist maps at EUR 0.1/Mb 7,218,461 4,776,923 4,476,923 4,385,538 3,756,462 2,870,308 2,824,615 2,784,462 2,270,769 2,166,923 2,062,615 2,039,077 1,991,538 1,920,000 1,903,846 1,843,385 1,809,692 1,800,462 1,753,846 1,708,615 1,705,385 1,658,308 1,541,077 1,513,846 1,476,923 1,418,769 1,417,846 1,350,923 1,350,000 1,302,923

Total top 150 international 1,731,802,800,000 tourist cities

117,112,615

Euromonitor based on data by World Tourism Organisation, European Cities Tourism, National Statistics, National Tourist Boards, Local Tourism & Convention Bureaux, Trade Turisme de Barcelona Conservatree, USA

55

Scalability

THE CASE OF VISUAL IMPAIRMENT
One of the biggest challenges to mobility solutions and urban service innovations is to enable those that are chronically ill or disabled to integrate to the largest possible extent into society. Herein lies also one of the great promises of recent developments in technologies. Whilst research in healthcare is working hard to reduce the percentage of the blind and visually impaired in our societies, we also have to accept that in the here and now action can and must be taken. What constitutes visual impairment? This already poses one of the great challenges, and is significant in that the answer determines the legal qualification for government support and special rights around the world. According to the

World Health Organisation’s definition of visual impairment and blindness, 35,413,444 people in the world are blind, and 161,001,115 are visually impaired. Cities around the world are taking a variety of measures to support the visually impaired, yet it is also clear that those suffering from severe sight problems rely heavily on their immediate family and social environment. Studies have shown to what extent this is a direct economic and personal burden to both the individual and relatives. Hence, when we review the case of visual impairment in this section, we will not only examine the impact of a technology on the person, but on the actors and environment that forms part of the condition. In Hamburg, as in other cities, consideration is given to the desire of visually impaired people to gain freedom and independence, to live life as fully as possible within the normal socio-

The blind and visually impaired in the world (in thousands) i

15,521 15,535 1,393 Europe 161,006 Americas 2,732 10,178 2,482

50,665

12,558

Eastern Mediterranean Region 28,576 South-East Asia 40,531

35,413,444

7,288

8,960 Africa

World 161,006,115 i World Health Organisation (WHO)

Visually impaired Blind Western Pacific

56

Chapter 4

economic fabric. This implies that support is less centralised and needs to offer more options, such as the choice to live in a private home, shared accommodation or a specially adapted environment. Technology, together with improved and adapted infrastructures that can be combined with a range of organisational innovations, can widen the range of options to facilitate a more integrated lifestyle. The City of Hamburg 1 has delivered an out-care model that extends into private homes, and offers a choice of service providers to the disabled at home. As a disabled person in Hamburg you have the right to: • have your private home, with a private lease agreement, • have autonomy in managing your income, • furnish your home according to your own taste and wishes, • receive visitors in your home, • close the door when you want to be alone, • manage your own daily programme and routine, • ideally choose what food is bought, and how it is prepared, • take responsibility wherever possible • receive support when needed. Behind this declaration of a more participatory approach to disability lie a number of processes that have transformed the way support to the disabled is being delivered. Most importantly, choice was introduced to the system based on the recognition that there may be a mutual benefit in opening up new options, introducing greater autonomy and de-institutionalising social services. A great number of actors are involved, from social services to medical support staff, workplace integration officers and legal support to voluntary workers, and a range of private providers such as taxi drivers, landlords and caterers. Hamburg, allocates a budget of EUR 325m or 3% of the annual budget to support 255,000 disabled

citizens. As a result of disability policies around the world, public spaces, services and transport have been adapted and new building legislation put in place to increase accessibility. Most visibly, wheelchair ramps and special floor and wall textures to guide the visually impaired have been deployed. In addition, mobile phones have become widely adopted not only as voice communication devices but also e-readers and voice synthesizers. Visually impaired users are often highly competent in using technologies to their advantage. Today, visually impaired or blind users use sophisticated software and tools to translate image files into words. This has made information more accessible and hence broadened the reach and quality of knowledge at their disposal. BrailleScreen,2 a new low-cost textural display may open further possibilities. Technology is therefore an important enabler of any professional and private activity, with artificial intelligence assisting in mapping relevance of information continuing to evolve as a key enabler. At the same time, many of the regulations and adaptations appear to be afterthoughts to existing models of organising space. Policies to remove barriers take a linear view on how a visually impaired person might move around. Universal design, accessible to all, is desired by many of the stakeholders, allowing continuity of regulation in designing products, spaces and services for all. However, this is a complex and highly capital intensive approach to synchronising and upgrading our cities and will not be achieved overnight. Emerging technologies may provide a bridge to integrate existing systems, both physical and digital, into a unified experience. In mobility in particular, the combination of more precise positioning, consolidated urban data and contextaware systems carry great promise. Market conditions for mobility solutions for the visually
2 w ww.livinglabs-global.com/mWatch/showcase/221/braillescreen--tactile-interface-display.aspx

1 City of Hamburg, Department of Social and Health Affairs: “Die Entwicklung der Teilhabe von Menschen mit Behinderungen in Hamburg” (German, 2007)

57

Scalability

impaired are looked at in the following section. These need to be examined carefully to see if there is an entrepreneurial opportunity in such solutions. What if the blind and visually impaired could move freely? How do you measure the value of eyesight, freedom, workplace, health or the ability to walk through your city? This fundamental question underlies any idea for a solution or new service for the visually impaired. Astando,3 a technology company in Sweden, together with the City of Stockholm, started to ponder this question in 2005. Clearly, new technologies could enable a lot of functionality, but more importantly, what were the implications? and for whom? Technology is reaching a degree of maturity where it can take on such critical tasks as guiding or supporting a visually impaired person, or providing back-up in situations of disorientation. In addition, value creation for the blind should also be value creation for society, following the principles of universal design, which are sustainable by default and not by afterthought – like the bolt-on wheelchair ramps attached to many historic and modern buildings. It appears that today for the first time, three fundamental ingredients are in place to launch mobility services for the visually impaired: 1.  A critical cluster of relevant technologies is reaching maturity where they can be combined to create more precise positioning methods, aggregating the vast data-sets that cities maintain today into a single, up-to-date source of information. 2.  Visually impaired users have shown their appetite for meaningful technologies, and using mobile phones has become familiar. They have created workgroups to evaluate new technologies that become part of new developments. In Hamburg, as many as 40% of the visually impaired and blind could be

considered enthusiastic adopters of such solutions. 3.  Policy towards the disabled has changed and has become more inclusive, more holistic and more customised to the needs of the individual and their context. Innovations can enter the market more easily and draw on different types of support. Let us review the value created by a mobility service like e-Adept, the solution developed by Astando and the City of Stockholm, which enables the visually impaired to walk and explore the city unaccompanied. Several dimensions, and hence related actors can be considered in this process: The User e-Adept enables the visually impaired user to move unassisted through a city. A key limitation for many visually impaired people is that they may move independently, but only on fixed routes. Going from A to B becomes a major challenge when the user does not know the route. Tools to assist planning the trip, with up-to-date information on possible obstacles will help define a route, and the mobile device can assure that the right path is taken. How can we measure this benefit to the user? In piloting such a service in Stockholm, a large number of values emerged, such as the regular exercise that would take place and its impact on health, increase in independence, savings from taxis, saving time, feeling safe and so forth. All of this could be valued, and given the qualitative change in the life they bring, will be fundamental. In Stockholm the ambition was to set even higher targets together with the authorities and the visually impaired. Increased mobility and independence should make employment more accessible, an achievement that would bring not only respect but also extra money to the visually impaired. The assumption is, therefore, that 10% of

3 w ww.astando.se

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Chapter 4

the visually impaired will be able to find work. The added income (on top of special benefits already provided) will be about EUR 1,000 per month in Stockholm, and at a conservative estimate EUR 800 in other cities in developed countries.

visually impaired, especially when navigating the city or using transport systems alone.

What the relatives gain (EUR) Relatives value created per visually impaired user (per year) Total relatives gain per year
Source: Astando, City of Stockholm

1,000 2,400,000

Value created for the visually impaired through an advanced mobility solution Citizens Blind persons Total visually impaired citizens Number of potential e-Adept users (40%) Visually impaired that can take up job with e-Adept Annual income for e-Adept workers finding work (EUR) Monthly added income for each workplace (EUR)
Source: Astando, City of Stockholm, WHO

814,418 1,629 6,000 2,400 600 7,200,000 1,000

Relatives gain a clear financial benefit from the mobility service as a sum of less time taken off work (hence more pay), and less kilometres driven. The Government Mobility solutions for the disabled are compatible with local government policy to delegate responsibility to the individual, to encourage pedestrian movement, to reduce costs in paratransit services (i.e. A to B shuttle services), and to create an Intelligent Transport System. Other benefits are the consolidation of data sources, attractiveness of the city, improved sustainability, and a platform for other mobility services for tourists, citizens and others. Value created for Government (EUR) Paratransit costs 2009 Paratransit cost Savings of 10% Total Benefits to Social Service and Healthcare Social Service and Healthcare Benefits per e-Adept user
Source: Astando, City of Stockholm

Thus a simple calculation of financial benefits shows the solution can generate EUR 12,000 in extra revenue for 1 in 10 visually impaired persons in Stockholm today. This is in addition to the benefits listed above which help about 2,400 visually impaired persons in Stockholm. The Relatives Freedom, mobility and even employment affect those closest to the visually impaired most. In New Zealand, each family member spends an average of 126 minutes a week driving a visually impaired relative.4 Moreover family members dedicate large amounts of time to compensate for the impact of disability which is considered a barrier to full career development. Any time freed is also likely to generate economic benefits. In addition, many relatives voice fears over the safety of the

3,250,000 325,000 6,325,000 2,500

Direct financial value is created in the reduction by 10% in the paratransit costs as illustrated above, and the overall positive impact of the

4 “The Cost of Blindness in New Zealand”, Royal New Zealand Foundation of the Blind, 2006.

59

Scalability

greater mobility of the visually impaired users on uptake of social services and healthcare costs, which are calculated at EUR 2,500 per year. The Local Economy Beyond the benefit of incorporating more talent into the job market, a key benefit in the integrated service concept of e-Adept in Stockholm is the objective for the service not just to enable visually impaired citizens, but to also aggregate content, precise positioning and guidance to incoming tourists. A more accessible Stockholm will be more rewarding to tourists, attracting additional visitors and increasing return rates.

Overall, the impact of a mobility solution for the visually impaired in Stockholm could generate a positive balance. A very conservative approach has been taken in the above calculations, in particular in terms of the value generated for relatives and the efficiencies created for the local government. Tax revenue through additional commercial activity, for example, has not been accounted for. Value for Stockholm Benefit to local economy Benefits to visually impaired citizens Benefits to relatives Benefits to government Total immediate benefits 1,236,249 7,200,000 2,400,000 6,325,000 16,792,249

Value created for the local economy Total Visitors per year 9,300,000.00 Extra tourists through mobility platform Visitor Expenditure per day (EUR) Wealth through extra tourism 1,236,249.00 30% of spending (EUR)
Source: Tourism Statistics City of Stockholm

Cost of e-adept system per year 369,000 0.1%

Visitor Expenditure per Stay (EUR) 443 211

With the greater economy of Stockholm in mind, the impact of the solutions would be surprisingly large. Given that the visually impaired citizens make up just 0.7% of the population, the contribution of the programme represents about 0.05% of Stockholm’s GDP, or the equivalent of 0.42% of public spending in value created. Scaling up to the global market.

The benefit of the solution is transferred to tourism and the value created for the economy calculated at 30% of spending for a conservative estimate. For Stockholm, the impact of providing a mobility solution for the visually impaired results in a profitable outcome. At a projected annual cost of EUR 369,000 to maintain e-Adept, enthusiasm by different stakeholders appears to be justifiable. Most interestingly, the solution provides a platform for many other new businesses and services to emerge, not just for the visually impaired, but for other citizens and visitors as well.

As shown above, Stockholm has achieved more than to pilot a new technology or procure an extra service. In line with the sustainability policy of the city, disability is being seen as one of the factors in a universal design process that is reflected in the Intelligent Transport System (ITS) of which part will be presented in Chapter 5. What then, is the market opportunity for solutions for the visually impaired outside Stockholm? Do the numbers add up in the Swedish capital but nowhere else?

60

Chapter 4

Given the broad range of statistical data required to structure a global market analysis, we have chosen 7 international cities (see table below) to predict global opportunity for e-Adept. The model was further applied to the cluster of 356 Metropolitan Areas in the US. With more than 600,000 visually impaired citizens in Tokyo, almost 400,000 in New York City, and a high number even in non-capital cities like San Francisco, Hamburg, and Barcelona it appears that cities have sufficient, un-catered for demand. According to the model applied to other international cities and metropolitan areas, solutions for the disabled appear to scale

well, especially when value is created as well as productivity increased. It is clear that the government and the user are the main beneficiaries of the service, although other business models can emerge on the platform to commercialise the technology, aggregate and geo-localise data, and to increase availability. Given that the solution is still in the piloting phase, it is difficult to verify in detail the value creation in other cities. What is clear though is that the demographics of the visually impaired and their motivation to become more independent and integrated, creates a mobility challenge which remains unresolved around the world. There

Blind and visually impaired citizens ii
Stockholm Hamburg Barcelona Washington DC San Francisco New York City Tokyo

7,629

43,000

31,500

91,800

15,600

383,000

630,000

Potential value creation of e-Adept (EUR) ii

16,792,000

83,644,624

59,297,624

180,647,659

37,935,682

737,324,191

1,105,669,298

e-Adept benefit % of GDP ii

0.05

0.09

0.14

0.09

0.08

0.07

0.09

Stockholm

Hamburg

Barcelona

Washington DC

San Francisco

New York City

Tokyo

ii  Astando, Local and National Statistics Offices, WHO City Governments, US Census National Centre for Health Statistics City of Stockholm

61

Scalability

is therefore a comfortable margin for learning. Furthermore, the balance between public and private, user and relatives may adapt around each region and in fact each citizen. Article by Elisabeth Dawidson In 2010 the City of Stockholm is to become the most accessible capital in the world. So far mostly physical adaptations have been implemented, such as rebuilding pedestrian crossings, bus stops, and playgrounds as well as installing ramps or hearing devices in Stockholm City properties. By 2005, programme leaders realised that it was not possible to make the city accessible for persons with visual impairments just by taking physical measures. In part this was due to aesthetical and practical implications, and in part because the provision of artificial guide paths in fact predetermines where persons with visual impairments are allowed to walk. Our company Astando had extensive experience in working with different municipal data systems and have specialised in ITS (Intelligent Transport Systems) and integration of GIS (Geographical Information Systems), traditional database systems and digital road networks. We maintain framework agreements with several municipalities, including the City of Stockholm, to support their IT business, GIS and system development. In 2005, in response to the challenge of accessibility, the project e-Adept (Electronic Assistance for Disabled, Elderly Pedestrians and Travellers) emerged out of discussions between us and the city on what could be done to better meet the needs of accessibility for people with visual impairments. Today, e-Adept is a mobility solution to increase the accessibility in cities for visually impaired citizens. It comprises a richly detailed data interface that can now offer a new breed of services for all citizens, building on a common road map database for pedestrians. Unlike several existing navigation solutions, e-Adept makes it possible for the user to be guided along sidewalks,

pathways and pedestrian crossings. Data on the pedestrian network is supplemented with other related data held by the municipality (addresses, street lightning, stairs, and obstacles like road construction and bike stands). Information is not being moved from the existing database and can therefore be continuously maintained and updated ensuring that data will be accurate and up to date. e-Adept can be used on mobile telephones, which are widely used by visually impaired persons. e-Adept does not intend to replace existing aids like walking canes or the seeing-eye dog, but rather complements these to allow people to independently navigate and explore unknown areas to a greater extent than before. Maps, but also walking instructions present the route with information about obstacles and other information of relevance such as seasonal outdoor restaurants, stairs, and signs on the sidewalk. A pedestrian route often includes public transportation at least for some part. With e-Adept, the user can get a route on the pedestrian network to the most suitable bus stop according to the profile used, and the connecting pedestrian route from the arrival bus stop to the destination address. e-Adept uses existing travel planners (web services) provided by public transportation companies. Pedestrian movements with their route alternatives and the individual movement of users require more precise positioning than GPS signals can offer. GPS signals bounce off buildings in urban areas, generating errors in positioning accuracy, and we incorporate other techniques such as accelerometers, gyroscopes (inertia), digital compasses, and step counters into the system. We have achieved enough accuracy for e-Adept to function as an urban navigation aid for the blind and visually impaired. Route planning, public transport and advanced positioning techniques are complemented by user reported data, indoor navigation using networks of virtual signs, passive alarms and active emergency and help calls.

