Cities as Epicenters of Digitalization - OPPORTUNITIES AND GOVERNANCE CHALLENGES - Oliver Wyman Forum
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Cities as Epicenters of Digitalization OPPORTUNITIES AND GOVERNANCE CHALLENGES
CITY READINESS Cities as Epicenters of Digitalization OPPORTUNITIES AND GOVERNANCE CHALLENGES
Executive Summary
ONE: The intersection between the growing SIX: Forward-thinking cities are already
role of cities, the challenges and opportunities moving ahead and innovating along the
they face, and the evolution of digital governance front, and many of them have
governance will determine how societies will “smart cities” strategies for enabling the
operate in the future. tech industry to grow rapidly. Unfortunately,
however, few possess the holistic vision
TWO: Urban residents in Asia generally regard and approach needed for addressing the
technological change as beneficial, and their opportunities and overcoming the risks that
views are significantly more positive than in they face in an era of sweeping change.
other regions. However, risks related to data
privacy and job losses due to automation are SEVEN: Success will mean balancing the
at the forefront of their concerns. competitive needs of new private sector
ecosystems powered by digitalization with
THREE: Technological change is a double- the more humane concerns of local urban
edged sword: Successful transformation communities – in other words, efficiency and
for a city will require complex trade-offs innovation must be balanced with respect
across multiple stakeholders, including and inclusiveness. The cities that have made
business leaders as well as the leaders of city the greatest and most sustainable progress
governments, social services, and NGOs. have done so by developing well-coordinated
public-private partnerships, backed by real
FOUR: Cities run the risk of sporadic and commitment and investments, and guided by
unilateral digital governance, which may a clear vision and digitalization strategy.
exacerbate future societal and economic
pressures. However, they also have the EIGHT: Where to start? We offer the following
opportunity to develop consistent and questions to drive the dialogue that will be
comprehensive governance to bring together necessary to bring our cities successfully into
different stakeholders, take a more holistic the AI-powered future.
approach to digital governance, and solve •• Is your picture of a digitized future
problems once deemed insoluble. characterized by a chorus of harmonized
voices or by a series of competing solos?
FIVE: The number of challenges facing city
•• Does your map of a successful digital
leaders in this task is considerable – ranging
future mean success for yourself alone or
from the speed of digital innovation and the
for multiple stakeholders?
risk of large-scale workforce displacement
to the risks of digital divides worsening •• How hard – and where – have you looked
inequality – and the array of issues requiring for the risks in your plans?
thoughtful and innovative governance •• How sustainable is your vision of the
is broad and complex – spanning from digital future?
governance challenges related to “smart
cities,” to preserving and enhancing their
“people friendliness.”
3
one Digitalization in Leading Cities: Why It Matters
Since 1950, the world’s population has tripled objectives, alleviate the pressures of
to 7.7 billion,1 with cities currently home to urbanization such as congestion, and pave the
more than half of the global population. In way for rapid technological change.
the next 30 years, almost 70 percent of the Digitalization has already brought about
world will reside in cities, though the rates productivity improvements and expanded
of change and specific migration patterns consumer access to core services, from
will differ by region.2 This rapid urbanization banking access to improved mobility. Given
is putting pressure on city infrastructures, increasing urbanization, it is important
natural environments, security, and food and to consider how city residents feel about
water supplies. accelerating digitalization. Oliver Wyman
conducted a global online survey of more than
10,000 residents across 21 cities and found
Digitalizationi that respondents generally view technological
The proliferation of digital or digitally infused change positively, with optimism higher in
products and services and the associated data Asian cities than other regions (87 percent
and artificial intelligence (AI) algorithms can view technology change positively in Asia
help alleviate some of these pressures while vs. roughly 60 percent in North America and
bringing forth opportunities and challenges Europe). (See Exhibit 1.)
for businesses and individuals alike. But Despite the optimism, residents are
digitalization will require new thinking about concerned about job loss and privacy issues.
governance by public and private-sector (See Exhibit 1.) More than half of respondents
leaders. Digital governance is about more polled in Asia consider their jobs at risk from
than simply setting rules and regulations – it automation, yet data privacy is their chief
is about harnessing digitalization to achieve concern, particularly in China.
a broad range of social and commercial
i The key drivers of digitalization as we define it here are the internet (that is, internet access) and the cloud; mobile technology
(especially smartphones) and digital communications; the Internet of Things (connected devices, sensors); analytics and big data; and
artificial intelligence. For clarity, in this context digitalization does not include offline technologies, which do not necessarily depend
on internet connectivity or big data, such as robotics in manufacturing.
