Public Policy

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How is the new city-making industry evolving to help cities create extraordinary economic value?

A new city-making industry is perhaps the best vehicle for cities around the world to successfully deal with mega challenges such as: energy efficiency, environmental sustainability, natural disasters and manmade disruptions, infrastructure development & renewal, and the holistic deployment of smart technology.

I have observed and participated in the making of this emerging industry since the beginning of the twenty-first century as I helped cities in Asia, the Middle East, Europe and the Americas plan and launch districts designed to support innovation and entrepreneurship. Conceived after the turn of the twenty-first century, the intent of such districts is to jump start extraordinary high value industry clusters within 10-15 years, a process that formerly took 30-50 years or longer in places like Silicon Valley, Cambridge, UK and the Kendall Square area around the Massachusetts Institute of Technology.  These projects are propelled by alliances forged among the following: public sector agencies at local and national levels, established start-up businesses of all sizes, education and research institutions, financing enterprises, real estate developers, and information & communication technology companies.

At the heart of these alliances is a mindset that encourages participants to work together across organizational boundaries in order to invent new ways to discern and exploit economic and business opportunities. This attitude supports the adoption of new business models and the transformation of relationships that move participants beyond their own core competence and to a mode where they can create products and services outside of ‘what they always do.’ The organizational form and leadership of cluster-making alliances varies from city to city, influenced by local capabilities, interests and politics.

High value clusters, which act as linchpins for economic development, are complex ecosystems of (i) physical facilities for corporate-specific & shared research, development, education, business incubation & acceleration, and product-making, (ii) communication technology, and (iii) human talent. These clusters serve as a platform for social and organizational networks to facilitate intersections among disciplines and organizations within knowledge supply chains, from the point of idea creation to marketable products and services. Underpinning the clusters is an array of inducements, e.g., tax or funding incentives and regulatory permissions, which support entrepreneurial risk management.  Clusters are hosted within large-scale, mixed-use developments (100-500 acres) with digitally enhanced environments designed to serve the life and work style of a creative, hard driving workforce.

Three key characteristics mark the behavior and organization of alliances as they plan for, weave together, and create synergy among the many elements of the cluster.

Convergence. Participants converge their expertise, interests and knowledge at the very outset of a cluster’s conception to co-invent a narrative that weaves together a coherent story about purpose and how it can be achieved by a blend of physical and human capital. The narrative is steeped in the economic, social capital, business capabilities and interests of the place, the region and its initial & future occupants. The narrative clarifies how development will add value to all interested parties and lays out a conceptual roadmap for creating the cluster’s ecology.

Launch and Learn. Alliance participants quickly mount small-scale experiments and beta projects, even as they design the narrative. Planning and implementing these projects help alliance members to collaboratively envision potential futures at a time of uncertainty and rapid change.  This exercise also helps participants learn how to proactively contribute their expertise to one another’s work.

Networked Leadership. Leadership for these alliances plays out through a network of people who engage and align the interests of the full array of stakeholders. These networks have little in common with traditional schemes for project management that function with predetermined roles and lines of authority. Members of the cluster-making network act with agility to achieve what has to be done. Three actors are critical for the network to function. One is the enabler – a person who forges a commitment to the cluster among colleagues and business units within his or her own organization.  A second is the trend spotter– a creative contributor who skillfully brings new –sometimes-disruptive – ideas into the concept and planning arena.  The third is the integrator – a person (sometimes a group) who plays a facilitative role working with the different groups to help them define their interests in the cluster and understand how those interests can be served through collaboration with others.  The integrator is essential for the group to weave together different perceptions and objectives into a shared narrative.

Although industry clusters occupy a small part of their host cities, the lessons learned from the alliances supporting them are germane to how cities can respond to the mega challenges that they face. Like cluster-making, these challenges elude simple definition and defy solution through traditional compartmentalized, linear responses. They also require many independent groups to converge perspectives and expertise. Fluid alliances will continue to form in response to cities demanding effective solutions to the mega challenges before them and businesses coming to appreciate the extraordinary large market for solutions delivered through the alliance approach. Over time, these will add-up to a new city-making industry.

 

What is the global outlook for Smart cities over the next 12 months?

To talk about the global outlook for smart cities, we first must describe what it means to be a “smart city” and also explain what is Cisco’s vision for cities around the world. Taking a step back, we need to explain the concept of the Internet of Everything (IoE).