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What is the market potential for e-Adept? People with impairments often require additional navigation support. With the help of e-Adept we can lower dependency on special services and/or friends and relatives as well as accomplish better accessibility and an increased use of public transportation. Most likely, our target group will experience increased independence, freedom, safety, security, and control. Other parties could also make use of e-Adept through gaining more travellers (public transportation companies), being able to use their resources in a more efficient way (Paratransit Service), becoming more attractive as tourist destinations (other cities) and being a user of the system (e-Adept, standardization committees, tourist business). e-Adept has been co-funded by both suppliers and public means. Astando does not have the intention to sell the software but wants to spread the technology to cities and other companies. As a result, Astando is assisting other companies with piloting e-Adept and can aid in further development work if needed. We are encouraging external parties to develop new e-Adept functionality that can be shared with others, extending also the functionality we can offer to our customers.

e-Adept is moving into early markets. We test e-Adept every couple of months with visually impaired persons. All functionality is based on their needs and wishes, which we collect during user group meetings every six months. These supervised tests have been performed in Stockholm and Malmö. Feedback has so far been positive and many have expressed a sense of freedom and independence when trying it. Our first unsupervised pilot will take place in autumn 2009 and e-Adept will be accessible for a number of users at the end of 2010. Our goal is to spread the results to as many cities as possible in Sweden and internationally. We hope that cities will provide e-Adept services to their own citizens and visitors. For users, a deployment of e-Adept will mean the ability to travel to other cities offering the same support functions, using the same handheld device. Elisabeth Dawidson Project Manager at Astando Inc.

16M new jobs globally

EUR 33.45bn value created

63

Scalability

THE CASE OF PUBLIC HEALTH
Fear and desire. Public perception of mobile technologies. 70% of parking transactions in Tallinn are carried out by mobile phone in a society that like many others in the world today, has more mobile subscriptions than citizens. But at the same time, citizens around the world also fear the environmental and health impacts of radiation emitted by devices and antennas. The numbers are compelling, with 73% of European citizens stating that mobile phone handsets affect their health to a large or to some extent, and 76% stating that antenna masts affect their health in a similar way.1 Fear of radiation has grown 133% over 5 years, in line with the 155% growth in mobile phone penetration in Europe over the same period. For each of the following, please tell me to what extent you think it affects your health?i

Mobile phones are adopted with enthusiasm. This is the right term, considering that a hightechnology product that is often tied into complex contracts, has been adopted by practically every citizen in the developed world. Yet this desire to be connected is matched by a fear of the side effects. Maybe users think that mobility is too good to be true. Mobile phones are not the only object of concern, but fear extends to other wireless technologies, in particular Wi-Fi hotspots and devices. Almost half of all Europeans are fairly or very concerned about the health risks of Electromagnetic Fields (EMF), and rank mobile phones, antenna masts, and wireless hotspots among known sources of EMF. Scientific evidence appears to state that mobile technologies are not dangerous, but opinions clearly reflect the citizens’ insecurity and lack of trust in public authorities being able to fully understand the implications of possible sideeffects. The worry, shared by many Europeans,

As far as you are aware, which of the following can be sources of electromagnetic fields?ii
71% 67%

76%

74% 39% 65% 56% 37%

56%

Mobile phone masts

Mobile phone handsets

Wireless computer networks

Mobile communication masts / base...

Mobile telephones

Wireless computer network

To large + some extent 2002 EU15 To large + some extent 2007 EU25

1 Special Eurobarometer 2007 on Electromagnetic Fields

i Special Eurobarometer 2007 on Electromagnetic Fields About.com poll of ICT experts, US, 2007 ii  Special Eurobarometer 2007 on Electromagnetic Fields

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is that science may discover side-effects only in the future, given that the technologies have been adopted so rapidly across almost 100% of the population. And it is not just the un-informed citizens, but ICT experts also who, when polled, express concerns about Wi-Fi hotspots, for example. Public health authorities have not been able to defuse this prevailing fear by citing scientific evidence. A full 60% of Europeans consider their government’s actions to protect them from EMF risks ineffective. Policy-makers in Europe and beyond are torn between the need to modernize society following indications that pervasiveness of network access fosters economic growth, whilst at the same time dealing with a degree of uncertainty about possible risks, whether perceived or real.

We fear the technology we love. 70% of europeans fear mobile technologies while 60% consider public bodies ineffective at protecting them from health risks.

In your opinion, do public bodies act efficiently or not to protect you from potential health risks linked to electromagnetic fields? iii
44%

23%

15%

16% 2%

Don’t know No, not at all effectively No, not very effectively Yes, fairly effectively Yes, very effectively

iii  Special Eurobarometer 2007 on Electromagnetic Fields

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Given the distrust of public bodies effectively protecting citizens from potential health risks, a significant market for fear has emerged. Margins are high, given the mark-up on conventional products.

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Source: Internet search 7.7.2009

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The electromagnetic field of Hamburg. Our introduction to this section on public health used European and global data to show the public concern and that of experts about mobile technologies that emit electro-magnetic fields (EMF). When 1.003 Germans were polled in 2006, 55% stated that they feared health risks from mobile phones. Of all federal states, Hamburg presented the highest density of public concern. A full 83% of citizens fear mobile phones as a health risk.2 Yet mobile phones are only one of the components of concern for citizens, as poll results in the previous section have shown. Antenna masts and Wi-Fi hotspots have a lower penetration, yet rank highly in public awareness. If we look at Hamburg, an international city with a population of 1,769,000 and elected by the European Commission as European Green Capital 2011, we can begin to map the city’s electromagnetic field according to the density of mobile phone antennas and Wi-Fi hotspots as the infrastructures that statistically each citizen carries with them. Hamburg is by no means exceptional in the density of infrastructure, but the high degree of public concern is remarkable. Data outlining the density of deployment of wireless technologies in the city shows some interesting correlations: 1.  W hilst Hamburg has enough Wi-Fi hotspots deployed to cover the entire city area (93%) with internet access, only 18.7% of the population can make use of this infrastructure. This means that the city (like most other cities in the world) is experiencing a severe underutilisation of an infrastructure that is considered a health risk by 83% of the population. 2.  If Hamburg was to achieve 100% public access to Wi-Fi hotspots it would require the deployment of an additional 780.000 antennas or more than 5 times the current amount.

3.  If a Wi-Fi network roll-out was planned as a shared infrastructure and deployed evenly at about 25 hotspots per km2, the entire city could be served by 18,875 hotspots or 1 per 100 citizens as compared to the current density of 1 per 10 citizens (giving access to only 19% of citizens), or 1 per 2 citizens if the current model was deployed to 100% coverage. The global supply for electromagnetic fields. A look at Wi-Fi Chipsets. As illustrated in the case of Hamburg, we may well have enough hotspots and antennas in European households to cover our cities with Wi-Fi access for all. Given the high degree of fear, and the growing concern about sustainability and efficient use of resources, we propose to take a look at Wi-Fi as a global technology roll-out. In 1997, the world’s first Wi-Fi chipset was presented to enable wireless networking between devices. Since then, growth has been spectacular, reaching about 600 million units per year in 2010, and an estimated 1 billion units in 2013. Wi-Fi chipsets complement mobile phone handset sales of about 1 billion units a year,3 indicating the density of expected penetration. Where in 2005 Wi-Fi chipsets deployed could cover barely 1% of world habitable land with network access, the potential coverage will reach more than 55% by 2013.

2 ZEIT Wissen 2006 tns-emnid poll of 1003 citizens

3 Source: Gartner

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Hamburg Electromagnetic field iv Mobile Phone Masts Wi-Fi Hotspots Hamburg Population Citizens per mobile phone mast Citizens per Wi-Fi Hotspot Mobile phones per citizen Households with broadband Households with Wi-Fi m2 per antenna % of city that could be covered by existing Wi-Fi % of population with access to Wi-Fi Number of hotspots required at 25 hotspot / km2 roll-out 1,300 182,015 1,796,000 1,382 10 1.23 528,000 179,520 4,119 93% 18.7 18,875
18.7% of population have access to Wi-Fi network 93% of city covered by existing Wi-Fi

HAMBURG

Antennas required in current 960,000 business model for 100% coverage Percentage of citizens that consider 83% mobile phones a health risk

1.23 mobile phones per citizen

83% of population consider mobile phones a health risk

iv Sources: German Statistics Office, Fon, JWire, Eurostat

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Why do public health concerns matter in a book on urban service innovation? Public fear at such high levels is a political timebomb. Fear of the unknown can easily gather sufficient momentum to derail technologies or other advances. 83% of citizens in Hamburg, or 76% of Europeans form a sizeable political lobby, if it ever became activated. And the case of Salzburg, reported below, shows just how powerful a movement against deployment of new technologies can be. Moreover, concerns about risks are always weighed against the benefits, a calculation that in the case of the mobile phone has clearly been in favour of not missing out on the connectivity. Essentially, this is connectivity by voice and SMS. With the roll-out of additional wireless infrastructures, the calculations may not be so favourable, especially if the benefits are not realised. So, there is a direct correlation between the question “Where are the mobile services that have changed my life?” and the perceived risk of massive deployments of mobile handsets, phone masts, Wi-Fi antennas and other systems. As shown in this book, the market for mobility is not just a great commercial but also societal opportunity. Demands and opportunities for efficiencies, higher service qualities and new experiences have been presented in the previous chapters. And yet barriers prevail that cannot be explained by insufficient infrastructures or technologies, but only by an inability to collectively deliver solutions that citizens and users value. The risk of public health concerns becomes more pertinent the less these service innovations make their ways into daily lives. Citizens are likely to value technologies that bring safety to their children, better healthcare, better transport and a more sustainable city. However, if the benefits of advanced wireless infrastructures remain broadly limited to downloading music, ringtones and social networking applications, concerned parents may strike a more serious tone.

It is surprising, given the degree of public concern, that very little public debate is held by political, community and industry leaders on taking some mitigating actions. Hamburg operates 10x as many Wi-Fi hotspots as needed, and is likely to deploy another 5x more to give every household access. This is a fundamental flaw in the business model of broadband deployment, in which wireless technologies multiply the accessibility to various users, unlike a telephone socket. The statistics presented in this section are intended to draw attention to an issue that could transform our cities, and in which constructive solutions may also be simple ways to reduce energy consumption and CO2 emissions. Global Wifi Chipset Sales (1,000) v
1.2 bn Units sold 0 1997

2007

2013

We may also consider public fear as a potential market, not only for protective products as shown above, but for efficiency and user comfort. The green movement is an interesting precedent in which health and environmental concerns triggered by fear of industrialised food, complex technologies and products called for greater transparency. In Hamburg, the market for public safety may be calculated in the cost savings of rationalising 183,000 Wi-Fi hotspots to 18,000, which at EUR 50 price per hotspot would liberate about EUR 8,25m in household spending on hardware alone, plus about EUR 1,6m in annual energy savings. Of course, the savings would be even greater as an alternative to the 960,000

v Source: ABI Research, In-Stat, Techknowledge, WiFi Alliance

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hotspots that would be deployed to reach every household, leading to a potential cost-saving of EUR 47m plus about EUR 10m in annual energy savings. This is equivalent to more than 0.05% of Hamburg’s GDP, or 0.4% of public spending.. Some questions have emerged on the theme of public health that we can consider: 1.  W hat is the overall risk to urban service innovation if a large percentage of the public fears the technologies and, due to the slow arrival of new services, sees little benefit? 2.  Should we consider service-oriented deployments of infrastructures to evaluate risk /benefit scenarios together with end-users and citizens?

3.  Can we develop consolidated infrastructure plans for deployment of multiple mobile networks or private Wi-Fi hotspots that avoid a 50x oversupply of hotspots in our cities, which use resources, electricity and are a public health concern? 4.  Does this fear create opportunities, as concerns regarding food and personal items did for ecological products? How big would this market be? 5. W  ould the public debate on health concerns be less polarised if options to current deployment methods and business models existed?

Evolution Chipset Surface Coverage vs World Habitable Land vi

1% 2005

14% 2009

40% 2013

vi  Source: Gartner

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Interview with Johann Padutsch Mr Padutsch, what is the Salzburger Vorsorgewert? Unfortunately there is no webpage about the installation process of new mobile phone transmitters in the City of Salzburg, so please let me describe the course of action over the past 10 years. For about the past 10 years my colleagues and I have been dealing with the installations of mobile communication networks in the City of Salzburg. In the late 1990s, the Salzburger Vorsorgewert (Salzburg Precautionary Value) 4 was created in collaboration with the director of the regional health commission, Dr. Oberfeld. The Salzburger Vorsorgewert recommended that power flux density be limited to 1 miliwatt per square meter (mW/m2)= 0,614 V/m, calculated on the exterior of affected buildings. This emission value is not Mobile transmitters in Salzburg

compulsory, which (as with all health regulations) is a federal responsibility, but takes the national regulation (ÖNorm) with limits of 9-10.000 mW/m2 (58 or rather 61,4 V/m) as reference. According to Salzburg’s planning laws only some of the new transmitters need to be approved (if they are more than 2m high or within specific land use categories) and are only judged according to integration in the townscape. As a result, the possibility of local authorities having any influence on emissions is rather small. In 1998 the ‘citizen group against GSM-antenna poles’ and I made a gentlemen’s agreement with the mobile network operators, in which they assured us, they would adhere to the ‘Salzburger Vorsorgewert’ when deploying future antennas. Operators would present us the calculations as evidence. In the course of the re-densification of the GSM

x52

x78 x100

1m/w

1-3m/w

10,000m/w

4 w ww.salzburg.gv.at/themen/gs/gesundheit/umweltmedizin/ elektrosmog.htm

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networks one mobile network operator broke the agreement and surpassed the agreed emission levels. This situation escalated until in the end I was sued for abuse of authority, an accusation of which I was ultimately cleared. Unfortunately with this sentence the implementation of the Salzburger Vorsorgewert failed as the court ruling stated that health protection is a federal issue and therefore can’t be taken into account in applying building laws in Salzburg. Together with the mobile phone network operators, we managed to agree on all sites for the installation of the new UMTS transmitters. This workshop process was started at the beginning of 2005 and, with only a few exceptions, the new network is as good as complete. During this process the operators agreed to provide us with all necessary information, so that we could calculate the emissions (worst case scenario), to assure the highest possible health protection for the inhabitants. This time, no specific value was agreed on, but the Salzburger Vorsorgewert was kept in mind by all persons involved. In all, the UMTS roll-out resulted in about 42% of the 260 transmitters emitting a power flux density of 1 mW/m2 or less than our worst case scenario calculations. A further 30% of transmitters work between 1-3 mW/m2. Our measurements on site at full use of capacity proved that the calculated value was not reached, and that we had therefore achieved a success in the precautionary health protection of our citizens. Unfortunately, on some sites the Salzburger Vorsorgewert could not be kept and the value was significantly above the mathematically aspired value. Based on our experiences, I am sure that a continuous 1 mW/m2 power flux density could be reached for a well functioning mobile network, if it was regulated by law (technically more elaborate, but possible).