5
Exhibit 1: Survey results of city residents on the greatest risks of technological change, and optimism that
technological change will improve life in their city
Percent of respondents
Residents optimistic
about local effects
Top concerns of technological change
New York 61%
Chicago 58%
Dallas 59%
Toronto 68%
San Francisco 59%
Boston 56%
Jakarta 86%
Beijing 93%
Shanghai 95%
Seoul 86%
Hong Kong 83%
Singapore 80%
London 59%
Paris 58%
Berlin 47%
Madrid 80%
Amsterdam 59%
Stockholm 64%
Dubai 76%
Global 69%
0% 20% 40% 60% 80% 100%
Loss of jobs Data privacy violations Greater income inequality
Inadvertent discrimination brought on by AI algorithms Lower salaries Other
Source: Oliver Wyman Forum
6
“Successful digitalization will involve a series of complex trade‑offs for society and business.”
two Impact on Stakeholders and Governance: Key Challenges Today
Successful digitalization will involve a related to privacy, job losses, inclusion,
series of complex trade-offs for society and more.
and business. The major stakeholders Reactions from various stakeholder
are numerous – from city residents and groups to digital advancements have been
the broader public to companies in the mixed, vocal, and uncoordinated: Individuals
private sector, various governments and concerned about privacy rights nevertheless
intergovernmental organizations, and avidly use social media; startups and
social and civic groups. All have varying challenger firms can find financial support
issues to consider within their objectives in but face regulatory barriers; and innovative
the digital economy. We have provided a government policy is influenced by lobbying
simplified characterization of the complex pressure from national champions. Cities
dynamics facing these stakeholders. run the risk of sporadic and unilateral digital
(See Exhibit 2.) governance, which would exacerbate future
Reconciling multiple stakeholder urbanization pressures. However, they also
perspectives can lead to strains in society, and have the opportunity to develop consistent
digital advancement will add a new dimension and comprehensive governance to bring
to such tensions. Digitalization will require together different stakeholders and, with
an “all hands on deck” approach to enable intelligent forward planning, solve problems
leading digital cities to alleviate the pressures once deemed insoluble. A few cities such
of urbanization while balancing concerns as Singapore,3 Tallinn,4 and Copenhagen5
Exhibit 2: Different stakeholders have overlapping objectives and tools for digital governance
MAJOR STAKEHOLDERS OBJECTIVES OF DIGITAL GOVERNANCE GOVERNANCE TOOLS
(selected indicators)
Individuals Economic growth and Voting
Community members business dynamism
Committees
Economic output
Social sector and civil society
Firm productivity Dialogue
Non-profits, NGOs, universities,
community groups Well-being and quality of life Grassroots movements
Digital access and activism
Private sector
Standard of living
For-profit enterprises Expert voice
Sustainability
Government Forming new groups
Long-term growth and well-being
Country, province, city, and district and partnerships
Privacy
Intergovernmental organizations Self-governance
Safeguards on data
UN, WTO, OECD, IMF, ADB, EU,
Informed consent Disclosures
ASEAN, G20, etc.
Inclusion and fairness Strategy
Digital divides
Biased algorithms Investments
Job displacement Guidelines, frameworks,
Managing new risks and agreements
Cyber theft and attacks Laws and regulations
Fake news
Cyberbullying Budgeting and programs
Source: Oliver Wyman Forum
9Top Ten Challenges
for Leaders of
Digitalizing Cities
ONE. The speed of digital innovation
requires more governance and acceptance
of some uncertaintyii
New technologies diffuse at breakneck speeds, quickly
rendering many products and services obsolete. Some and government officials lacking in expertise in the new
phenomena, such as the rapid growth of applications digital business models. In fact, authorities worldwide lack
on smartphone platforms,6 are well known. But other an in-depth understanding of the digital businesses they are
innovations – such as facial recognition and cashless charged with overseeing and governing.10 Industry forums,
stores – are newer technologies that cities are still innovation hubs, pilot projects, and research partnerships
becoming acquainted with and that have outstripped all have a preliminary role to play in facilitating meaningful
governments’ ability to regulate them effectively. For discussions. For longer-term success, all stakeholders will
example, San Francisco banned the use of facial recognition need to re-evaluate what it will take to engage and address
by city agencies, despite the city’s reputation for being at future challenges while building trust, and whether they
the epicenter of private-sector digitalization.7 It is clear that have the experts on hand to do so.
progress is uneven, with some companies and cities willing
to work together in a more agile way while accepting more
uncertainty, thus speeding ahead of others.8 FOUR. Large-scale workforce displacement
and transformation are expected in the short
and medium term – reskilling will be essential.