The Internet of Everything is Cisco’s vision of a connected world, in which People, Data, Processes and Things are all connected and generate added value to everyone, including cities. By 2020 Cisco estimates that we will have about 50 billion smart devices existing all over the world connected to the Internet. This technological transition is called Internet of Things. This path brings unparalleled value of data that Cities can leverage to improve themselves.

Our estimates calculate a total IoE market at $19 Trillion dollars over the next 10 years, in which 4,6 Trillion dollars come from the Public Sector area. That value is the value at stake revenue that comes from various areas within a city. Optimization and creation of new infrastructure services; adoption of new technology within their internal teams; centralization of services and networks; new governance models, managed services, etc.

Cities today are looking to multiple ways to become Smart cities. But what does it mean to become “Smart”? There are multiple layers and angles to address this concept of smart city:

For cities, the main focus and challenge will be how they can better manage their infrastructure in a way that not only enables them to provide better services to their citizens, but also optimize their OPEX and centralize all departmental IT networks, converging them into a single foundational network.

Besides that, being smart is also being sustainable in the way that it focuses on the continuity of the city based on three main pillars: the environmental, the economic, and the social. Many cities today are already investing in accelerators and their startups in a way to generate such innovation and wealth, which will also be key for the city to grow.

Considering the above, cities of today are focusing on the above areas while walking the path to become “smart”:

Government

The will of a group of public officials determined to create a transformational strategy for its city, not only by setting up a digital strategy roadmap, but also how every department will cross-functionally work with each other. Alignment on joint budget and strategic initiatives around economic development is also key as well as monetization strategies for a quick ROI turnaround of their install base.

Technology

To understand the current infrastructure of the city and also what is needed to create the foundation of a single unified platform that connects every city department, to serve its city team members as well as citizens. To focus on areas like parking, lighting, traffic, safety and security, operations center, environmental, water and waste management, in order to optimize such areas, which are so critical within the city. Collecting data through sensors, which are processed in the data center to generate value that makes it possible for city officials to make better decisions.

Citizens

To attract talent and retain highly educated individuals, whilst at the same time, providing e-government/Wi-Fi tools for all citizens within the city to bridge the digital divide and provide more opportunities for everyone to be able to grow and become empowered as an active citizen.

Governance

To drive the creation of key legislation that enables these new services to appear in order to simplify bureaucracy in order to allow a better agile set of services. To drive key initiatives that enable a better approximation of the citizens to their government through a participating democracy.

Partners 

Not only technology partners, that integrate, manage and operate these smart services, but also economic partners, who can drive foreign direct investment into the city, allowing but new job creation, revitalization of the economy and key areas of the city.

Coming back to the initial question, and based on the above context, the global outlook for the next 12 months is going to be very exciting in the smart cities area as we are starting to see a convergence of these key factors that enable cities around the world to become smart. Every city is different in specific use cases, but the ingredients are all there.

We clearly see cities today coming forward with their own structured digital agenda, aligning their several internal departments to meet the needed requirements, set budgetary needs as well as resources and structured planning in order to start working in deploying smart city solutions. All of this while working together with key stakeholders to build an eco-system of partners, subject matter experts, which will help them manage and deploy all of these complex solutions.

Cities today are in competition with each other and the fight is to create the best city in the world that has the very best infrastructure and services, that serves their current citizens, attracts top talent, local and foreign investment and generates wealth. 

What are the top trends in the global energy efficiency regulations and are there any regional differences?

“It is better to create a structured framework than prescribe singular solutions”

To reach challenging energy efficiency targets it is important to look at all stages of the energy chain (generation, transformation, distribution and final consumption) and at all sectors (Industry, Residential, Tertiary, Transportation). All energy efficiency regulations in the world’s major energy consuming states address these stages. In my opinion, the European Union Regulations concerning Energy Efficiency represent the benchmark and define a framework in which the top trends in energy efficiency are as follows:

  • Setting Energy Efficiency targets
  • Prescribing products, services & buildings with high energy efficiency standards  
  • Supporting the introduction of Energy Management Systems
  • Promoting systematic use of Energy Performance Contracting
  • Introducing an Energy Efficiency obligation scheme for utilities
  • Providing a comprehensive account of current energy cost to end-users

Other countries’ regulations have more or less the same layout. Below you will find a brief description of each of the aforementioned points.