Our experience shows the limitations of the judicial possibilities of influence. Therefore one is dependent on working together with the operators, which can succeed with pressure from the population and a joint political stand. In achieving this result, you relied on a citizen movement as well as collaboration with the operators. What role did the media play in this process? Indeed, the media played an important role in the process. Generally it was on our side and the side of the citizen initiatives (in terms of the precautionary health protection). In isolated cases they presented the opinion of business and industry players, blaming our restrictive position in terms of precautionary health protection as reason for a possible blockade of Salzburg when the new UMTS network was to be installed by the mobile system operators. Such sanctions were threatened in specific cases, unreasonably painting Salzburg as a community in the technological Stone Age. There were few disadvantages regarding the public dynamic in this question. In some cases, in particular with higher masts but low emissions (below 1mW/m2), these base stations were perceived by the public as a threat to nearby parks or residential areas and denied permission. Even in these cases, the media was generally at one with the public. For me this is not a disadvantage, as it is logical that the optimal value cannot be achieved at every site when applying such a complex, elaborate process throughout the city. One can say that this process increased the pressure on both the lawmakers to issue binding values, and on operators to look into alternative ways to provide a functioning mobile network.

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How did you manage to understand the impact of base stations in the joint workgroups in which both experts and citizens were taking part? The actual accomplishment was the software, which translated the emission values on the surrounding buildings (top floor ceiling) instantly into a GIS-graph (Geographic Information System), taking into account all relevant parameters in each case and linking them with existing GIS-Systems of the city. Although it was time consuming, it allowed us to conduct this process jointly with the operators at hundreds of sites within a year. Citizens fear the technology they love vii

Visualising the impact had the advantage that interested citizens could understand the repercussions of each site easily. Furthermore the software was capable not only of demonstrating the individual values of the sites, but also of linking the surrounding sites and demonstrating the different cumulative effects. A further development, independent to our process, was the 3D representations of “emission clouds”, which gave an impression of the spatial allocations of the emissions. This technology was operated by Dr. Oberfeld.

vii  Source: www.buergerwelle.de

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Could you explain how, from your experiences, the processes of deploying networks in cities could be further rationalised? I have wondered many times if it is sensible to have 6 operators for at least 13 networks constructing the technical infrastructure for each network individually. As a result, the number of transceivers is extremely high in the metropolitan area. In some cases, site sharing led to a single location hosting a dozen or more transmitters. From a technical point of view it would also be possible, to put it simply, to install a transceiver for all operators and networks, which supplies the customers in different channels and frequencies. This would on the one hand relieve visual impact on the cityscape and on the other hand would lower the emission impact significantly. Here, the challenge is the formal principle of competition, though I am pretty sure, that this could be solved as well. The costs for the operators would be lowered significantly and therefore potentially carried over to the user. Many sites have to be operated at very high capacity, as they have to penetrate through buildings and even underground car parks. A possibility would be, in some cases, to work in single cases with several micro- or small units instead of a normal transceiver. This would reduce emission intensity, yet would also imply more work, but it would be possible. Mr Padutsch, we thank you for this interview. Johann Padutsch City Councillor, Salzburg (Austria)

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WHICH TOURIST WOULD PAY EUR 4,550 PER VISIT FOR DIGITAL MAPS?
Contributors Alexander Börve Meili Hsiao Catherin Huang Dominique Laousse Juliette Leygues Ake Lindstrom Eric Marbeau Carlos Romero Dirk Tangemann Stanley Wang

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The business of service innovation in cities: Roaming, Kilobytes or value-creation?
Value creation is key to any commercial transaction, and the price paid for a product or service in a market economy is determined by negotiation between provider and buyer. In today’s mobility industry, such negotiation has to date barely taken place, and has been binary by users either accepting or rejecting services. The result is a business format that charges not by value-added, but by antiquated utility pricing models such as volume of data, bandwidth and time spent online. This leads to confusing ratios of costs and value-creation, or irrational deployment of infrastructures. Three examples, introduced in greater detail in earlier chapters of this book, can help to illustrate the conditions: 254 million tourists arrive from abroad in the world’s top 150 tourist cities every year. Like in Barcelona, they will typically pick up 1.5 paper maps of which some are bought, but most are distributed freely by local commerce, tourism associations or hotels. As shown in Chapter 4, distribution of the same amount of map-data via the mobile phone would cost roughly EUR 6.800 for each tourist, or in reverse, if each tourist were to view the same information as a free 1:20,000 tourist map on their mobile device it would cost them EUR 4,550 in data roaming charges1. The perceived value added for a tourist, accustomed to spend EUR 4-5 on a paper map at most, is not matched by the value-proposition on offer. The paper map can, for example, be reused, scribbled on and shared with others. As a result no tourist elects to spend EUR 4,550 per visit on digital maps, nor is the local commerce sector willing (if technically possible) to spend EUR 6,800 to replace the free paper with digital maps. Hence

the market for mobile tourism does not exist due to a lack of any negotiable position between provider and user. EUR 30bn a year is the value put by Now! Innovations on the global market for mobile parking transactions. Users around the world agree that such a service would simplify their lives, as do parking operators seeking cost reductions and greater efficiency. Communities are enthusiastic about mobile parking services as they can improve profits but also tie into the loyalty schemes of local commerce among others. Yet, among the main obstacles observed by experts in the field are the exaggerated transaction fees charged by mobile operators to offer the simplest possible payment solution (i.e. charging to the phone bill). Instead, tedious registration systems have to be devised to circumvent such costs. As a result, users do not get the ease-of-use they demand, communities do not get the impact sought, parking operators lose efficiencies and telecoms operators see no breakthrough in the market for mobile payments valued at EUR 13bn annually at a 0.5% transaction cost. With eyes on protecting 10% transaction fees, operators instead aim for a EUR 260bn market that users walk away from. Again, no one appears to win in this situation. About 182,000 Wi-Fi hotspots are deployed in the City of Hamburg, covering roughly 179,000 households or 34% of the city’s population with an infrastructure potential that could cover 93% of the entire city area. Or, taking the perspective of the 85% of Hamburg citizens who fear mobile radiation: Why does an apartment building of 30 apartments deploy 30 hotspots if one could be shared by all? The answer is simple, broadband providers’ business models rest on selling individual lines and packaging these with subsidised devices. Whilst cities managed to abandon having 30 TV antennas on multihousehold roofs, we now deploy 30 antennas inside, emitting unnecessary radiation. A different business model could benefit both operators and

1 According to research, roaming charges for data access averaged at about EUR 18.20 whilst a single Google Maps Mobile transaction for an iPhone screen consumes about 285kb of data.

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public health, as deployment costs and incentives could be reduced and negotiated to lower costs for users and up the profit of operators. Yet, atomisation of infrastructure multiplies sales, lowers per unit costs and delivers consumer satisfaction. On measures of health, energy use and sustainable consumption of goods, this business model does not deliver value. Negotiation has at best been binary, with users either accepting or rejecting services. Evidently, the above examples illustrate business models for mobility that either put users off from switching to digital services as in the case of tourism, delay roll-out and efficiencies as in the case of mobile parking, or contradict directly with user desires about health and safety. Given that no technology is as widely spread and accessible in the world today, it is surprising that the marketplace has yet to overcome simple organisational barriers and deliver value to the user, while charging accordingly. It also shows how entire industries, like tourism, miss out on the efficiencies that mobility can provide. Much of this is a legacy of monopolies, regulated markets and organisational inertia. Whilst the telecommunications industry was capable of appropriating technologies and even standards, it has proven itself incapable of involving the user in the definition of the most basic business models. Infrastructures are today the centre of business models, defining value and cost, rather than user experience. As a citizen, tourist or patient you may be charged not by the value you get, but the bandwidth you use, the time you spend online, and the amount of data you process.

PUBLIC BICYCLES HAVE SHOWN HOW BUSINESS MODELS can BALANCE DIFFERENT INTERESTS. THOSE BUSINESS MODELS THAT HAVE FAILED TO RESOLVE CONFLICTING INTERESTS HAVE been SHOWN to NOT WORK
In short, users are billed for engineering concepts and not solutions to their problems, which in turn also shuts the door on services that may add great value and hence generate major returns. Business objectives appear to be pre-determined, although some major transformations will occur in the industry. Since the user did not play along with the established models, and fat (like roaming) is trimmed by regulation and some competition, alternatives may have to arise to justify big infrastructure investments. Especially in Asia, the trend towards alternative mobile infrastructures may be relevant. WiMax, whilst insignificant in Europe, is seen as a strategic national infrastructure for countries like Taiwan, Indonesia or Malaysia. National networks go live in 2009, and interestingly, tendering of the spectrum required the operators’ business model to consider alternatives to the usage pricing of traditional telecoms. As a result, the newly awarded operators are exploring new ideas on value creation, which may provide a major historic opportunity for those markets to invent business models for mobility.

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if mobility was a supermarket checkout: + width of corridors you walked down x time spent in supermarket x size of objects selected + 10% for paying = mobility value you pay

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Galileo, a European version of the GPS satellite navigation system to go live in the coming decade, is seen as another enabler of new business models for mobility particularly through its verified location information. This means that unlike GPS, business transactions can use the verified location as the basis for contractual relationships such as paying for car insurance depending on where you are parked, or only when you move your car. It remains to be seen whether the user will become part of inventing the resulting value-proposition, yet the introduction of an alternative infrastructure may in this case unlock new functionalities. Understanding the role of business models in urban service innovation. As previous chapters have demonstrated, the business model also holds the key to turning actors into enthusiasts (or not), by providing scalable and sustainable benefits. This makes it a central component in devising solutions that can overcome the scalability barriers introduced earlier. Naturally, the business model also determines the viability of different investment models, according to factors including risk, upfront investment needs, regulatory conditions, scalability, exclusivity and intellectual property rights, and user-uptake barriers. Results may include completely private ventures (iDoc24), private ventures that receive initial public support (Smart Card Taipei), or outright public services (Bicing), depending on how the objectives are measured and whether the value created can be commercialised freely. In all these cases, the user has reported value created, yet the external factors required different capital resources to be deployed according to the local context and service offering. Public bicycle systems like Barcelona’s Bicing (covered in the following section) have been implemented according to a variety of different business models in recent years:

Barcelona: Bicing2 Bicing is a public mobility service crosssubsidized by parking revenue and operated through a service contract by Clear Channel, an outdoor advertising firm. This model is an active policy with a public service investment attitude in which costs, impact and quality of service are measured. Coverage is governed by the city’s mobility and transport policy, seeking to balance a variety of modes of transport. Paris: Velib3 The well known public bicycle service in Paris is part of the outdoor advertising concession awarded to JC Decaux, a market leader in outdoor advertising. The service constitutes a provision by obligation, seeking to recuperate outlays by reducing costs and increasing usage and indirect use of advertising. Coverage is determined by outdoor advertising contract terms and service provision obligations. Berlin: Call-a-bike4 Deutsche Bahn, the German national railway company operates a public bicycle system in Berlin as a private venture. Results are measured in revenue, and possibly brand impact for the parent company as well as providing easy access to train infrastructure. Unlike Velib or Bicing, this system does not operate stations in public spaces, but works by taking and leaving bicycles parked randomly within the Call-a-bike zone. Provision is determined by commercial viability, rather than even coverage of full city area. Public bicycle deployments show how the business model is not only a determinant on how revenue is generated, but how different interests are balanced. Some urban services are simple, standalone business models with a single measure of success (e.g. profit, less cars in city, greater efficiency). Others are more complex hybrid business models in which different measures are applied, such as iCarYou where a supporting city may focus on reduction in traffic and CO2, or company profits generated through transactions,
2 w ww.bicing.com 3 w ww.velib.paris.fr 4 w ww.callabike-interaktiv.de

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while users look at money saved by not having a car, or money earned by sharing a ride, and operators at earnings from data-traffic and billing services. Business models that have been shown not to work are those in which conflicting interests have not been resolved. As mentioned earlier, London’s congestion charge had an inherent contradiction in its funding model, whilst concern about data protection with foreign providers created public debate about the consortium. Unlike Octopus in Hong Kong, Taipei’s Smart Card only relies on generating transactions to receive a fee, and does not in itself gain revenue either by issuing cards or by creating operational efficiencies in ticketing or otherwise (this benefit is carried by corporation’s shareholders). This makes the business leaner, but also reduces it to a volume business model in which a critical mass has to be reached to sustain upfront investments in infrastructures and distribution of 16 million smart cards.

Some cases for innovative business models in service innovation. On the following pages, we will present nine cases of service innovations, in which the business model played a central role. Cases range from services that have been designed as public services, such as Bicing, to entirely private undertakings as in the case of Mobilife at Les Suites Hotel in Taipei. The purpose of these cases, which should not be seen as formal case studies, is to give an insight into why a number of strategic decisions were taken along the way to establish a service. All the cases constitute a break-through in their own right, by re-thinking the technologies, business and services model around a simple objective: to add value to the user. These cases were written with a range of partners and contributors, and often with the support of the project leaders or entrepreneurs themselves. We have allowed for flexibility in presenting each case in its own form, providing a rich showcase for the reader.

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CASE STudy Bicing: Barcelona´s public bicycle system
The objective of Barcelona’s public bicycle system is to make bicycles available to citizens as an economic, practical and sustainable way of transportation in the city. Bicing1 is about promoting cycling as a complementary transport option to the citizen and to enhance the inclusion of such vehicles in the intermodal transport offering. What Bicing set out to achieve: • To create a new public transport system for individual use that is sustainable and healthy and to support citizens in conducting their daily journeys by bicycle. • To implement a new mobility service that is completely integrated within the city’s existing public transport system. • To promote bicycles as a frequent use vehicle in the city. • To improve the quality of life in the city by introducing new low noise and smoke emitting transport modes Bicing was designed on the back of the accumulated experience of various American and European cities that from the 1960´s onwards have tested several options of public bicycles with varying results. The last decade has seen the emergence of the first automated systems (e.g. Munich, Copenhagen) that are the direct precursors of the current functioning public bicycle systems. More recently, in the last five years, Europe has been experiencing a boom of new automated systems, such as the ones in Lyon or Paris and, the case in discussion, Barcelona. Lyon’s system2 was the main reference for Barcelona, both for the elaboration of the contractual framework and for the actual implementation in the city’s streets. Barcelona’s Bicing contracting method did not follow its
1 w ww.bicing.com 2 w ww.velov.grandlyon.com

French precursors in integrating the service into an outdoor advertising contract. In the Catalan case, the service provider was designated by a public competition. In addition, Barcelona was a pioneer in financing the public bicycle system by using the operating profit from parking regulations in the city’s roadways, public and residents parking areas, as established by the local fiscal ordinance. The advantage of separating the public bicycles from advertising contracts is that it provides the city better control over the system and its service quality. After a progressive roll-out, over 18 months, there are currently 400 stations in the city, with 6.000 bicycles, 200.000 subscribers (60.000 in the first year) and 50.000 daily journeys. This success is due to three factors: • Favorable geographic and climatic conditions. Barcelona’s climatic conditions favor cycling. The average temperature is 17ºC and there are only 74 days of rain a year. It is also a compact and dense city, with a rectangular surface of 11x9 km2 and a flat and even central area. • Bicing has helped increased the popularity of cycling as another transport option for the city, ideal for journeys that are too far on foot (more than 20 minutes) but too short to justify a motorized private vehicle or traditional public transport. It has also become one more option that complements the intermodal offer of public transport. Experience shows that Bicing is greatly used at the end or start of intermodal journeys. The average user profile is no longer an environmentlist and there is now a wider scope of age and occupation among current Bicing users. Environmentalism is no longer the main reason to cycle; speed, commodity and cost are also big factors. • Bicing is the culmination of a 20-year policy to promote cycling in Barcelona. This policy has focused on building a cycling road network, bicycle parking provision all over the municipality and the creation of 30 km/h and pedestrian zones where traffic is reduced and

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slowed down so that bicycles can circulate with higher security while sharing space with motor vehicles. This is how bicycles, propelled by the installation of Bicing have reclaimed a niche in the modal transport catalogue of Barcelona, and it is forecast that its role in urban mobility will be increasingly relevant in the coming years. Bicing has significantly impacted on the profile of users, to a much broader demographic and professional spread. It has become an integrated mode of urban transport in Barcelona.