TWO. The pace of digital change calls for We already live in a world where kiosks, ATMs, and
balancing trade-offs between innovation chatbots are replacing cashiers, tellers, and customer-
and competition. service representatives. Areas where automation and
Fast-paced innovation is critical to winning in the digital AI will replace or complement tasks currently done by
economy. This creates quandaries in applying traditional humans are growing. While new roles eventually will
competition law, which has focused on preventing emerge, education, reskilling, and other programs will
consumer price exploitation. Platform and ecosystem be needed to help displaced workers make potentially
strategies often rely on large network and scale effects painful transitions. The private and public sectors need
to succeed – consider acquisitions and investments by to coordinate long-term efforts across government,
Alibaba, Amazon, and Google.9 Although these firms companies, and the educational sector.
have used their scale to foster innovation without raising
prices – often lowering prices or providing services free-
of-charge (in exchange for data) – they are coming under FIVE. Data is a core asset for new services and
more antitrust scrutiny as concerns grow over winner-take- innovation, which will require the promotion
all markets and potential digital monopolies. of more open data sharing.
Today, for example, fintech companies cannot provide
payment-related services without controlled access to
THREE. New business models are bank account data. To address this issue, Korea is creating
proliferating – deep expertise is needed to a government hosted “MyData” platform where banks
govern them. will be required to store customer data so that customers
Digitalization has enabled the platform economy, the gig can comparison-shop across providers. 11 Similarly, a
economy, and the sharing economy. Well-known examples bank consortium in Hong Kong, Jetco, recently launched
include Amazon, Uber, and Airbnb. Each business model APIX, an open API exchange platform for businesses to
has hit roadblocks due to diverging regulatory responses host APIs and provide developer access to speed B2B and
10cross-industry innovation.12 Meanwhile, in Europe, the EU NINE. Cyber threats are increasing in volume,
has implemented data portability rules for the financial complexity, and impact.iii
sector.13 One objective of the EU is to transfer ownership More than 4,000 ransomware attacks take place each
of data to consumers so that companies can compete day,20 and cyber crime is rampant, leading to $600 billion
to create compelling value propositions.14 Data-sharing in losses in 2018.21 No one is immune – Yahoo, Facebook,
platforms are relatively new and the challenge is to create Marriott, and First American Corp. have had more than
the incentives and governance to nurture startups and 500 million records breached. The attacks spare no region,
benefit consumers. spanning clients, banks, medical records, and more.iv
Private-sector firms weigh how much to invest in cyber-risk
management, with many businesses now viewing cyber
SIX. Personal data can be mismanaged, risk as their number one threat.22 There has been a spate of
leading to privacy infringement and mistrust. cyber-ransom attacks on US cities – in 2018 and 2019 the
In the wake of recent scandals, data privacy has targeted cities included Baltimore, Atlanta, San Diego, and
become a major reputational risk. Facebook and Apple Newark.23 Digitalization of cities will continue to exacerbate
recently revised their business strategies to focus on cyber risks and create greater vulnerability. Policymakers
privacy protection as a competitive advantage.15, 16 City and other stakeholders need to build relevant expertise,
governments also face privacy concerns in their own data prioritizing what to defend and how to respond in crises.
collection. For example, Dragon Eye, or Dragonfly Eye, is
an AI facial recognition system first installed in Shanghai’s
metro system in 2017 that instantly checks passenger TEN. Digital access and literacy are distributed
faces against a database of nearly two billion people.17 unequally, creating divides within and
London has been testing facial recognition using its CCTV between societies.
system, prompting concerns and legal challenges from Whereas nearly all youth in OECD countries are internet
civil libertarians.18 users, only 63 percent of adults aged 55 to 74 use the
internet. While most residents of Korea use the internet,24
less than a quarter of individuals in Myanmar use the
SEVEN. Countries need to coordinate to make internet.25 About 5.5 percent of male workers in OECD
cross-border data flows secure, efficient, countries are ICT (information and communication
and fair. technology) specialists, compared to 1.4 percent for
Digital services such as remittances, e-commerce, and female ICT specialists.26 There are also major differences
video calls send user data across international borders. in digital access between countries and cities. There are
Governments and companies alike need to ensure a even divides among firms – whereas more than 90 percent
minimum standard of data security and privacy without of businesses are connected to the internet, only 20
hampering digital trade. However, some regulators are percent use digital technologies to sell products online.
wary of data leaving their borders, or are unprepared Low-income individuals, the elderly, women, and people
to collaborate with foreign regulators on common rules in developing cities are at risk of being left even further
— to date, the APEC Cross-Border Privacy Rules (CBPR) behind by the digital economy. Initiatives to increase
System has only gained participation from eight of the 21 digital access and literacy will be critical to ensuring access
APEC economies.19 to the benefits of city digitalization – an area where all
stakeholders can play a major role.