Energy Efficiency Targets

The importance of targets is in setting a long-term objective and in monitoring progress. Targets can be seen as an “instrument” to motivate energy saving and they are important for the maintenance of a priority, focus and attention. The EU has set a 20% target on energy efficiency for 2020. Other countries have their own targets but not all consider energy as a whole and sometimes focus only on electricity or gas.

Energy Efficiency standards

Specifying performance requirements for energy-consuming items (such as products, services & buildings) effectively limits the maximum amount of energy that may be consumed by the item. A standard is made mandatory by a government body and can be accompanied by the introduction of labeling. This aims to provide end-users with clear and relevant information about the quality of the products, and to guide them towards choosing a product which is more efficient.

In the EU, the Ecodesign Directive provides rules for improving the environmental performance of energy-related products. In the USA there is the US ENERGY STAR program which has a similar scope and structure.

Energy Management Systems

An Energy Management System is a systematic process for continually improving energy performance. Recently the ISO 50001 on Energy Management was released. It is based on the management system model of continual improvement, also used for other standards such as ISO 9001 or ISO 14001. The system needs to:

  • Develop and implement an energy policy
  • Identify main energy users
  • Set energy objectives and measurable targets
  • Implement and operate programs to meet these objectives and targets
  • Check and take corrective action as required
  • Review system continually and improve where possible

Continual improvement ensures that new opportunities are found in all areas where energy savings become a recurring task.

Energy Performance Contracting

Energy Performance Contracting (EPC) is a form of financing. Under an EPC arrangement, an external organization (ESCO) implements a project to deliver energy efficiency and uses the stream of income from the cost savings to repay the costs of the project.

EPC allows the delivery of infrastructure improvements to facilitate that which is lacking in energy engineering skills, manpower or management time, capital funding, understanding of risk, or technology information.

Energy Efficiency obligation scheme

An energy efficiency obligation is a regulatory mechanism that requires obligated parties to meet quantitative energy saving targets by delivering or procuring energy savings produced by implementing energy efficiency measures.

An Energy Efficiency obligation scheme generally has the following features:

  • a quantitative target for energy efficiency improvement;
  • obligated parties that must meet the target (typically, providers of energy such as electricity and natural gas distributors);
  • a system that defines the energy saving activities that can be implemented, measures and verifies the energy savings achieved.

The main advantages coming from the introduction of an Energy Efficiency Obligation Scheme are that there is no impact on national budgets and it is one of the most efficient energy efficiency instruments available for policy makers; furthermore the scheme contributes to the creation of a strong market for energy services.

Comprehensive account of current energy cost

Easy access to data on energy consumption will empower end-users to better manage and control their energy consumption, making more informed choices on devices, energy providers and the impact of energy costs on budgets.

Conclusions

Global energy efficiency regulations tend to create a framework that enables market actors to move towards efficiency “automatically”, in compliance with standards for energy-consuming items, starting a continual improvement through the introduction of an Energy Management System, Energy Performance Contracts, Energy Efficiency obligation schemes and enabling better cost control by end-users. All these are drivers that push efficiency to the best practice levels. This is a low-cost way to ensure optimization in a much more “efficient” way compared to prescribing singular technologies or solutions.

What would be the global and regional social economic and political consequence on governments and industry financial and business reporting using eXBRL?

Introduction to eXBRL (Extensible Business Reporting Language)

Extensible Business Reporting Language (eXBRL) provides the following:

1. Global standard method for the electronic exchange of business information (replacing 100s of proprietary methods). XBRL is also a method of expressing meta-data and semantics, that is how the business information can be exchanged. Basically, this is what the XBRL Specification provides.

2. Global agreement of the semantics of financial reporting concepts and business rules. These concepts and rules, the semantics, have already been created for IFRS and US GAAP. These two taxonomies provide agreed upon semantics against the respective set of accounting standards. So, rather than each company defining it own financial reporting terms and business rules, standard taxonomies of concepts and rules have been created which enhances comparability across companies.

3. An organization, comprised of 400+ members from around the world which stands behind and maintains XBRL. The non profit organization XBRL International provides this. XBRL will cause a fundamental shift in infrastructure relating to the creation, storage, transmission and consumption of business information as the cost/benefit model for creating and using such information has substantially changed.