Bicing users and average journey length: i

250,000 professionals (2009)

20,000 students (2007)

Average journey of 3km

i Source: City of Barcelona

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Business Models

CASE STudy EasyCard Corporation: Taiwan
In March 2000, the EasyCard Corporation1 was founded by Taipei City Government, Taipei Rapid Transit Corporation (Metro Taipei), private bus companies (13 in total), banks, system integrators and engineering consulting firms. EasyCard’s mission is to integrate and operate a contactless smartcard ticketing system for buses, metro, and public off-road car parks in Taipei. The objective of EasyCard is to provide the best electronic ticketing system platform in transportation, tourism, and the consumer retail business for the general public. Services have extended beyond transportation such as the metro, bus, railway, public bicycle, off-road car park, and parking meters, into other useful applications including libraries, access systems (e.g. offices), student ID’s, schools, and micro-payments for many services. Like Octopus in Hong Kong,2 EasyCard originated from a transport ticketing system, with more applications added for the convenience of passengers over time. Although the initial plan was to add other application, it was only with the Act of Issuance and Management of Electronic Monetary Cards that the e-pocket (electronic cashless wallet) function was launched, allowing monetary transactions with EasyCards. The e-pocket system is embedded in the current ticketing system of EasyCard, meaning that a single card can store cash and transport value. The maximum amount it holds NT$10,000 (EUR 215). EasyCard is different from conventional magnetic cards, by being the first ‘touch and go’ IC (Integrated Circuit) card for mass transportation in Taiwan. Transactions on EasyCard are executed by wireless signal transmission through memory IC chips and induction circuits implanted onto the card. Its non-contact feature, coupled with larger capacity, durability, speed, accuracy, and security, etc. enables prompt transactions and repetitive use for many years. Passengers no longer need to carry coins or do repetitive ticket purchases. Transfer rides do not require tickets to be validated in advance. It thus enhances citizens’ convenience in using public transport. • Integrated fare collection for various transports by one ticket; • Usable for years to avoid repetitive ticket purchase; • Speedy passage; • Convenient locations (over 20,000 convenience stores) for ticket purchase, micro-payments and adding funds; • Auto-load with banks to reduce risks of cash transactions; • Can be integrated with access or other smart card systems. For transport operators, EasyCard helps provide: • Reliable operational data, such as revenues and transport volumes to help management improvements; • Unified and integrated operations to enhance coordination among operators; • Operation efficiency of vehicles by shortening passenger’s time while getting on and off; • Automated transactions reduce operation cost of cash handling, ticket audit, etc. The Taipei City Department of Transportation utilizes this electronic ticketing system as a major part of the city’s mass transportation infrastructure development. Today, EasyCard Corporation has already issued more than 16 million cards including IC cards and credit cards co-issued with local banks. Over the years, the service has expanded out of Taipei into surrounding counties and other cities.

1 w ww.easycard.com.tw/english_01.php 2 w ww.octopuscards.com

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Challenges are faced when integrating and extending the system outside the City of Taipei, since the infrastructures and operators of the Rapid Transit System are different. For example, Taiwan’s land area is much bigger than Hong Kong and Singapore’s, therefore challenging efforts to deploy a unified ticketing system. The age of EasyCard users on the Metro ranges from young to old. Revenue is generated by way of a contracted percentage from each transaction made using the card. The small minimum deposit of NT$100 (EUR 2.15) combined with the card’s high convenience lowers the barriers for all to use public transit. Every 2 years, AC Nielsen conducts a satisfaction survey on public transport EasyCard uses:

passengers for EasyCard. The result is promising, as 95% of those asked said they were very satisfied. In the future, the EasyCard will be usable in a wide variety of locations and facilities, including convenience stores such as Family Mart or 7-11, vending machines, and fast food venders.

Entry to the Zoo

Library card

Public Transport

Credit / debit card

Parking Payment

Key

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Business Models

CASE STudy Sickla Smart Park&Ride
As in all large cities, the traffic situation in Stockholm is a challenge. Despite an effective public transport system and a congestion charge system that reduces traffic at rush hours by 10-15%, the street and road capacity is insufficient. Population growth in the region and several large road and rail investments that are to be realized simultaneously, are factors that are expected to put even more pressure on the street and road network in a near future. Thus, the Intelligent Transport System (ITS) is a complementary tool to improve traffic conditions and will play an even more important role. In Sickla, on the edge of Stockholm, a smart Park&Ride (P&R) concept is being developed as one of several essential components designed to meet the future transportation challenges in Stockholm. Parking is an essential component of the transportation system and various types of parking management systems and strategies exist around the world. Cost-effective parking management programmes can reduce parking volumes dramatially, in some cases by up to 30-40 percent. The challenges associated with parking can be expressed both in terms of supply and available spaces and in terms of easing the traffic tie-ups caused by drivers searching for a parking space, but also in terms of facilitating intermodal travelling and thus reducing city congestion and CO2 emissions. Sickla Park&Ride. A new value-adding transaction point. The main goal of the project is to design, realize and demonstrate a new smart P&R concept in Stockholm, with an emphasis on user aspects and overall traffic volume reductions. The Sickla shopping mall (which is approximately 10 minutes away by bus or train) has been chosen as a pilot concept spot. An important focus in the project is customer needs and values. The theoretical starting point is that a P&R location, designed to combine the customer value of public transport with that of a shopping centre, increases the overall customer attractiveness of the location or an intermodal travelling offer. In the project, key concept components, applicable to other P&R locations in Stockholm, will be identified, put into practice and tested. Initial observation and study. An introductory study (focus groups, conducted in 2008) included discussions with users that travel to the Sickla shopping mall either by car or by public transport and that either only Park&Ride or also run errands during the stay in Sickla. The aim of the study was to explore what customers actually consider as important to them and to develop an inventory of customer values and a comprehensive list that defines different customer motivations. The study resulted in the important insight that a successful P&R concept must be designed in a way that it makes people´s everyday life easier. In general, only in exceptional cases do motorists save time by P&R travelling. The competitive advantage lies in reduced travel costs (fuel and congestion charges), ‘spare time’ onboard a public transport vehicle and in environmental benefits. These values are probably not enough to make a general P&R offer attractive – values must be added in order to make a P&R alternative more attractive than the car alternative. In the introductory study, more than seventy such value-adding ideas were brought forward by the customers and travellers (see following pages). The study lead to the over-arching conclusion that a ‘door-to-door’ and a ‘life facilitating’ perspective must be adopted in order to make the P&R concept successful.

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The Sickla Smart Park&Ride Concept. The results from the introductory study were used when outlining the Sickla Smart P&R Concept. The concept is based on assisting travellers to make well-informed mode choices and offering every-day facilitating services. Data from the Stockholm Public Transport Management Center (real time and incident information), the Stockholm Joint Traffic Management Center (travel time and congestion information) etc and the Swedish Rail Administration Management Center (travel and incident information), presents relevant choicemaking information via Variable Message Signs (VMS) but also via a Web/Mobile P&R Portal and Service Terminals in the Sickla area. Furthermore, the P&R portal will offer parking information, parking lot reservation, real time travel and delay information. The user will also find information about shops, available shop discounts, guides and other kinds of available customer-oriented services. The basic concept components are: • V MS (variable message signs) along the motorway displaying P&R choice information • P&R Guidance System giving guidance to the P&R area • Parking System supplying information about available P&R parking lots • A rea guidance system giving guidance to the different public transport choices and shops • Service Terminals inside Sickla shopping mall • Web/Mobile Portal including parking lot reservation possibilities • General improvement to public transport stops improvement • Add-on services such as food-delivery, dental service, training service etc.

A Business Model for a sustainable Smart Park&Ride concept. Stockholm has a congestion charge with profits transferred to the traffic system in order to improve and invent new functions and services. Sickla Smart Park&Ride is a receiver of this congestion funding. The business model for the Sickla project is unusual and will be evaluated during the pilot. Both private and public companies are involved, at no charge. However, any costs associated with participation are something that each service provider must account for (except basic providers that have no venturing interest in the project). Most companies realize the potential in reaching some of the nearly 2 million people who use public transport in Stockholm each day. Stockholm Transport pursues no interest in direct revenue from the involved parties and measures the objective that more people use Park&Ride facilities and public transport instead of going by car. All actors should be motivated by the outcome of the project. Public transport gets more customers, involved service providers get more customers, the traffic situation is improved and the environment is a winner as well. Some heavy investments is involved, but some companies are willing to do so because they believe Sickla Smart Park&Ride will pay off in the long run. Atrium Ljungberg, the owner of the shopping mall, have made a major investment in the project, an investment that will benefit public transport customers as well as shopping mall customers, which may of course be one and the same thing.

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Ideas that emerged from workshops with citizens. Pleasure – Cinema – Library There’s much to do without shopping Nice to get out of the house Nice outdoor environment important! Shopping area, not shopping center 30 min parking is important – there ought to be computers and service phones I want to come here – this is nice and safe Shopping is nice – has character Too narrow with a pram The locals shop here Transport service for goods Transport service makes you able to take bus or bike Taxi station wanted Playground wanted We want to sit down outside More benches needed in the ‘Magasinet’ Babysitting like they have in IKEA Route planner Goods brought home More and larger restaurants Restaurants for families (spaces for prams) ‘slow food’ – but fast food Bakery wanted Shopping on the market square wanted Second hand Inexpensive work out needed Post!!! Weather central No one misses a bank!!! Newspapers in the public spaces Much talk about the Gallery Pedestrian crossings wanted

People want to walk to the shopping area, but they want to go home with public transport The cars are dictating traffic – more short cuts for pedestrians Shortcut to AkzoNobel More defensive measures for pedestrians Dark tunnel is making the way unsafe More signs helping the pedestrians The walk from the tracks is badly protected Boring to go to the tracks from Alphyddan Hard to get home with collective traffic – no late buses Buses coming all at once – spread it out Buses should be coordinated with opening hours and cinemas More buses on Sundays/in the evenings A lot of complaining about bus no. 74 More bus stops More space for prams in busses A terminal wanted in Sickla Better information on buses Fast trains are good – but frustrating Free buses Long queues – need better roundabouts Employers should do more to make people take the bus to work Special parking at Sickla station Signs, service, communication More info about buses Shopping trolleys that can go on the busses Annex 5: all ideas Better signs for cyclists Orientation maps Signs outside – ICA Missing a KIOSK Where to buy a map Names for parking spaces

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Sickla Park & Ride

Shopping Parking reservations Parking info Sickla Park & Ride

User

STOCKHOLM
Decrease in traffic and emissions

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Business Models

CASE STudy RATP and the changing paradigm of urban mobility
Interactive bus stations! Metro of the 21st Century! My-RATP-in-the-pocket (mobile official website)! More than ever mobile and interactive information technologies not only play a growing role in transportation but are changing transit trip planning towards sustainable urban mobility. Today people can optimize a trip together with other activities they want to perform. For the transport sector, it means that we are facing a major change, a transition from transport to urban mobility. That transition is not a simple semantic shift. It’s a step towards a new vision of mobility as a personal trip, a mobile experience characterized by interaction with other travellers and smart environments. Today’s average user is becoming tomorrow’s urban navigator, quite a chronosapiens seeking physical and virtual coaching, as well as on-the-move services to help manage the complexities of everyday life. For public transport operators like RATP,1 all the above analyses form a part of a strategic study. These questions challenge prevailing economic models in use, which seek to reduce time dedicated to trips. In short: Should we stay focused on simply optimizing means of transport, or should we make a move to consider the mobility services citizens desire, even if we have to integrate other actors from the transport sector or outside? For RATP, it was a matter of product-service innovation that we addressed using a structured innovative design method2 to work on Soft Mobility applied to classic transport means, to help our Bus and Metro system enter the 21st century. As a result, RATP is in the process of defining a new business model which can clearly demonstrate transportation economics, massive diffusion of ICTs and users expectations of social interaction. The new economic principle is ‘conviviality economics’, a branch of the economics of functionality. This principle is postulating that sustainable economic development could be better reached if firms offered added-value by mixing basic products and services. For RATP, it means being a global player in urban mobility and no longer proposing transportation as such, but ‘meaningful mobility’ with extended navigation, routing and coaching services. Here, RATP’s innovation was to consider complementary services not as accessories, an extra or additional soul (un supplément d’âme in French), but as a core of element of transportation. This constitutes a real change in transportation, as previously RATP offered these services only in the case of incidents and not as a basic system component. New opportunities can emerge when associating other actors in an incubating process to develop new mobility services. RATP is becoming both a catalyst and a booster to materialize innovations. RATP could be called the ‘land of innovation’ and in a near future, much of this innovation will come from outside the firm and indeed the transport sector. For example, during ‘Futur(s) en Seine’ (June 2009), an international event about digital innovation in Paris, RATP implemented an iPhone application for the T3 (Tramway line 3 in Paris) named ‘Transports Amoureux’ (Loved Transports) where travellers could leave virtual tags about other people, the city and transport. It was a preview of the new way to work with startups, to help them design daily services inside transport places. RATP called that experiment Mobility 2.1 to symbolize that it is a new step beyond classic social networking (web 2.0) where relations to institutions like RATP could have business significance.

1 www.ratp.fr 2 C-K theory, Hatchuel and al., 2001

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For such a new mobility operator, the next step will be to develop Design Platforms, like clusters inside transport places, for collaborative innovations that create sharable added value. Transport places (surface, underground and… virtual stations!) are the most crowded spaces in modern cities, with beta-testers ready to evaluate new services as shown by the ‘La Fabrique RATP’3 experiment.