EIGHT. Mismanaged AI can lead to
discriminatory or misguided decisions.
Algorithms, while more reliable in some ways than human
judgment, can automate biases and make mistakes that ii Agile governance is an iterative approach focused on moving fast but in small,
are difficult to detect. Biased algorithms in lending, facial manageable increments, using multi-stakeholder teams that co-create outcomes
using the principles of agile development.
recognition, and recruiting have been shown to reinforce iii For further reading, see MMC Cyber Handbook 2019 (http://www.mmc.com/
gender and racial discrimination. As the amount of data insights/publications/2019/mar/mmc-cyber-handbook-2019.html) and
needed for AI expands, it becomes harder to separate Oliver Wyman’s report, How A Cyberattack Could Cause The Next Financial
Crisis (https://www.oliverwyman.com/our-expertise/insights/2018/dec/
the signal from the noise and easier to overfit to the past, risk-journal-vol-8/emerging-risks/how-a-cyber-attack-could-cause-the-next-
introducing bias. It is unclear how existing discrimination financial-crisis.html).
iv Examples: Marriott’s massive multi-year data breach compromising the records
laws apply in algorithmic decision-making. As cities take of up to 500 million customers; a 2018 British Airways breach involving about
advantage of digitalization opportunities, policymakers will 380,000 bank cards; Singapore’s breach of 1.5 million electronic health records;
various Toyota breaches, including 3.1 million client records in Japan; and 10
need to work even more closely with businesses to ensure the million client data records stolen from Cainiao – the logistics support to Alibaba’s
solutions of the future do not embrace problems of the past. Taobao e-commerce platform.
11have made significant progress already. to comply with GDPR, and this has global
Others should consider their example but, ramifications. Major global technology firms
more importantly, seek to adapt to the that already comply with GDPR have pledged
unique challengesv that multi-stakeholder to bring similar protections to all geographies
governance presents in the digital economy. where they operate, and some of these firms
Reaping the benefits of digitalization have called for a US version of GDPR.27
and fostering innovative and growing city/ Increasingly, intellectual property
business ecosystems requires continued rights have been highlighted in global
protection and evolution of how we treat trade disputes. Although the world’s major
personal data and intellectual property. economies are members of the World Trade
Personal data is usually stored, managed, Organization, the World Intellectual Property
and transferred digitally, which brings into Organization (WIPO), and other international
play challenges related to governance of data agreements related to IP, there are
sharing and cyber risk. The EU has brought disagreements over how digital content and
the topic of personal data protection to the technology should be handled. Contentious
forefront with its General Data Protection intellectual property concerns include online
Regulation (GDPR). For the EU, strong piracy, sale of counterfeit goods (such as on
consumer protection is paramount, but this e-commerce platforms), theft of trade secrets,
comes at the risk of potentially hindering technology transfer expectations, research
innovation. By contrast, US data laws vary localization requirements, challenges in
widely by state and industry sector and tend obtaining evidence, insufficient enforcement
to be easier for businesses to comply with. In and punishment, and questions around
China, national data laws give a high degree judicial impartiality.28,29 However, the
of control to businesses and public-sector regulatory landscape for intellectual property
entities, leading to relatively low consumer is evolving and harmonizing quickly. For
control over personal data. In practice, any example, China’s 2018 Electronic Commerce
online business dealing with EU citizens needs Law30 makes it easier to combat the sale of
counterfeit goods online. In addition, the 2019
proposed revisions to China’s Patent Law,31,32
introduce stronger protections that are closer
to international standards. This notably
“Cities have a role to play
includes higher damage awards, lower burden
of proof for plaintiffs, longer time limit to take
in managing the risk of
legal action, longer patent terms, and shared
liability for the Internet Service Provider (ISP).
cyber theft and attacks,
Complex global issues, such as data
protection and intellectual property, will
addressing data privacy
always require leadership from national
governments and intergovernmental
concerns, and combatting
organizations. Cities and businesses also hold
and share sensitive data, requiring them to
bias in algorithms.”
play a crucial role in governing and shaping
digitalization – a role we explore in the
following sections.
v Challenges were compiled by analyzing Oliver Wyman Forum interviews with policymakers, business leaders, academics, and
nonprofit experts. These views were supplemented by Oliver Wyman’s subject matter experts on digitalization.
