The rise of the information economy has fundamental implications for cities and their economies.
Recently I had the privilege of joining a discussion with a group of IBM’s global thought leaders on cities and the information economy. This stemmed from a talk on I gave to the Institute of Economic Development in November (see: http://www.slideshare.net/slideshow/embed_code/28576026).
I am grateful to Rashik Parmar, President of the IBM Academy of Technology, IBM Distinguished Engineer, and Board Member of the Leeds City Region Local Enterprise Partnership (http://rashikparmar.wordpress.com/) for sharing his thinking and that of the IBM thought leaders group on five patterns in the digital economy. I have considered what these trends might mean for cities, and specifically Leeds. In doing so, I identified a sixth trend of my own (see Trend #1 below).
Trend #1: The Increasing Importance of Cities
For many years people have been predicting the death of cities as a result of the digital and information economy. They have argued that the internet, email and wireless connectivity mean we will no longer need to travel, to work together in offices, and meet face-to-face. But in fact the opposite has been the case. As the economy has become more specialised and advanced, knowledge intensive functions and jobs have clustered in city centres, which can support high densities of face-to-face interactions, knowledge spillovers and have access to a skilled workforce. Digital connectivity is important in enabling firms in these locations to access markets and information from further afield, but the rise of the information economy has made cities more, not less important.
Trend #2: Codified Services
Codified services are replacing what people do with software, which can then be sold to create revenue. This is replacing a physical presence of economic activity in cities with an online presence, with cost intensive operations located elsewhere. An example is the rise of online retail at the expense of the high street. This trend is also leading to job losses in back office functions and call centres in sectors such as financial services.
Trend #3: Pattern Augmentation
Pattern augmentation is where increased information is enabling increased performance and value of a product. This has enabled Rolls Royce to sell “power by the hour” from its aero engines, and become as much a service sector company as a manufacturer (see the excellent Work Foundation report on the rise of “manu-services” http://www.theworkfoundation.com/Reports/284/More-Than-Making-Things-A-new-future-for-manufacturing-in-a-service-economy). Another example is Trinity Leeds, the largest city centre retail scheme in Europe completed in 2013, which is the world’s first genuinely digitally enabled shopping centre. Technology is enabling new ways of communicating and engaging customers and monitoring shopping patterns.
Trend #4: Interconnected Industries
The ability to gather analyse data and information from across different sectors means that the cities that are really prospering from the information economy are those with strong capabilities in interconnected industries. The best-known example is Tech City on the fringe of the City of London. This phenomena, which was never planned by the public sector, emerged through the coming together of a number of factors: the creative sector in inner east London, a high density of tech skills, a culture of entrepreneurialism, access to finance, and the public sector in London making its data available. See the Centre for London’s “Tale of Tech City” report, of which Chapter 2 is essential reading for anyone who wants to understand how clusters emerge in the information economy: http://www.demos.co.uk/publications/ataleoftechcity.
The concept of “interconnected industries” is central to that of “Smart Cities” which I define as: “Use of intelligent technology and data analysis to enhance performance, resource efficiency, and resilience of city systems. Encompasses infrastructure, energy, utilities systems, data and information in urban areas. Emphasis on interconnectedness of technology and analysis across different organisations, disciplines, and systems.”
Trend #5: From data to value
The big growth areas in the information economy are big data and open data.
“Big Data” refers to ways of handling data sets so large, dynamic and complex that traditional techniques are insufficient to analyse their content. “Open Data” can be used, reused and redistributed freely by anyone, subject only, at most, to the requirement to attribute and share alike.
The economic potential of data science is being driven by a number of factors. We are seeing huge growth in the creation of data: 90% of the world’s data has been created in the past two years. The UK is leading the way. We have the world’s first Open Data Institute (www.theodi.org), a not-for-profit body to promote open data founded by Sir Tim Berners. There are already over 9,000 datasets at www.data.gov.uk. Advances in computing power are making new methods of analysis possible. For example the N8 Supercomputer based in Leeds has the processing power of over 500,000 ipads. It is in cities where there are concentrations of organisations generating data, those that can benefit from its analysis, and the right skills and expertise across all sectors. For example, Leeds has the largest concentration of health informaticians in the world.
Trend 6: Digitalised assets.
The increasing use of sensors and technology such as smart meters is generating a wealth of information on the performance and condition of assets, and in relation to consumer behavior. It is also enabling new approaches to managing city utilities and infrastructure such as energy, water management, and transport.
Watch this space for further thoughts on what this means for Leeds.