RATP – ‘Transports Amoureux’

ratp invests in ‘meaningful mobility’, enriching transport services to help passengers relate to each other and their environment in entirely new ways PARIS T3

3 www.lafabriqueratp.fr

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Business Models

CASE STudy One Language for You: Advanced mobile language learning
Astana, Kazakhstan, is an emerging tourism capital. The city has experienced rapid growth in recent years due to the rapidly emerging regional economy of Eastern Europe, and a strong policy to attract high-quality tourism. Until now, tourists have primarily come from neighbouring Russia, an easy step since Russian is spoken in Astana. But business and public leaders are more ambitious and want to turn Astana into a truly international tourist hub. English and other language skills are a pre-requisite to achieve this goal. 1L4U (One Language for You) is a small company that has developed a smart mobile phone application for language learning that can help citizens qualify in new languages rapidly. Using the latest technologies in mobile communication, the user gets training on demand through their mobile phone according to an approved learning plan. Skilled teachers are the architects behind both the ideas and the pedagogical model that is the core of the service. The platform behind 1L4U is extremely flexible and creates possibilities to implement language training on most mobile devices and also in a lot of different languages. Users formed part of the development team, a process that was supported by Living Labs Øresund which organised collaboration with target groups such as teenagers, business persons and service providers. The service was first tested at the prototype stage, long before entering the commercial market. The advanced users of the Øresund region, which includes Copenhagen and the southern-Swedish cities of Malmö and Lund, worked as an ideal and diverse test environment. As a result, the platform is very flexible which means that you can easily adapt the service to any language spoken, but also the user experience can be tailored to a variety of custom or cultural needs. Whilst piloting was ideal in Scandinavia, the first markets for 1L4U are the emerging economies. In Eastern Europe there is a great need for English training and the language training infrastructure is still under-developed, as is the penetration of broadband which would support other e-learning methods. So, as in the case of Astana above, mobile phones are an ideal platform to reach many citizens in the most flexible way. Users in Øresund have also been an integral part of developing the business model for1L4U. Users displayed little willingness to pay, especially in Eastern Europe. So instead in selling to the end users directly, 1L4U targets the operators. All operators have an interest of driving traffic to their networks. Since mobile language training is a driver for data traffic there is interest from the operators to implement applications like 1L4U as a ‘free to use’ applications in their network. 1L4U has also learnt that the application is of great interest to local and national governments. As illustrated in Astana, tourism is a regional or national effort in which government plays a key enabling role. Building the skill-base for a more international service industry is therefore high on the agenda. As a result, 1L4U operates with a model where the cost for the application is shared between the public sector, the operators and the end users. The technical solution is very simple and the pedagogical method is proven by many years of practice in Swedish training institutes. By repeating different keywords, the student gets a very large vocabulary in a short time. Everything is run as an application in the mobile phone and there are many options to customise the application for special target groups or individual needs. The student will often be reminded by the application and called to answer, for instance, different questions in the language he or she

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is learning. This is a solution to a very common problem within language training, in that the student forgets different words due to the fact that they only get very fragmented exposure to the new language (in classes, typically). 1L4U will be paid for by the government, whilst operators invest in network capacity in order to spread the application widely. Operators also have the responsibility to market the application towards end users directly. Bundling the application into the mobile subscription is the most common model used where the user only pays for the data traffic.

1L4U is working to convince the different actors to collaborate with each other in order to get the application onto the market. As a government and business collaboration it constitutes a public private partnership for which there is little precedent in many cities. Trust between industry and public actors is not very high by default. So one main lesson to be learned from 1L4U, is to start early on with building trust between the key actors needed to enable a new service. Naturally, this takes a lot of time and that will be one of the largest challenges for the company.

Advanced language learning — from Øresund to Astana

Malmö/Lund

Astana

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Business Models

CASE STudy ICARYOU: Who shares moves faster!
The world’s first mobile internet carpool service. Stop and go. Stop and go. It is the same every morning. We sit in the car and move in stops and starts. We get angry just like the many thousand others who are alone in their cars, just sitting there and moving forward slowly. On the radio they say that the traffic in the Netherlands is normal. Is this normal? Please! I am on a six-lane motorway on my way to an important appointment, and going no quicker than a child on a scooter. Does anybody really need to travel alone in their car? Okay, there is carpooling. But in most cases it is difficult to use. You must decide far in advance when you want to leave and return. What’s more, you do not know the price of a ride in advance. And finally, it is uncertain with whom you will be travelling. But in a world where nearly everyone has a mobile phone, it should not be difficult to arrange for a ride in real time. Rienk Venema and his brother Peter thought about this problem in November 2006. The result was as simple as it was ingenious: Simply combine the mobile Internet with a mobile navigation software and offer this service to an online community. Everybody in this community – whether a driver or passenger – could meet somebody else via the mobile phone for a ride with the same destination “on the fly”. Efficiently used, the number of cars on the way to work could be halved at least you could therefore travel twice as fast and both drivers and passengers would have price confidence. Moreover, you would trust each other more, because you come from the same community. You may call it destiny or coincidence: Almost at the same time Dirk Tangemann came up with the identical idea of a dynamic mobile carpool service, without having ever heard of the Venema brothers. The fact that Dirk Tangemann and Rienk Venema met each other a short time later via a contact in Finland sounds almost like a miracle. Independently of each other, they both contacted a Finnish company working carpooling via SMS at the time. Instead of competing, the two sides decided to be much more efficient: they shared their knowledge and worked together. So far so good. But what’s next? How can such a great idea fly? How do you get money? How do you generate the critical mass, needed to make the idea work? Question after question. A lot of meetings with various authorities followed, discussions with potential investors and countless debates about the financial structure of the business. The name ‘iCarYou’ was invented. And the website and software for the mobile service were developed. The software and website had the great advantage that they could demonstrate early on just how easy and efficient “iCarYou” was, rather than only explaining an abstract idea. Shortly afterwards, a Dutch bank became very interested in investing. The only downside: the bank wanted to secure 90% of the ‘iCarYou’ business exclusively. The team’s courage and drive to put the idea into practice came to a halt. Retrospectively, what came next was extremely important. The ‘iCarYou’ team presented their idea at the Living Labs Global Matchmaking Summit in Hamburg.1 Instead of just showing boring facts and theory, they presented a few entertaining graphics and demonstrated the service prototype on 2 mobile phones to an enthusiastic audience. What followed was rewarding compensation for the dry spell in recent years. Living Labs Global opened the doors for ‘iCarYou’ and set-up rapid and nonbureaucratic contacts with numerous partners in Hamburg. This would be the first ‘iCarYou’ test market. A German subsidiary, with the name ‘comoveo’ is already established. Marketing
1 www.livinglabs-global.com/events_2008_hamburg.asp

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activities for entering the market are in full swing and the contacts with potential local partners in Hamburg are put into place. Why Hamburg? Hamburg is both a nonbureaucratic and a cosmopolitan city. iCarYou also prefer a local or regional roll-out rather than a bigbang, all or nothing implementation. Why local? Because a critical mass needs to be built up for comoveo to work as a fully flexible service. Thus, all the team’s current energy is put into customer acquisition in one community. Without local partners this would not be possible. After a successful launch in Hamburg, iCarYou would like to offer the service to any other big city or region. Potential local partners, such as existing networks (Xing, LinkedIn, Hyves), but also carsharing companies, taxi companies and telecom companies are invited to join ‘iCarYou/comoveo’ in the roll-out. If the idea of ‘mobile phone matchmaking’ proves a success in the Hamburg pilot, as expected according to recent market research results, ‘iCarYou’ is ready for the German market and also for the European and even global market. Dirk Tangemann commented on the recent developments: “Since our idea will only work with an active network, it was clear that we could progress faster by using the network structure of Living Labs Global. We share our knowledge with others just as the ‘iCarYou’ community does with their cars!” iCarYou intends to share its success with local, regional and global partners. Promising initial contacts have been made with potential partners, such as the municipalities of Sant Cugat (Spain) and Helsinki (Finland). Whilst the company base remains in the Netherlands, contacts have been made with Taipei (Taiwan) and Silicon Valley (USA). iCarYou is looking to co-operate with social networks, telecom companies and, municipalities.

Car sharing

Save time

Save money

Save emissions

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Business Models

CASE STudy The Case of EU-Latitude: TOURISM CONTENT AS SERVICE
Gallimard, a leading French publisher of literature and tourist guides together with co-publishers saw that investments on digital contents will increasingly rely on larger markets. Costs will have to be shared to cover a growing number of traveller expectations (research, booking, location-based services) in as many languages as possible. Based on the above challenge, EU-Latitude started as a market validation project supported by the European Commission as a consortium of 13 European publishers and tourism authorities. Some trends in the European business for tourism: • Tourist Authorities have to promote their region. This is a constant, budget driven effort, requiring the ability to finance marketing efforts. Content needs to constantly be updated to cover local activities and events. • Publishers are looking for business models to push their existing catalogues of content, whilst experimenting to identify new sources of revenue. • Content is produced by social media in a massive way meaning that editorial content no longer constitutes the majority of content. • Travel distributors are looking for ways to increase margins to compensate their average marketing costs of 37%. Partnerships are needed in marketing, a trend expected to grow over the next decade.1 • Europe has more than 10,000 publishers, with about 800 focusing on travel. Less than eight are currently involved in digital delivery of their content, leaving a huge gap for the exploitation of legacy content. EU Latitude resulted in both a technology and methodology, an approach called “Content as a Service”, providing the resources and infrastructure (both technical and market) to bring relevant tourist related content from regions to travellers. This is done by: • marketing to all tourist authorities • i nvolving content publishers • referencing and tagging content • supplying distribution channels to present content to the user when needed. However, content as a service implies more than delivering appropriate information to different actors in the travel industry. It also means participating in an environment for products and services related to travel & tourism. To succeed, a technological framework needs to meet the existing competing standards on the Internet. As of today, EU Latitude is a platform for delivery of on-location travel services. It addresses the following needs: • W hat can I do here and now? For tourists, this is about how they can maximize their experience in a given destination. Beyond providing basic offers that already exist, it is about providing the context in which an experience can be perceived: from trusted content, to collaborative reviews, to updated and verified activities and events, to the ability to actually be able to book. • Let’s go do it. Being able to make enquiries and book an activity or package in a given destination. This booking can be done before a trip, but takes on a much greater meaning when done on-location • Let’s share the experience. Word of mouth, social sharing and relaying the experience spreads the benefits of what has been experienced. Capturing the context and content of an experience plays an essential role for future discoveries and bookings.

1 Phocus Wright, 2008

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• Discovery around the world. Tourists eager to find a unique experience and learn about becoming ‘like a local’ The business model of EU Latitude is organised into three parts: 1. Tourism authorities involve and finance publishers in content creation, packaging, tagging and referencing. EU Latitude exposed the difficulty of generating revenues from local tourism authorities: their rhythm, organisation, and political constraints are quite different to the private sector. Whilst they are very important in the overall ecosystem of the approach, they cannot constitute the basis of a business model. 2. Publishers and tourism authorities generate revenue by promoting content for all parties involved. Active participation is required from all members, plus a critical mass of publisher and tourism authority membership. A large marketing budget is required to promote a portal, which could not be raised from EU Latitude members. 3. Licensing revenues are generated in a businessto-business environment. This mostly interests publishers and tourism authorities. EU Latitude extends this to involve tourism authorities in the process.

The development of “on location” mobile services has turned out to be the most promising business model. Revenues can be generated from the following lines of business and the following targets: • LBS services (design, marketing and distribution) •B  usiness Model •L  icensing of Apps and web based services • Licensing and sharing of content revenues with publishers • Target: cities and territories, Local Actors, Publishers, Travel retailers • Mobile Booking services for retailers and contextual in-application advertising/sponsoring •B  usiness Model •S  hared revenue with retailers •A  ffiliation revenue on bookings •A  d and sponsorship revenues •T  arget: retailers, local actors, brands EU Latitude is mainly an organizational breakthrough, by having publishers and tourism authorities delivering (and updating) contents in different languages using a same protocol. This is not without challenges to the implementation and wider adoption. Scalability in the deployment phase poised a further challenge in this mobility project, with many actors around the table, and collaborations between technical and marketing experts.

EU Latitude: Tourism content as service

EU Latitude Travel distributors Tourist authorities Publishers The user

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Business Models

CASE STudy Extransit: your mobile service prototype in 20 Minutes
Many citizens, civil servants or entrepreneurs spot a problem and have an idea for a solution. And many of these may be ideas for mobile services. Yet only very few people understand what it takes to build a service, regardless if anyone would actually use it. So imagine, you could have a prototype for a mobile service within 20 Minutes. For free. Welcome to Extransit. Software development platforms tend to be intuitive to the expert, opening a big market for simpler platforms for those who want to easily develop mobile services. In collaboration with Living Labs Øresund the company Extransit embarked on this challenging mission, and has developed a completely new mobile service development tool putting the amateur user-experience rather than the professional developer’s perspective at the centre. As a result, Extransit is an experience, but also a departure from the professional business models used in the past. Instead of following strict licensing model, Extransit works with freemium thinking. In small scale the platform is free for use in its basic functions, and for large companies or professional users there is a business model connected. End-users were directly involved in the Extransit development phase in order to increase the functionality of the platform. This has resulted in a state of the art platform for those who are developing new mobile services but also for those who have no programming experience. This is a great contribution to a maket, where device manufacturers and network operators have invested heavily into technology that enables everyday use of mobile services. Despite all the technological progress, we are still waiting for the revolution of mobile services, and their everyday use. The relationship between service providers and users has been a little bit of a chicken-or-the-egg dilemma. With development costs being fairly high and user uptake low, business ideas suffered whilst users did not get their services. Extransit has addressed this dilemma through building a mobile platform that makes it as easy as possible to design and deploy mobile services that are quick, easy to use, and look good. By empowering the widest possible audience to turn ideas into services, Extransit hopes to spark a wave of mobile service innovations – created for users, by users. As a platform, Extransit Mobile Interaction Suite consists of three parts; the catch Client that is installed on mobile phones, the Strike Server or Express account that hosts all applications, and the Pitch Studio which is the on-line visual development environment for mobile services. An easy-to-use user experience. Users only need to download the Catch Client to their mobile phone. When started it connects to the Strike Server and presents the user with a list of available services. When a service is selected, an on-line application is started. Realtime interaction. Any events on the server are immediately reflected to the mobile client. If anything from the latest headline on a news page or transport information arrives, it is immediately accesible to the client. This makes the technology ideal for interactive and ‘push-based’ applications. The client can even be put in ‘sleep mode’, and remotely woken up on demand, by the server.

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On-line visual authoring and service development. Applications are edited by using a remote application technology. The Pitch Studio is installed on any computer, or run via Webstart. Everything is easily edited in the studio, including the user interface, application flow, integration to external web services as well as different effects. Changes in the services are immediately passed on to clients installed in phones. Mobile clients can even be used as on-line real-time previewers when editing. Rapid prototyping. Extransit can help try ideas on mobile phones as never before. This simple and flexible development environment, at no cost to the amateur, allows a citizen to dream up a solution to the problem in front of them, and make it accesible to all the required actors. Extransit have put a lot of effort into finding the right business model to have the maximum impact and tried to find a more flexible model where citizens can use the platform in an almost free model, while larger users pay more traditional license fees. An upcoming challenge for Extransit is to help users of the platform to integrate their business models in the model of Extransit. Different types of shared profit/shared risk models are about to be tested on a pan European level in order to see what type of models are suitable for new, still unproven solutions. Extransit is also measuring the impact of how the model works in a market that is affected by the ongoing financial crisis. In spite of the lack of venture capital the great need from the developers’ communities has lead to an increasing demand for the Extransit platform to simplify processes and focus on bringing new services to users.