12Box 1: Regulatory approaches to personal data protection and intellectual property rights
Regulatory issues Degree of protection Examples
(non-exhaustive)
High Medium Low
EU: Consent needs to be explicit
Informed consent
and tied to specific data
EU: Consumer right to modify their
Data subject rights
data or delete in the future
Personal EU: Companies must designate
Data protection and compliance
Data Protectionvi Data Protection Officer (DPO)
EU: Source of personal data
Data security
is retained after transfer
EU, US: Fines for violations and
Penalties and breach reporting
mandatory breach reporting
China: No process to challenge
Patents
validity of pending patent
US, EU: Expeditious injunctive
Copyrights
-style action
Intellectual EU, US: Stronger rights to redress
Trademarks
Property Rightsvii unauthorized uses
China: Less robust civil and
Trade secrets
criminal standards
China: Higher piracy rate with
Enforcement
fewer legal remedies
EU US China
Source: Oliver Wyman Forum analysis of relevant country laws and Global Innovation Policy Center’s International IP Index
vi Summary assessment based on detailed comparison of relevant laws. Relevant US laws include the Federal Trade Commission Act, Children’s Online Privacy Protection
Act, Health Insurance Portability and Accountability Act, Gramm-Leach-Bliley Act and state-level privacy protection acts such as the California Consumer Privacy Act.
China’s data protection laws include the General Rules of the Civil Law, the China Data Protection Regulations (CDPR), and the Law on Protection of Consumer Rights
and Interests.
vii Summary assessment based on the Global Innovation Policy Center’s detailed sub-criteria in its International IP Index: https://www.theglobalipcenter.com/ipindex2018/.
13three Cities’ advances and crucial roles in digitalization: Where we are and why cities matter
The pace of urbanization has become governance, financial investments
elevated: Between 1980 and 2010, the and incentives, strategy and planning,
population of cities in the Asia-Pacific region community engagement, and public-private
alone grew by more than one billion. By partnerships. (See Exhibit 3.)
2050, it is expected that two-thirds of the Digital governance objectives and
global population will be urbanites. Cities challenges add a new dimension to
already account for more than 80 percent these roles. We see six areas where cities
of global GDP, and some major cities— increasingly play a role in resolving the
most prominently, London, Tokyo, and challenges around digital governance.
Seoul—contribute up to 30 percent of their
respective nations’ GDP. From 2014 to 2016,
the 300 largest metropolitan areas accounted Building “smart
for 67 percent of global GDP growth.33
Given this trajectory, digital-related
city” applications
growth and investment are highly and e-government
concentrated in major cities, as evidenced
from the Oliver Wyman Forum’s work on The use of big data, Internet of Things (IoT)
indexing global cities readiness for the age sensors, and new emerging technologies
of AI. These cities, unsurprisingly, are able to present the major ways for cities to
attract top talent and take an active stance participate in the digital economy and build
in fostering digitalization and innovation (as “smart cities.” Smart city initiatives include
showcased in London, Singapore, and San traffic and transportation management,34
Francisco). Moreover, cities have the density waste management,35 and energy grids.36
and scale to be able to make large-scale data E-government is closely related: City
collection and data sharing easier, which is administrators are digitizing core services
critical to successful AI innovations. such as tax collection and voting,37 and are
Cities are playing a growing role in exploring digitally-enhanced emergency
shaping and controlling digital innovations, response as well as apps to collect
thus helping to tackle digital governance citizen feedback.
challenges. It is noteworthy that this is so in Often, the key success factors
both more capitalist societies and those with in smart cities are well-coordinated
more state control. For example, the Chinese public-private partnerships and
government designated the Shanghai Free accompanying investments.
Trade Zone in 2013 to serve as a testing For example, the City of Copenhagen
ground for economic reforms, such as the is working with Hitachi and a consortium
introduction of videogame consoles. The of partners to build smart applications
free trade zone has provided both Shanghai that allow citizens to track their carbon
and China with more opportunities for footprint, transportation patterns, energy
controlled innovation. usage, and much more.38 Hitachi will guide
Traditionally, cities have been a focal the implementation and provide analytics
point for the public and private sector to and AI tools on a subscription basis. The
build municipal assets, provide essential city government will coordinate the overall
services, protect against risks, and launch planning, data integration, and data
new initiatives cutting across governance governance. Another example is Singapore,
objectives. Stakeholders serve these roles which as part of “Electronic Road Pricing
and interests through a variety of levers, 2.0” is planning to install an internet-
including laws and regulations, corporate connected device in every car. This device
15will automatically compute all tolls, parking utility company will gain a testing ground for
tickets, speeding tickets, and road tax next-generation grid technologies.