Global social and economic impact of using eXBRL by governments, public sectors, and industries

eXBRL is useful for several reasons:

  • Large scale planning and budgeting process at local, regional, and national level
  • Identifying country resources and possibilities of  exchanging and moving capital through investments 
  • Tax and regulatory compliance of international trade, taxation and tariff regulations
  • Comparative analysis across industries, sectors within a country or across countries
  • Uniformity of definition od financial, and accounting terms
  • Investment decision by investors and analysis
  • Fiscal decision based on financial and nonfinancial data presented using different criteria and scenarios
  • Reusing format with updated data
  • Applying accounting standards and concepts uniformly

There are many characteristics of XBRL which contribute to its overall benefit. The following is a summary of the features of XBRL. 

XML Standard: One way to solve a problem, rather than 100s of different ways of transferring data. Lowered costs of training staff (only have to learn XML). XBRL is XML. Lots of standard software for working with XML. Reduced training costs.

Open Standards Provide Leverage: Open standards provide leverage. You can get for free things you would typically have to buy and you are not locked into one specific vendor.

COTS Software: Commercial off-the-shelf software can be used, rather than building custom, internally created and supported applications.

Cheap Business Rules Engines Improve Data Quality: Robust, validation engine and validation infrastructure moves the creation of business rules from programmers to business users. One-to-many validation rather than one-to-one programmatic validation.

Flexible, Extensible, Comprehensive Solution: XBRL is quite comprehensive in what it can achieve. Its flexible, extensible nature makes it extremely effective.

Structured versus Unstructured Data: People often miss the fundamental reason for XBRL/XML: structured versus unstructured data, meaning and “context” attached to data, truly can be exchanged effectively. Exchanged between trading partners, between entities and regulators, exchanged internally. Properly structured data is fundamentally easier to reuse between automated applications. Unstructured data is fundamentally difficult to reuse unless manual intervention is used.

Automated Exchange of Data: All the above adds up to the automated exchange of data within a single organization (subsidiary to parent, one application to another), or within a supply chain (between one company and another, between a company and its regulators).

The following is a brief list of some of those using or preparing to use XBRL:

  • APRA (Australian Prudential Regulatory Authority) – 12,000 regulated organizations, went live with XBRL in 2000
  • FSA (Financial Services Authority) – regulates 70,000 financial institutions in the UK
  • Korean Stock Exchange – regulates approximately 850 listed entities; (53 stock exchanges around the world)
  • EU – $1.2 million grant to jumpstart XBRL-based financial reporting in the European Union.
  • Dutch Government – financial reporting by the Dutch Water Board; will expand to 12 Dutch providences for reporting by municipalities. Currently the Dutch Government is building a taxonomy for all information collected by the government. This XBRL taxonomy will be used to collect information by all agencies of the Dutch Government.
  • CRAS – Credit Risk Assessment Services currently uses EDI to exchange credit risk information; they are building a solution to replace the EDI exchange mechanisms with XBRL.
  • CEBS – The Committee of European Banking Supervisors (CEBS) is building Common Reporting (COREP) taxonomy for solvency ratio reporting by 9000 credit institutions and investment firms to 25 supervisors/regulators in Europe under future EU capital requirements regime. This is part of Basel II. They are also creating FINREP, a financial reporting taxonomy for these same financial institutions, this will be modelled using the Belgium Banking Taxonomy as a starting point.
  • US SEC – The United States Security and Exchange Commission (SEC) announced in February 2005 that public companies could begin supplying XBRL data for specific EDGAR filings. This voluntary filing program is to help the SEC evaluate XBRL.

A pattern exists in these users. The first wave of use of XBRL is being made by regulators who already collect data from those they regulate. Each of these regulators already had some proprietary format for gathering information or used paper of unstructured formats such as PDF.

SourceFINANCIAL REPORTING USING XBRL – IFRS AND US GAAP EDITION (2006-03-01), © 2006 UBmatrix, Inc.

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Mexico on the Rise – Here to Stay or More of the Same Instability?

Mexico’s economy is booming, despite loud concerns that returning power to the traditional Institutional Revolutionary Party (PRI) would mean a return to a despotic cronyism.  It is the second largest export market and has a flourishing network of trade internationally. The incessant drug war is also seeing somewhat more peaceful days. However, corruption, poverty, crime and meager public services continue to weigh the country down as a credible player on the world stage.

Will Mexico rise as a solid and even leading neighbor to the United States and Latin American countries – or will this be a short-termed prosperity that will again be swindled away as it was during the previous 100 years under the (PRI) Party? Continue reading