Time to Market

Idea

20 Minutes

Prototype

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Business Models

CASE STudy MobiLife by Les Suites Taipei
Les Suites Hotel Taipei1 is a small business hotel emphasizing service quality, design and innovation in order to to stand out to international business travellers. The concept of the MobiLife service was invented by the firm’s president, with the idea of fulfilling the needs of frequent business travellers. The hotel, if compared to other business hotels in the city, charges premium room rates. In addition to maintaining a friendly and comfortable environment, the management has made a great effort to introduce exclusive services at affordable cost or even for free to its guests. Users of MobiLife are the hotel guests, who are predominantly foreign visitors (90%) doing business in Taiwan or attending international trade shows. MobiLife provides business travellers with more convenience during their stay in Taipei by providing a mobile phone to make inter-room calls, local calls, and international calls, free of roaming or other surcharges. No charges are booked for inter-room calls or calls to the operator/ front desk. Local calls are charged at the same rate as a local mobile phone. A hotel guest can contact his or her friend also staying at Les Suites Hotel by dialling only the room numbers even when both are outside the hotel. Guests can also contact the hotel operator for assistance on transportation, directions, reservations and even translations for taxi drivers. Les Suites Taipei does not advertise its MobiLife service, but instead relies on word-of-mouth to spread awareness. Guests are generally happy with the hotel’s pleasant atmosphere and excellent services. This is reflected in the high return rate of over 65%. Other business hotels in Taiwan and Hong Kong are also taking up this new service. MobiLife was invented by observing the needs of business travellers; the CEO of the Les Suites Hotel began to approach solution providers and internet service providers who both thought it would not be feasible. In the planning and development stages, many engineering teams had failed to overcome technical challenges to bring this service online. The planning started in 2004 and it was not until the first quarter of 2007 that this new service has became available. MobiLife was born out of providing value-added services in order to stand out from competitors in the hospitality industry. The key success-factor is not technological, but rather the marketing strategy of listening to what customers considered convenient during travelling. This resulted in high return rate and a breakthrough as the first hotel in Taipei to offer this service. Although the satisfaction of guests has been high since the service was launched in 2007, the underlying business model is not yet fully established. A challenge of MobiLife is that it hardly generates additional revenue for the hotel. In fact, there’s even a revenue loss as compared to the hotel’s past telephony service. In the future, Les Suites Hotel will need to add further innovative value-added services to MobiLife to stay ahead of the competition as the preferred choice for its customer base and retain a premium margin.

1 www.suitetpe.com

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Take the concierge with you wherever you go.

Translation services

Taxi bookings

Restaurant bookings

TAIPEI
Hotel bookings

Return rate to the hotel

65%

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Business Models

Demand as a driver for service innovation, and the true nature of value-networks
How do you define demand? The notion of demand is probably the economic term which most relates to our self-interest as individuals. Disregarding what we want and how we want it, it is us – you and me – that ultimately establish our own demand, consciously or subconsciously, espoused or imposed. In this framework, demand can be the Smithsonian desire for wealth, or Maslovian need for selfexpression, the Calvinistic work ethic and fear of God, or the revolutionary’s desire for liberty and equality. No magic in that. When it comes to service innovation and the social diffusion of innovation, the main driver of diffusion is linked to the same underlying desires: to change the status-quo and mould our surroundings to better cater for our individual needs and tastes. As noted in Chapter 2, markets are based on demand. However, demand can have many faces, and can be carried forward by advantages and drivers of very different nature. In this chapter, we will investigate some methods of estimating demand for new mobility services.

How do we know how markets evolve? The traditional methods for understanding how markets evolve are tied to looking at existing markets; their historic growth rates, and attempting to predict their future growth. However, as the market forecasts for internet-based business models from leading market analysis companies in the 1990’s showed, such methods can be highly volatile, if not entirely ’guesstimates’. An alternative method is to establish scenarios looking at technology convergence and industrial transitions to understand the redistribution of supply chains or other fundamental market mechanisms. However, such analysis is highly complex, and while providing an estimated ‘complete’ market overview, it might not take into account or predict the impact of radical innovations and actions of humans. This handbook suggests a third method. We can take an informed look at selected business cases and determine their actual economic impact. By extending the conclusions of such case-based measures of impact to the entire industry or market to which they apply, one can construct a picture of validated market opportunities. When combined, these will indicate the possible demand that exists. Such an estimate will not be complete but it does provide a more realistic picture of demand conditions. Furthermore, it leaves room for other interesting business cases to emerge from as yet undiscovered angles. The whole purpose of this exercise is, in fact, to identify new markets. Fundamentally, new markets are only created in three ways: • Efficiency (doing things at a lower cost or using fewer resources) • Effectiveness (producing more output at the same costs) • Strategic opportunities (new services, not seen before or targeting new markets)

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How does the idea of a market come about? In essence, it starts with the business case, often based on an observation or by being annoyed with the status quo, like Dirk Tangemann of iCarYou in our opening to this book. If you are going to offer a solution to a challenge, you will either create something that is less costly, produces more output, or approaches the problem in a completely new way. To understand how the three methods of estimating demand work, let’s have a look at the concrete case of iDoc241, a service developed by Dr. Alexander Börve, for remote diagnosis of skin conditions – so-called tele-dermatology. This service allows you to send an image of your skin anomaly via MMS – wherever you are, and whatever time of day – to a team of trained dermatologists for quick and efficient evaluation. The dermatologist will provide you with medical information for self treatment which includes a most probable diagnosis, information, treatment possibilities, and will inform you if you need to see a doctor in person. The iDoc24 service can thus be the basis for several innovative business cases that can justify why the service should be used by paying users or even be reimbursed by the public health insurance. We will investigate some of the business cases, to exemplify how demand can be estimated.

A/ Efficiency Gains Developing the iDoc24 case on the basis of efficiency gains involves estimating the potential cost savings for the involved actors. Using health economics, we can present the positive impact on the Swedish health care system the introduction of tele-dermatology will create. In Sweden, as in the entire developed world, it is estimated that 15% of all general practitioner visits are skin-related. The current, yet limited, data shows that 50% of the tele-dermatology MMS sent during the first pilot resulted in the user not having to visit the doctor. Hence the service could potentially save up to 50% of all skin-related visits. At present, there are 14M visits to general practitioners every year in Sweden, meaning that tele-dermatology could ultimately save around 1m visits to the doctor. At a cost of EUR 170 to society for a visit to the doctor’s the cost savings for Sweden could reach EUR 170m per year. With 7.4bn visits to general practitioners in OECD countries2 the potential cost savings could reach EUR 94.35bn 3. Beyond these efficiency gains there are other benefits to society, such as CO2 emissions from cars and other transportation. As access to a dermatologist can be difficult outside of cities, this means that these conditions are especially reliant on transportation. Calculations show that in Sweden, the reduction in CO2 emission could be a significant. The average CO2 emission per patient for general practitioner visits per year in Sweden is 10,93 kg. The total CO2 emissions from a mobile telephone life cycle, a one year subscription and application use is 2.59 kg of CO2/year4. If iDco24 can prevent 1 million visits to the doctor the total yearly CO2 reduction would be roughly 10.000 metric tons.

1 http://idoc24.se/ 2 OECD Health Data 2009 (opposite column)

3 Calculation:15% of 7,4bn annual visits in OECD countries leaves 1.11bn skin-related visits, at EUR 170 per visit and 50% visits not taking place, not going would therefore save EUR 94.35bn. 4 The potential CO2 emissions reduction from a mobile telemedicine system, Peter Håkansson, Ericsson Research PowerPoint presentation Med-e-Tel Luxemburg 2nd April 2009

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INSTEAD OF READING MARKET STUDIES, LET US LOOK AT BUSINESS CASES to UNDERSTAND THE ACTUAL ECONOMIC IMPACT
B/ Effectiveness Tele-dermatology enables the dermatologists to be more productive: For example, as they can work in teams screening the incoming images, utilisation of the individual dermatologists can be better and the greater volume of cases can generate a rich resource for research and specialisation, as was found in tele-radiology companies. In addition, dermatologists can also work when they are unable to go to the office, or they can telework. Finally, light cases can be concluded quicker than the time allocated for a full consultation, thus allowing more cases to be diagnosed in the same amount of time. These advantages can be measured by their indirect systemic impact. However, the most direct productivity gain might be the time that citizens save by not having to go to the doctor – time which can be directly converted to productivity in society. In Sweden, this has been measured to be eur 75 per consultation. On the national level, the potential time savings amount to EUR 75m (1 million visits) in productivity gains. With a total population of 1,2bn in OECD countries, and at an average productivity loss of EUR 50 per half day (slightly less than Sweden), this amounts to EUR 27.5bn in productivity gains at full utilization.

iDOC24 — MMS service

MMS

Diagnose 50% of skin diseases by MMS

Save Swedish healthcare EUR 170m / year

Save OECD countries EUR 94.35bn / year

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C/ Strategic Opportunities Measuring strategic opportunities in numerical terms can be difficult, as the business case often involves either a new service or a new convenience that can be hard to quantify but pivotal to uptake in the market. In teledermatology there are many such opportunities that either lead to increased usage, completely new uses, or for example savings in the public health system by shifting costs to consumers. For example, 20% of the MMSs received so far in the pilot have been related to sexually transmitted diseases (STDs). The MMS is perhaps more convenient in this situation, as it is more anonymous, and might also result in faster treatment; thus saving the health care system a considerable amount in the long run, as catching the disease in the early stages reduces the risk of further infections. Another example is malign melanoma, an aggressive form of skin cancer, which is deadly but can be prevented if diagnosed early. Early diagnosis can save lives and treatment costs. Men over 50 are most prone to developing the disease due to delay in seeing a doctor. An MMS from a worried partner can motivate a patient to book a doctor’s appointment for further diagnosis. There can also be other advantages. In Sweden, 10% of all doctor’s appointments are no-shows. Hence, at full utilisation, 5% of all doctor’s visits can essentially be spared, since they are shifted to paid MMS services. In total, this means saving the health care system about EUR 60m in lost productivity at the general practitioners office. On OECD level the savings are theoretically up to EUR 63bn if the numbers can be extrapolated. Dermatologists can be anywhere in the world, and thus be available 24h a day. In one example from the pilot, a user sent an MMS at 11:30 PM on Saturday night, and received an answer from a skin-specialist at 8:00 AM in the morning on the

Sunday. This kind of service is seldom available to ordinary citizens, even in the OECD countries. Applications of such image-based diagnosis using readily available and diffused technologies could have an even greater public-health impact in poor countries. Countries in Africa, or rural areas of China or India will increasingly rely on centralised diagnostics services as low population densities and doctor to citizen ratios of 1:50,000 (as compared to 1:320 in Sweden) cannot be compensated by opening specialised dermatology services within reach of patients.

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chapter 6 METHODOLOGY

HOW TO TURN A LOCAL PROBLEM INTO A EUR 30 BILLION MARKET
Contributors Adolfo Chautón Søren H. Jensen Liza Lichtenfeld Anna Majó Alex Nisbett John Wolpert

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Methodologies for urban service innovation
In this last chapter, we will present an overview of methodologies for urban service innovation. Drawing on a number of experiences and cases, we will illustrate critical questions and decisions in the process from observation to early market entry. Observation: the idea to make things better. Service innovation is usually triggered by observations, ideas on how things could be done better. These observations may come from a variety of sources: users, professionals providing services, an entrepreneur, expert consultants or technological breakthroughs making their way into the market. Examples can be found to illustrate these ideas for improvement from all these sources. As outlined in the opening to this handbook, normal users, like the founders of iCarYou, may spot new opportunities for service innovations out of day-to-day frustrations or observations. The realisation that at the core of the traffic jam was not “the others” but a collective misuse of resources (they were all alone in their cars), triggered a “What if” series of scenarios, “What if we were two per car?”, which seemed to make overwhelming sense to all parties, especially when a small commercial transaction was involved. It would reduce costs for everyone, make better use of resources, create a social contact and, if it reduced traffic by 10%, would eliminate most traffic jams. In some cases, users are actively encouraged to spot opportunities for improvement. Surgery patients at Aalborg Hospital in Jutland, Denmark, are encouraged to participate in rehabilitation groups to exchange experiences and practices (joint care concept) that can help them recover more rapidly, reduce pain, or understand their condition better. In chronic illnesses, this has

created a number of new formats such as the special media, technology1, training and nutrition offerings for diabetes patients in Denmark. Service innovation at the University Hospital of Lund, Sweden, has begun to shift the attention from the medical doctor to nurses as an important source for ideas on improvement. It was found that nurses, as service professionals, have a much deeper insight into the patient condition and the system surrounding them, learning more about non-technical issues relating to their circumstances. The department of nursing has set up a unique research track to integrate clinical aspects of elderly care with social services2. This triggered a variety of observations that had previously remained unreported, until they were actively encouraged to present problems and ideas for improvement. Fuelfor3, a healthcare innovation consultancy in Barcelona, has developed a set of methodologies that use immersion and empathy excursions as techniques to rapidly engage a local healthcare system and its stakeholders with the goal of turning observation into an active and manageable activity. Drawing on their extensive experience at Phillips Design, the team builds a 360° perspective of healthcare to spot new opportunities for improvement that cut across user–provider or other organisational boundaries in the system. During intensive periods that may span from two days to several weeks, patients and other actors are observed, shadowed, interviewed or confronted with small interventions in their daily activities. In parallel, a background is elaborated through research into the more technical processes and conditions that frame the healthcare system. Piloting: the first prototype experience. Often, observations are verified by use of an inductive approach in larger markets – by checking other places, statistics, cost structures and processes. Yet, in most cases reviewed for
1 See for example the MaXi Project http://www.maxi-projektet.dk/index. php?id=464&L=1 2 http://portal.omv.lu.se/Portal/forskning/research_areas/01_area 3 w ww.fuelfor.net

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this handbook, the place of observation became the place of first deployment. This is a natural step to take: You know the place, it usually is near home, near your employment, may provide seed funding on trust, you understand the cultural context and system behind it. Yet, to take an informed decision, a number of criteria may be useful to evaluate whether your immediate surroundings offer the right resources to take an observation to the next level: • A re there potential users for your innovative solutions? • W hat kind of public and private find investors, with shared interests to help you go from pilot to product development, can you find nearby? • Do businesses or institutions share your interests and could they be motivated to partner? • Is there a cluster of like-minded persons from different backgrounds to discuss and improve your ideas, maybe join your venture, and further down the line to hire professionals? • A re there potential customers, willing to spend on your service, in the area? • Will the results of the pilot be representative to other regions, and will outside customers, partners and investors trust the results? A local pilot / first implementation may offer advantages: • Cost savings and minimising risk • Familiarity with the actors and systems, thereby drawing on a knowledge advantage and trusted relationships • Extension of trust to share risks with others

• How easy can your service be copied or substituted by other services? • A re potential partners willing to buy your service, or do they prefer setting up their own similar service? On taking a decision to pilot a service or doing a first deployment, a low entry barrier is important, e.g. try it out next door. This practical (cost saving) step needs to be balanced against the rationality of developing and adapting the service from the start to the right market, as it is most likely that the initial partners would become the first customers. Often, there is a default condition in which observation, pilot, first deployment all take place in the same place. There are several ways in which we can evaluate these options:

…and disadvantages: • T he local market may not scale to a significant other market in roll-out. • Surprising insights may be overlooked by building on trust rather than rigorous argumentation. • T he solution may only be feasible out of goodwill. • T he pilot may not be respected by others (e.g. investors) as a credible proof of concept.

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In a similar way, a remote pilot / first implementation may offer advantages: • To spend the extra costs indicates commitment. • Choice of location not by chance but rational decision against selected factors. • A ssure scalability, acceptance of results, proper commitment by partners through taking trust and goodwill out of the equation.

…and disadvantages: • Significantly (possibly) higher costs, efforts and opportunity costs. • Higher entry-barrier, as goodwill may not ease the way and all actors need to be convinced. • Failure may come at too high a cost – it may not be possible to keep trying.