throughout the city-state by communicating
via beacons and satellites.39
Smart city projects can also bring together Creating an environment
universities and the private sector. Georgia
Power and Georgia Tech plan to spend $15
to attract businesses and
million to build a research microgrid on the talent, then enabling
university campus in Atlanta.40 This grid will
test the latest smart energy management,
them to thrive
recording the flow of energy in real time, Cities play a vital role in building critical
thus allowing for advanced analytics and infrastructure, creating ecosystems for research
simulations.41 The university will gain the and innovation, advancing open data, and
chance to study the engineering details and cultivating strategic industries. For example,
business models in the new grid, while the London has leveraged its status as a global
Exhibit 3: Cities’ roles in digital governance overlap with their traditional governance roles
TRADITIONAL CITY CITY LEVERS FOR IMPACT
GOVERNANCE ROLES (non-exhaustive)
Prosperity Constraints Public sector led Multi-stakeholder
Build city Protect Laws, Funding, Strategy, Projects and Community
assets and Provide against risks regulations, taxes, planning, public-private engagement
capabilities services to the city guidelines incentives assessment partnerships and outreach
Digital governance role
Building smart city
applications and
e-government
Creating the right
environment to attract
businesses and talent, then
enabling them to thrive
Easing job displacement in
the digital economy
Building a strong
workforce for the future
Reducing the digital divide
Addressing data breaches,
privacy, and data misuse
Primary impact Additional impact
Source: Oliver Wyman
16financial center to create a well-rounded digital
ecosystem. Even amidst the current Brexit
concerns, AI companies like to locate there
because of their access to clients, vendors, new
business partners, and the services sector. The
London Datastore, a free data-sharing portal,
provides open access to over 700 datasets.42
London is also home to world-class universities
and research institutions that generate talent
and foster innovation. The Alan Turing Institute
is a focal point for AI research, bringing
together UK’s leading AI researchers in London.
13 universities in London offer at least 24
undergraduate and postgraduate degrees in
artificial intelligence and machine learning.
Google DeepMind explained why they chose to
locate a major office in London: “We have top
talent right here on our doorstep from world-
leading institutions such as UCL, Oxford, and
Cambridge, and we wanted to stay close to the
academic community.”43
To build an appealing business
environment, city managers need to attract
private-sector investment, partnerships,
and talent. Those partnerships may include
co-investment in AI and digital research,
hackathons, and innovation hubs. Cities
can also attract talent by creating accessible
co-working spaces, sharing best practices
in workplace design, and promoting flexible
work arrangements. These activities help a
city become known as a digital hub “and an
attractive place to work,” thus triggering a self-
reinforcing cycle of talent inflow and business.
Another example of this virtuous cycle is
Hangzhou’s fintech sector, which benefits
from the presence of Alibaba in attracting top
talent to the city. The Alibaba Global Leadership
Academy expands the knowledge pool and
international connectivity within the Hangzhou
workforce. The city government further
supports fintech growth by partnering with
local research institutions, such as Zhejiang
University, and by “establishing a strong
international presence” through events, such
as the G20 Summit.44 Hangzhou is also among
many Chinese cities offering incentives toattract and retain talent, including housing future. City administrators need to consider
subsidies for foreign graduates and attractive the implications of digital trends over a
loans for individuals and businesses.45 10-to-20-year horizon to place the right bets
on industry focus and education priorities.
Given the complexity and expertise
Easing job displacement required, city officials, businesses, educators,
in the digital economy NGOs, academics, and other experts need
to communicate and collaborate when
Our survey found that most city residents making decisions on long-term workforce
around the world see job losses as the biggest investments. As part of its 2030 strategy,
emerging threat from digitalization. City officials Berlin sets out its plans for safeguarding
often have direct control over the use of budget employment through education and
and initiatives for reskilling the local population, upskilling.50 Amsterdam held the WorldSkills
and they can use new techniques to optimize conference in 2018, discussing the
the teaching of new skills. Skillful, a collaborative challenges and solutions for equipping
venture between the Markle Foundation, youth with future-proof skills.51 Singapore
LinkedIn, and the states of Colorado and Indiana, provides the SkillsFuture program to support
leverages data-driven analysis to provide high-quality education and training, giving
insights on employment demand in Denver and all Singaporean adults credits to use on
Indianapolis, and works with local educators approved courses. SkillsFuture was the
to develop relevant training programs.46 product of a multi-stakeholder council with
Businesses in cities are often at the forefront members from government, industry, unions,
of creating or re-inventing jobs, and they can and educational and training institutions.52
take a lead role in reskilling their employees. The New York views cybersecurity as a
key is “aligning with long-term business strategy key and growing trend: It plans to spend
to identify the jobs of the future and committing US$100 million in public-private investment
to a reskilling plan to fill them.” DBS Bank in and create 10,000 cybersecurity jobs.
Singapore proactively mapped out the new Its initiatives include building a Global
roles required after it digitalized and enhanced Cyber Center as a training center for
its customer service.47 As digitalization reduced enterprises and introducing structured
the call volume at call centers, DBS trained over training programs at local institutions.
500 of its customer center employees through Collaboration is key – the initiatives are co-
its Professional Conversion Program to take run between the public and private sector,
on new roles, including social media relations including city officials, New York-based
manager, customer experience designer, and universities, banks, large corporations,
knowledge platform designer.48 This reskilling startups, and investors.53
was co‑funded by DBS and the Singapore
government, “and was highlighted in Prime
Minister Lee’s recent address on National Day.”49 Reducing the digital
divide in cities
Building a strong Cities have a crucial role to play in
workforce for the future reducing the digital divide: increasing
access to the internet, promoting the use
In addition to addressing short-term job of digital devices, and improving digital
displacement, cities must develop a long- literacy. Achieving these goals will require
term plan for building a workforce for the the combined efforts of city officials,
18telecommunication companies, investors, a large role in protecting itself by adopting
and tech companies. best practices in cyber-risk management and
Comcast’s Internet Essentials, which forming industry consortia.
provides Philadelphia and other cities To address data privacy concerns, New
subsidized high-speed internet to low- York instituted a Library Privacy Week, which
income families, is an example of a private- leverages the city’s public libraries and staff
sector effort to reduce the digital gap.54 as a platform for educating the public on
Beyond connectivity, some cities also provide digital risks and online privacy. They host
subsidized or free digital devices to those workshops showing residents how to control
who can’t afford it. Baltimore has distributed their Facebook and Twitter privacy settings.61
wireless tablets to roughly 500 residents Urban neighborhoods and demographics
to help them cope with increasing digital offer solid ground for testing new algorithms.
needs such as job hunting and schoolwork.55 New York City officials aim to lead the way
Toronto has equipped public libraries with by making algorithms used by their own city
around 19 computer-learning centers in all agencies more transparent so that the public
districts for public use.56 can scrutinize them.62
Even with access to the internet and
devices, some individuals may not know
how to leverage them. Toronto provides
training programs on basic digital
literacy, such as the use of hardware,
software, and the internet for youth from
underprivileged backgrounds.57
Addressing data
breaches, privacy,
and data misuse
Cities have a role to play in managing the
risk of cyber theft and attacks, addressing
data privacy concerns, and combatting bias
in algorithms. In recent years, a ransomware
“Urban
epidemic has spread around the world,
disrupting operations at police stations,
neighborhoods
hospitals, and schools. In response, cities can
gather local cybersecurity knowledge and
and demographics
talent in cyber hubs, such as the integrated
strategic operations center in Los Angeles.58
offer solid ground
Melbourne also has a Joint Cyber Security
Centre, which holds seminars for SMEs to
for testing
educate them on the potential cyber threats
facing them and their customers, such
new algorithms.”
as phishing attacks and online scams.59
Boston hosts similar training for its own
employees.60 The private sector also plays
19four Towards full digitalization in leading cities
To succeed, however, cities need sustained Index,66 named the Smart City of 2018,67
commitment and investment. Strong vision and ranked as the most competitive global
and sound digitalization strategies are critical. economy in 2019.68
A role model in this respect is Singapore, To assess cities’ vision for the future, the
which sets out three pillars of its Smart Nation Oliver Wyman Forum scoured the strategy
goals – digital economy, digital government, and planning documents of 104 major cities.
and digital society. It presents clear plans to (See Exhibit 4.) We found that most cities
prepare its people, companies, and public have smart-city plans and strategies to attract
agencies for transformations in the digital tech talent, but fewer have a plan to support
age. It also shows real commitment, as their overall workforce, and very few provide
illustrated by its Open Data platform that a perspective on the local benefits and,
combines more than 26,000 historical data importantly, risks of emerging technologies.
series from more than 60 public agencies.63 One might assume that cities with a strong
Singapore is also thoughtful about emerging asset base and proven ability to manage
governance issues, as demonstrated by challenges would also have a clear vision.
its proposed AI Governance Framework64 However, this is not always the case. Our
and its fairness, ethics, accountability, and research indicates that their strength of vision
transparency (FEAT) principles for the use of varies widely, even after accounting for their
AI and data analytics in finance.65 Partly as a assets and capabilities. (See Exhibit 5.) We
result of its digitalization efforts, Singapore have observed four archetypes, illustrated
placed fifth in the 2018 Global Innovation here by a city exemplifying the type.