An evaluation of the above criteria leads to individual results that cannot generically be classified as right or wrong. Too many organisational, commercial, personal and other factors come together here. The important issue is to realise that the decision is ultimately contextspecific and that whether the decision is right or wrong depends on the reasons and logic behind it. Coherence and consistency are the keywords here. Yet, taking a more global view, there are economic rationalities that can help decision makers understand the importance of the issue. A look at the market conditions for entry and rapid growth would favour a rational strategy following observation and concept development: 1.  Rapid initial prototype and pilot in a favourable environment at lowest cost. 2.  Credibility and results of pilot enable first market entry in a scalable environment. 3.  Exploit initial service and business model to the maximum in first market. 4.  Use commercial operations platform to reach subsequent markets. This typical four-step commercialisation approach carries two major risks in a) the need for adaptation in entering the next level, and b) the risk in gaining fair access to the intended market.

A business and service model that only works in Step 1 will become a major burden to move into Step 2. The same risk occurs in Steps 3 & 4. If we take the case of mobile parking, which flourished in the initial deployment in Tallinn (a uniquely deregulated and motivated context), and scale the application, for example to Spain or the US, we find a very different regulatory and service context. The cost of entry, if we can generalise it across applications in transport and parking, to each municipal market appears to average about EUR 150.000 incurred over at least 12 months of acquisition, negotiation and regulatory adaptation. At this point, you will have your first pilot in that market, as a precedent to begin commercialisation. In short, you need to think beyond the immediate next step and create an in-depth understanding of the true context of the initial observation, pilot and the new potential markets. Otherwise, you can run the risk of facing costly barriers in later steps.

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iCarYou expansion

Apeldoorn The concept

Hamburg The pilot

holland

germany
The early market

Netherlands Apeldoorn

Finland Helsinki Germany Hamburg

The global roll-out

USA San Francisco

Spain St Cugat

Netherlands Antilles Curaçao

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Who is next in line? Entering early markets in urban service innovation. In the previous section we introduced the fairly large recurring capital investments and timescales required to bring urban service innovations to each market, highlighting the importance of finding a smart commercialisation strategy. Unlike other technology deployments, mobility solutions usually require a greater degree of consent, participation or business relations with local actors. Ideally, these are consulted in the initial stages of concept development and piloting with the goal of verifying variations in future markets, demand for the solution, availability of similar solutions and acceptable business models. These prospective customers may become your early markets, indicating the first step of a roll-out and paving the way for wider adoption in the market. Unlike electronic products, which are broadly standardised with customisable elements, urban service innovations tend to be adapted to the institutional, cultural and economic set-up of a place. In the past, they worked more like standalone prototypes in which issues of standardisation, interoperability and external market potentials were not considered. Early markets are not only stepping stones on the way to market success, but can make an important contribution to concept development, regulatory compatibility and the business model development early on. An early understanding of the particularities of these markets and how they will evaluate a mobility service becomes a direct competitive advantage reducing time and capital investments. iCarYou had already engaged future customers and other actors in distinct international markets during the prototyping phase, to build intelligence and awareness of the solution. In the end, the company chose to prototype services in the Netherlands but invest in pilots and market-entry in the German market. Hamburg lends itself to the pilot and market-entry strategy, for one because

it is a gateway to the largest European market, but also because it was elected by the European Union as European Green Capital4 for its commitment to sustainability. Understanding the perspectives of international markets like Barcelona at this early stage helped the team design more flexible business and service models, adapting more easily to local conditions. In short, communicating with your future customers should not be an after-thought, but an integral part of early phases. This builds understanding of their needs, awareness of your efforts (to avoid them starting something in parallel), and avoids creating one-off solutions that would require major adaptation efforts for each micro-market later on. Motivation: proof of demand and understanding value. But observation and the choice of first implementation are only two of the factors determining service innovations in cities. As outlined in earlier chapters, it is the motivation of the partners, customers, providers and other actors that will determine whether a truly relevant solution can reach the user. While often overlooked, motivation is and has always been one of the most important factors for economic success – as well as failure. In practice the challenge lies in finding the right way to identify and stimulate motivation. The fact that mobile solutions cater to new and often unrealised demand and thus are placed very high in Maslov’s need hierarchy further accentuates the difficulties. As our introduction to the actors in Chapter 3 has shown, objectives vary and results may be measured in different ways. As the case of Mobile Parking in Tallinn shows, the service had to meet different expectations to satisfy all actors in the value-network. What is elegant about the Tallinn Mobile Parking model is that the objective is scalable, a challenge that was not met by the London Congestion Charge business
4 http://ec.europa.eu/environment/europeangreencapital/index_en.htm

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Maslovs hierarchy of needs

Self-actualization Happiness Esteem Love/Belonging Safety Physiological Confidence Friendship Security & health Food & water

instruments discouraging car-use6, and managed as a public service subsidized at about 50%, or about EUR 25 per user / year. For the municipality, it has generated a breakthrough in bicycle usage in the city, up from 20.000 cyclists in 2007 to 250.000 cyclists in 2009. Similar services are now deployed for car-use after a critical share of the public realised the viability of the service model.

model, which was severely shaken by its own initial success. In London, the business relied on as many cars as possible paying the charge to deliver the predicted EUR 150m annual revenue to sustain the service. At the same time the objective of the public authorities was to reduce traffic. Upon launch, the impact reduced traffic so significantly that revenues were less than half those expected and could therefore not cover the operating costs5. On the other hand, Bicing, the public bicycle service in Barcelona (see Chapter 5) draws a 50% subsidy out of parking revenue and does not attempt to be an operating business in its own right. It serves the purpose of reducing traffic, and carbon emissions, increasing public health and balancing the overall transport system. Increasingly, such services become technologyintensive to create new efficiencies and possibilities unseen before. Public bicycle systems rely on mobile technologies such as UMTS and RFID to identify bikes, manage realtime availability, service and provide information via screens and smart-phones. The 400 public bicycle stations in central Barcelona represent a sophisticated digital layer managing the movement of about 200.000 subscribers. The service is deployed as a complement to other

The market for services in cities is neither fair or open. But some cities stand out as excellent and transparent partners
It is likely, that this volume of usage, the impact created and high resolution of data gathered will inspire new business models to exploit the systems popularity in other cities. In the ideal scenario, all Actors would share a single objective, although that is an unlikely outcome as providers and customers are inherently are constant negotiation about cost, quality and coverage of services. Hence the adoption of a competitive mobile parking system in many German cities, in which nine competing providers seek market share through better cost-service ratios7. This is an advanced stage of development following earlier pilots and experiments in different cities. Competition remains one of the key instruments to assure continuous evolution in service quality. In short, motivation is a critical factor to bring urban service innovations to the market. Some factors emerged as particularly relevant to recall in this context:

5 The Economist, ‘Lucky Ken’, August 21st 2003

6 w ww.avancar.com 7 w ww.mobil-parken.de

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1.  If not all relevant Actors are motivated, it is unlikely that the user will receive the most relevant solution. 2.  Motivation needs to be integral to the business, contractual and service models to assure that scaling up the operations does not lead to conflicts of interest. 3.  Mobility solutions are new and unknown, meaning that demand needs to be created, often relying on other basic needs to have been met, in order to make solutions truly relevant. 4.  Competition remains the best assurance that service quality and innovation will be rewarded.

Openness and transparency of cities as early markets. Competition is key to assuring service quality and innovation. For competition to flourish, the market has to operate in a transparent and accessible manner. This is an issue of particular concern as municipalities show great variation in transparency in general, and service contracting in particular. It is likely that cities with a higher degree of transparency offer a fairer and more open market environment. The second challenge to market access is the state of international markets for services. The EU

Transparency Ranking of Spanish cities (Service Procurement Category) i
57,1 Oviedo

Barakaldo 0 100 Bilbao

100 Lugo 85,7 Santiago Compostela

57,1

San Sebastián

57,1 85,7 Vigo

Logroño

28,6 Soria

St. Cugat 100

57,1 Badalona 57,1 Barcelona

85,7 Ávila

100=Maximum Transparency Average = 58,3
42,9 Albacete

100 Alicante

28,6 Granada 100 Sevilla

71,4 Cartagena

100 Roquetas de Mar 71,4 Málaga

i Source: Transparency International España 2009

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can be seen as a good representation of the challenges companies face in cross-border service transactions8. According to the EU Commission “…Barriers to trade in services penalise small and medium sized enterprises (SMEs) in particular, which are disproportionately affected by complex administrative and legal requirements and therefore more likely than larger firms to turn down cross-border opportunities because of them. Given the predominance of SMEs in service operations, this has clearly acted as a considerable hindrance the development of the Internal Market for Services…” These difficulties are not only limited to national markets, but amplified at state (US), regional and municipal level. In short, the market for services in cities cannot be classified as generically ‘fair’, ‘accessible’ or ‘open’. Regulatory efforts are made at various levels of government and trade organisations to improve conditions, but these generally focus on national regulations rather than municipal trade barriers. Major changes are unlikely to penetrate this most difficult of markets anytime soon. The problem extends beyond public procurement into the entire local business culture of a marketplace. The good news is that a substantial number of municipalities and regional markets have taken the decision to stand out and have a solid track-record for being excellent and transparent partners for innovative services companies. Some of them have, together with their business communities, articulated clear strategies and innovation plans. In the 22@ Barcelona Innovation District, the Urban Lab was set up to address critical issues of innovation in urban services. The programme emerged out of a history of urban service innovations such as the Districlima9
8 EU Commission website on Internal market for services and EU Commission Report on Internal Market for Services COM/2002/0441 final (2002) 9 w ww.districlima.es

consortium to deliver district heating and cooling in Barcelona. The objective of the programme is to pilot pre-commercial products. Urban Lab will continue to formalise a process leading from a declaration of service innovation priorities by the municipality through accountable steps and a regular cross-departmental review of pilot proposals to create a single point of entrance for innovative providers to the city. A recent consortium led by Endesa Network Factory used Urban Lab to pilot a new type of street light in Barcelona that incorporates the latest LED technologies, environmental sensors, Wi-Fi hotspots, electric vehicle chargers and video-sensors for traffic. Twelve such streetlights were piloted in 22@ Barcelona for 12 months and extensively tested and reconfigured. Although it took only 9 months from the first request for a pilot to installation, (already a great improvement to typical pilot lead-times), the Urban Lab seeks to reduce this period still further. These communities can be considered among some of the ideal piloting sites as they have proven their openness to incoming solutions from both business and public partnerships. Furthermore, their declaration to specific themes of innovative urban services presents a shortcut for companies in identifying piloting sites in line with their solution area. More importantly, as a network, such communities with expressed commitment to urban service innovation represent an early market of significant international scale, covering at least 90 million citizens, or 3% of the world’s urban population. Proof of demand is much easier when a lead market has expressed interest. For one, the declaration of intent, like Eindhoven’s carbon emissions goal, can only be achieved through innovation and partnering, turning commitments into regulations and investments. Furthermore, business and community leaders are increasingly aware of the realities of deploying new services, and can bring a greater understanding of business

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needs and motivations. However, these leaders need to be continually motivated to continue to innovate and recognise future solutions to emerging problems. In summary, this section introduced the challenging global market conditions and what may constitute an ideal early market for innovative urban services. Several factors converge to identify viability of an early market in a globally confusing and nontransparent market environment: 1.  Transparency remains one of the best indicators of openness in a local market, enabling competition to flourish and thereby providing an open door to innovative solutions.

2. I  ndicators of transparency and openness begin to offer a classification of early markets with accountable public procurement and decisionmaking processes. 3.  Some cities declare their interest in innovation in particular service areas, based on urban challenges or demand expressed. Such cities tend to have resources and leadership allocated to collaborate in urban service innovations or support introduction of relevant services. 4. S  ome cities have put in place accountable processes to pilot and evaluate technologies and services prior to major procurements. These processes can in some cases present a trackrecord of openness and success from pilot to market introduction. Proof of commitment

Community 22@ Barcelona Innovation District

Population 1,615,000

Themes Urban Lab for precommercial pilots in line with declared city priorities

An accountable process to review pilot project requests with relevant public decision-makers is being formalised.

Caceres

93,000

Participation Culture

Over 100 micro-processes for citizen and business participation. Candidature for European Capital of Culture is invitation for international partners.

Eindhoven

212,141

Light City Sustainability

Dedicate EUR 1m innovation budget for sustainable lighting technologies. Track record of international providers despite local incumbent (Phillips). Zero carbon emissions by 2035-45 and 100% local.

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Community Hamburg

Population 1,769,000

Themes European Green Capital 2011

Proof of commitment CO2 reduced by 15% since 1990

CO2 emissions: -40% by 2020, -80% by 2050. EUR 25m per year provided for innovative ideas which reduce CO2 emissions. Port expansion by efficiency rather than geographic expansion. Citizen participation.

Helsinki

578,000

Traffic and Geographic Services Healthcare Wellbeing Learning Innovation Communities

Forum Virium has been established as a neutral promoter for innovation projects in Helsinki involving key public and private partner institutions. Helsinki Apps for Democracy builds on the Washington D.C. precedent.

NYC

8,363,000

NYC Big Apps

Following Washington’s lead, the city of New York is creating a simliar application competition to create location-based services while utilizing city data-sets.

Paris

2,167,000

Digital City / District Tourism Mobility Commerce Real-estate Families

The Quartier Numerique10 is a dedicated area in Paris’ 2nd District in which new services and technologies are piloted. RATP and others conduct service innovation projects with international partners.

10 http://quartiernumerique.org

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Community Sant Cugat del Valles

Population 76,000

Themes EcoCity of Knowledge is the umbrella title for a number of specific Innovation themes and pilots.

Proof of commitment

Track record of Innovation projects with regional and international partners Established decision-process Publish Strategic Maps & Objectives

Stockholm

815,000

European Green Capital 201011 Intelligent Transport Systems

Water protection to EU directive 2015. Fossil fuel independent by 2050. 50% lower green-house emissions per citizen than national average. Clean vehicles initiative.

Taiwan

Taiwan: 23,036,087 Taipei: 2,619,000 Kaohsiung: 1,526,000

Sustainable Commercial Districts & Centres Intelligent Transport Systems WiMax

Open invitation to international service providers to join model programme for 80 commercial districts in Taiwan. Programme on Intelligent Transport Systems inviting international partners. International Entrepreneurs matchmaking with Taiwanese partner companies Invitation to innovative service providers on national WiMax infrastructure

Washington

591,000

Apps for Democracy Competition

User-driven mobile application competition for the people by the people of Washington, D.C.12 building new digital applications based on city-databases. Competition cost city 50,000 dollars and generated 47 applications with values in excess of 2,600,000 dollars to the city.

11 www.europeangreencapital.eu 12 www.appsfordemocracy.org/about

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The business model as the determining factor in service innovation. At times, scientific or technological discoveries, new technological standards and systems create a radical breakthrough that reverberates through all areas of the economy and society. Mobile technologies and the internet have been some recent examples of such disruptive breakthroughs. In service innovations, the business model becomes more central to the possibility of a breakthrough or may even pose the determining factor. Especially in complex, collaborative services delivered by a group of actors under changing circumstances, this appears to be an important feature. In urban services and infrastructures, companies like JC Decaux or Clear Channel have been pioneers in introducing new infrastructures and services to cities on the back of outdoor advertising revenues. Most major cities today rely on this commercialisation process to finance and operate bus-stops, public bicycle systems, or finance restoration projects. In Hamburg, the value of the outdoor advertising licence awarded to JC Decaux for 15 years was increased by almost 17.00% from EUR 30m (1994) to at least EUR 508 million in the period starting in 200913. Digitally enabled innovations have shown their ability to fundamentally change the business of urban services. An early example was the introduction in 1997 of Octopus Cards14 as a way to integrate the different public transport providers in Hong Kong. This smart card allowed each provider to retain their own business model whilst offering users a single transport ticket. Micropayments, not just for transit, but also kiosk and other services accepting Octopus as a payment method have emerged, with transactions creating a turnover in excess of EUR 5m per day. The system effectively operates both as a bank and as a transport provider, managing a significant volume of transactions and cash reserves for Hong Kong commuters.

THE BUSINESS MODEL IS CENTRAL AND REQUIRES AS MUCH PROTOTYPING AS THE TECHNOLOGIES TO UNDERSTAND THE FULL IMPACT OF A NEW SERVICE
What emerges from the above stories is that certain service innovations, while possible in some cities are unthinkable in others. Octopus has not been widely copied (especially in Western cities) not because of its complex technology, but because most transport systems are effectively municipal. They cannot enter the micro-banking market, yet are equally unwilling to integrate with private providers under any exclusivity. Moreover, the commercialisation of Hamburg’s urban environment through outdoor advertising licences (extending even into the digital domain of the Hamburg.de city portal) is part of a larger political strategy to encourage public-private partnerships. Such business models, welcomed in some cities, are categorically rejected in others. Some of the above success stories have emerged over many years, and evolved around existing service models and contracts. Technology turned out to resolve a major service and business problem in Hong Kong, unlocked more than a decade of bicycle policy in Barcelona, and to entirely new services being funded by advertising in Hamburg. In all cases, a strong public benefit was identified together with the ability to cut costs or increase revenues. Things look less cosy in the future, as development cycles shorten and many new forces enter the field. Incumbents had an easy game due to their existing infrastructures, lack of transparency and lower stakes. As the outdoor advertising license in Hamburg has shown, certain values

13 Senate of the Free and Hanseatic City of Hamburg, 2007. 14 www.octopuscards.com

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are being driven up, whilst cost efficiencies determine sourcing of services from contractors. The digital layers of cities, from Wifi networks to bicycle logistics, will enable new business models to emerge and converge around the themes of service attractiveness and user needs. It is only a matter of time before for a single smart card, like Taipei’s EasyCard, is used to unlock a public bicycle, a shared car, pay for a bus-ride, identify a student and open a library or office door in cities around the world. Agile business modelling and technology development. In product innovation, IDEO and others have shown that the product and business model are all part of the solution to change how people live their lives and see the world. A smart product designer today must also be a brilliant business model designer. In service innovation, this is arguably even more pertinent, as the technologies or products are only part of a system in which a solution is offered. Innovation in urban services or mobility puts a further demand on the business and service model by introducing a variety of business and political actors that need to be reflected in the overall service model. A look at software development methods may provide some clues as to what this means for designing new technology-based business and service innovations. Traditionally, software development was organised around detailed specifications by technical teams, translating a business or organisational objective into an automated service. This approach bred its own supply of service providers, contractual models, engineers and corporate departmental structures. Kent Beck, the creator of Extreme Programming and later signatory of the Agile Manifesto15 explains his new paradigm for software development16 as a way to meet the needs of developing software in changing environments. His goal was to prove that by changing the methodology of software
15 www.agilemanifesto.org 16 Kent Beck, Extreme Programming Explained: Embrace Change, Addison-Wesley Professional (1999) 17  E xtreme Programming was only one major evolutionary step in object oriented development, added to the evolving thinking of technology as an integral part of any business or service design.

development from a linear implementation to a series of rapid cycles, changes to the system would become less costly and thereby make it feasible to integrate the development of technologies and business models. Extreme Programming and Agile Development effectively rely on continued rapid prototyping, in which a simple original project design keeps evolving and a minimal system is always available. The long-held traditions of deep analysis of projects prior to start, to justify extensive specifications were overthrown in this approach. Beyond the method of development, Extreme Programming represented a paradigm shift in how programmers are positioned relative to project stakeholders and how they are expected to form part of the exploration of business models as the project unfolds17. Hence it called for engineers to become more broadly aware of their technology decisions. This was also reflected in IBM’s Extreme Blue18 top-talent recruitment programme to spot engineering and management talent capable of thinking across disciplinary boundaries. Furthermore, Extreme Programming called for a different attitude to infrastructure deployment, not as a pre-cursor to service development, but as an integrated process in which they become part of the prototyping process. The idea is clear, to create leaner and more adequate solutions, accepted by stakeholders and minimalised in their specification and infrastructure needs. This non-obtrusive approach has the advantage of reducing the resistance to change that is inherent in all organisations. Can agile development in business and technology be applied to urban service innovation? Talent, the capacity to think across boundaries and continually seek out more efficient technologies, service- and business models, lies at the core of the ability to rattle the cage of service innovation. John Wolpert, CEO of UpStart and former IBM Extreme Blue lab director, dedicates a blog to what he calls The Three
Some of the great service innovations of recent years show the tight integration of products, service technologies and business models that transform entire industries, e.g. Apple’s iTunes, Amazon’s Kindle. 18 www.ibm.com/extremeblue

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Percent19, the rare talent that is entrepreneurial and can act across boundaries of business and technology. Rapid development cycles can only be sustained by people able to handle the complexity of non-linear work and exposure to external stakeholders. Rapid development cycles are fairly new to urban processes. Urban services have traditionally evolved together with investments in infrastructures. Most municipalities today, for example, consider deployment of municipal wireless networks as major infrastructure investment (cost: around EUR 9 million for a city like Stockholm), and view this as the necessary basis for urban service innovation at a later stage. MuniWireless20, a blog dedicated to professionals in the field, counts more than 30,000 unique visitors per month, bearing evidence to the importance of this issue.

However, few deployments of municipal wireless networks have generated any real impact on services beyond adding some obvious efficiency gains in public management, partly because the uptake of technologies represents yet another, much larger investment. XPelcom, a small company in Stockholm, chose a different path together with the city to deploy wireless internet access. XPelcom looked at user-demand and providers that would be keen to deliver services. Skype and Aftonbladet (a leading Swedish daily newspaper), came forward as core users of a network that would offer citizens free Skype telephony and media services on an initially minimalist infrastructure. Following a short successful mid-summer pilot in a central park, the roll out was started. No licenses were required as antennas were installed inside local shops and restaurants covering almost the entire city area at a 95% cost-saving to a municipal wireless network. Agile Urban Service Deployment XPelcom/Skype/Aftonbladet wireless network Stockholm. Verification of No.1 demand (and maybe some others) No tendering and licensing needs as deployment is in private realm, covering public spaces. Off-the-shelf technology to distribute specific service. Low maintenance cost – parts can just be replaced. Low capital outlay means upgrades can take place all the time in line with new service needs. Stakeholders: Provider, Skype, Aftonbladet, end-user, local business community.

Generic Urban Service Deployment Municipal Wireless Network

Long period of research and analysis to specify needs for next 10-25 years. Long public tendering and licensing process (3-5 years total) for major public infrastructure Platform, industrial grade technology. High maintenance fee and service contract. High capital outlay means that returns have to be generated over many years on single infrastructure. Stakeholders: City and chosen provider.

19 www.thethreepercent.com 20 www.muniwireless.com

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Overall, this process looked a lot like the agile software development paradigm above – with a focus on stakeholder needs (users want free telephony and media, Skype and Aftonbladet cater to this expressed demand), whilst rapid prototyping and lean deployment in partnership with local shop-owners took place. The business model was tailored around the lean deployment and the business models of the sponsors, namely telephony and media services, as well as those of local shopkeepers free to use the broadband coverage in return for hosting an antenna. Critics will claim that this network is not capable of offering the full range of services of a EUR 9m deployment. One might counter that at such low costs, the infrastructure can be upgraded 20 times over as demand unfolds. A challenge may lie in the coordination and direction of the numerous iterations and upgrades, but this carries a significantly lower overall risk Caceres micro process 2008-2009 Pilot

than the large one-off projects that can be obsolete by the time it comes to implementation. Citizens as users: involvement in envisaging the future services of cities. In Caceres, a Spanish city of 93,000 inhabitants, the municipality is collaborating with a group of companies from around Spain to promote citizen participation through so-called micro-processes. Citizens, via associations and collectives, together with companies and the local government are encouraged to engage in a joint creative process. Political leaders, companies and society as a whole discover different perspectives on neighbourhoods, using a large number of experimental processes. After initial pilots, this methodology will be deployed in around 120 micro-processes involving up to 3,000 citizens over 18 months.

2009-2011 Roll-out

Pilot: • Aldea Doc Video Doc • Matarratos Short stories 100 Micro processes 3000 citizens

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One such micro-process was Aldea Doc, piloted by Ubiqa21 together with citizens from the Aldea Moret neighbourhood. Citizens were given mobile phones with video cameras to produce a documentary of their neighbourhood, reporting on quality of spaces, services, social problems and relationships. This massive deployment of small interventions in Caceres serves to activate a large community in the city. Each micro-process is a de-facto prototype of an interaction between public and private service providers and a user community. Sant Cugat del Vallès, a municipality of 80,000 inhabitants, invites citizens to participate in policy development and vision such as its 5-year innovation plan and conducts opinion polls twice a year on citizens’ perception of the public administration and the state of their municipality. Management of the city is conducted via Strategic Maps, which are fully transparent and communicate to citizens and other interested parties the political and administrative priorities of the city, resources allocated to each task, and progress in achieving set goals. Hamburg follows a similar strategy of engagement, drawing on its established expertise in citizen participation that was built up over several years, starting with shaping the vision for the metropolitan area, engaging citizens in interactive budget planning22, and prioritising service offerings for families. Issues of a previously complex nature have thereby been made accessible to consultation, using a moderated process rather than a traditional opinion poll. Mind:Lab, a cross-ministerial public service innovation unit in Denmark, acts as a joint resource to user-centric service innovation, deploying different methods to engage citizens in public service improvements. Strategic service challenges to public services are addressed by the Mind:Lab, involving users, businesses and other relevant stakeholders in a service design and innovation process.
21 www.ubiqa.com 22 www.buergerhaushalt-hamburg.de

Keeping more than an eye on the user: user-centric innovation, rapid prototyping and piloting. Several roles can be attributed to the end-user in mobility and urban service innovations and their commercialisation. In the past decade, users have voted with their feet when it came to mobility technologies, initially rejecting WAP services for being hard to use, not adding value and for being expensive. The same can be said about many well-intended urban service innovations that were deployed on a grand scale and never took off. Mobile bus-ticketing in Salzburg generates barely a dozen transactions per day, simply because locals have travel-cards and visitors spend their time exclusively in the historic centre. PDA tourist guides in regions like Vor-Arlberg (Austria) and La Selva (Spain) never took off because it was tedious to collect and return the devices (and leave a deposit), use an unfamiliar interface, or find out that the service is available to start with. Engaging users early-on in prototypes may have helped to spot more valuable services, the inadequacy of underlying functions, or raise unexpected questions about what could be done differently. Agile development methods, as introduced in the previous sections, contribute a technology development process that can offer users and other actors’ greater participation in the development of mobility services. Having rapid prototypes for experimentation with users effectively allows services to be tested, designed and inspired as a permanent development process. This naturally lowers risks and helps maintain close links to markets. Such prototypes reveal more than usability or technical reliability, if deployed correctly they can pilot the entire service concept and reveal acceptance of different business models. Pace is a critical factor, and a lot more can be achieved by a rapid prototype than commonly

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expected. When Best Buy ran a 10-week UpStart programme for a handful of small teams of employees with business ideas, all teams went through a full process of ideation, high-speed agile technology development, rigorous articulation of business models, prototyping and piloting, and a presentation to executives and potential investors. A company founded as a result of this process will enter the market with an urban transport solution proven to have a high potential during the short programme. UpStart’s early prototypes and pilots, comparable to those developed by teams in IBM Extreme Blue, meant that ideas could be tested against a variety of business, investment, technology and usability criteria. Furthermore, when various corporate, in- and external actors are involved, a prototype facilitates discussion, much like the cardboard model an architect will use to convey an idea. According to Engine23, a service design consultancy based in London, prototyping plays an important role throughout the design process. It is seen as the creation of a working model of a service or key elements of it, to support the design process and encourage new thinking. Importantly, the prototype can engage endusers in a meaningful way and encourages participation, in itself a great source of motivation to support the project. Prototypes are also used to market the service idea, or gain support at an early stage. Here, it may work like the staged prototype of iCarYou, mentioned in Chapter 5, which served as a defining public moment for the team of entrepreneurs and was prepared as an experience for an audience, rather than a technical introduction. Flexiplaces is an innovative workplace management and marketing concept that came out of shared observations by a real-estate developer, a consultancy firm and a new media entrepreneur to create a short-term lease market for workplaces in cities. Where traditional offerings are operated by office-hotels such as Regus, Flexiplaces offers
23 Engine Service Design, www.enginegroup.co.uk

anyone with a vacant workplace the tools to market these online and automates many of the operating services and transactions. To verify the validity of the observation and the concept, a 1:1 pilot was built on 500m2 in the Center for Innovative Medicine, in Hamburg. CIM Workplaces24 offers all the on- and offline functionality of the Flexiplaces concept to see how tenants will respond to a variety of service offerings and business models, and involves them in continually refining the service and business models. In a controlled environment, gaps in technology were covered manually to provide complete on- and offline service experience prototypes of the tenants, designed with the support of M.A.O. Works25, a service design consultancy. In short, users may have different roles in service innovation processes. The above section helped to present a number of strategic issues: • W hen services are fully developed and deployed, users have no choice but to vote with their feet. This happened to WAP as much as to tourist PDA’s. In neither case was there any technological justification to not involve users in service development and adapt to their true needs. • Agile development methods offer a view on how technology can be developed together with business and service models, and how users and other stakeholders can be involved. • Rapid development cycles mean that a variety of business, service and technology models can be tested continually, instead of a linear and risky pre-determined development path. •P  ace is an important factor, and examples have shown that results can be achieved in 10-weeks, including a range of prototypes and user involvement. •I t may not be necessary to develop the technology, but building the service experience for the user may be a more productive upfront
24 www.cimworkplaces.de 25 www.maoworks.com

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investment generating rich feedback from users. Technology can often be simulated or mashedup, to rapidly test viability of a service model. • A fundamental difference can be seen in how cities or public agencies engage users. In Mind:Lab, a clear service design objective is followed in a constructive process to solve a particular challenge. Interventions in Caceres, on the other hand, aim more to trigger creativity in citizens and companies, leading to specific outcomes and the capture of ideas and impressions that help to find problems and opportunities, but also encourage engagement.

• Behind many user engagement lies the idea to get your hands dirty, to engage hands-on with a situation and communicate in a more immediate way. The benefit is to motivate all stakeholders and create surprising new ideas by doing in practice what would otherwise remain abstract.

Methods of delivery

Traditional Programme

Analysist research

Specification

Programme

Test

Agile Delivery

1-8 actors

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notes

notes

notes

Where are the services that can change our lives?
Mobility is not a technology, but a paradigm shift. The user, as a citizen, professional, or visitor, is in a state of mobility represented by the ubiquity of mobile phones in our society. Why, this book asks, have highly appreciated services like mobile parking, tourism services, or solutions for the visually impaired not taken off, despite the astronomical investments in digital infrastructures in the past decade? Why, have these infrastructures not had the productivity impact that the internet had on our economies, when more than 60% of the world’s citizens have access to them? EUR 256,789,611,907 is the sum of opportunity presented in this book, following real business cases and examples of mobility and service innovations in cities. Drawing on the rich insights and experiences of Living Labs Global, the book illustrates what defines the market for mobility, neglected by many for its complexity. It logically structures the market opportunities, frustrations and successes, and actors that make or break success into a coherent call for action to fundamentally change how we deliver services in cities.

Price: 36 EUR

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