Exhibit 4: Frequency of each key component in cities’ digital strategy documents
Components of city vision (from strategy documents)
PERCENTAGE OF MAJOR CITIES
Smart city | 87%
Attracting tech talent | 65%
STEM education | 49%
Infrastructure challenges | 47%
Retraining the workforce | 47%
Fourth Industrial Révolution (4IR) | 25%
Benefits of 4IR | 17%
Challenges or risks of 4IR | 16%
Source: Oliver Wyman Forum analysis
21exhibit 5
Typology of Cities
Based on Their Vision
and Assetsviii
Strong vision Strong assets Strong vision Weaker assets
Example: Dubai Example: Shenzhen
Leaders Dreamers
Dubai’s strategyix stands out for clearly acknowledging Shenzhen’s well-rounded strategy69 offers smart city plans,
the need to prepare for technological disruption, good infrastructure, strong STEM educational offerings,
acknowledging infrastructure challenges, and laying out and tech talent. It has attracted a disproportionate
relatively thoughtful plans to transform its workforce. number of new high-tech startups as well as anchor
Not surprisingly, Dubai residents are the most confident companies such as Tencent, thanks in part to its status as
in their city’s vision across the 21 major cities surveyed; China’s first Special Economic Zone (SEZ) and its ability
this vote of confidence is a positive indication of the city’s to carve out a niche as the “Silicon Valley of Hardware.”
ability to attract talent and implement new initiatives in the Thus, Shenzhen has a fast trajectory that could overcome
future. Dubai’s strong vision is matched by strong assets, relative weaknesses in its workforce, infrastructure, and
including favorable demographics, a strong legal base, local research.
and world-class infrastructure.
viii We use a broad definition of assets and capabilities that includes infrastructure, workforce, companies, research institutions, funding, city administration effectiveness,
ease of doing business, and quality of life, among other factors.
ix Dubai’s strategy documents include Dubai Plan 2021, Dubai Advantage, and Dubai Future.
22Weaker vision Weaker assets Weaker vision Strong assets
Example: Manila Example: Taipei
Developing Untapped Potential
Manila has room for improvement in both its vision and its Taipei has strong assets and capabilities – outperforming
assets, but it has risen rapidly in recent years. To continue the likes of Dubai or Hong Kong on these
progress, it will need to make significant investments in dimensions – thanks to its strong infrastructure,
many areas, including its infrastructure, education system, companies, and workforce. Yet its strategy heavily
and workforce. Like Hanoi and Jakarta, Manila is unusual emphasizes smart city use cases at the expense of
among Asian cities for having a high proportion of young addressing broader topics such as retraining its workforce,
workersx – the challenge will be to empower these workers confronting the risks of disruptive technologies, and
to be more productive and innovative. attracting tech-oriented businesses. Thus, it scores
lower on vision, but clearly could aim for and deliver on
larger goals.
x 52 percent of the Philippines population is under the age of 25, compared to 45 percent in Indonesia and 40 percent in Vietnam. (Source: UN Statistics Division.)
23conclusion Considerations for Executives
Cities have become the locus for the new age will require a focus on collaboration and
of AI, offering the opportunity to concentrate transparency among stakeholders. As shown
human and technological energies into in this report, the cities that have made the
innovative solutions that can bring social and greatest and most sustainable progress have
economic benefits. The challenge will be to done so by developing strong public-private
balance the competitive needs of new private partnerships, backed by real commitment and
sector ecosystems powered by digitalization investment and guided by a clear vision and
with the more humane concerns of local urban digitalization strategy.
communities – in other words, efficiency Where to start? Oliver Wyman Forum
and innovation will need to be balanced research on concerns about AI showed that
with respect and inclusiveness. Key actors city residents are worried about two key
in this effort will be the leaders of private- issues: privacy and job losses. Using these as
sector businesses and public-sector leaders, a lens for senior executives and public sector
along with city governments, social service leaders, we offer the following questions to
organizations, and NGOs. drive the dialogue that will be necessary to
Successful and sustainable innovation bring our cities successfully into the AI-
benefitting both the public and private sectors powered future.
Is your picture of a digitized Does your map of a successful digital
future characterized by chorus of future mean success for yourself
harmonized voices or by a series of alone or for multiple stakeholders?
competing solos? •• Have you taken into account those
•• How do other voices – and especially stakeholders who may benefit less, or not
divergent voices – fit into your at all, from your plans?
digitalization plans? •• Where are the biggest trade-offs in your
•• Where can you find harmony among digitalization plans (e.g., between data
voices and where might you work with privacy and data sharing or between
other voices to create it? digital replacement of labor and digital
•• Has everyone heard – and been heard empowerment of labor)? Can these trade-
in – your plans? Where might you include offs be mitigated and optimized?
and use more voices? •• Who are the biggest winners from your
digitalization plans? The biggest losers?
What do they have in common in their
How hard – and where – have you engagement with AI?
looked for the risks in your plans?
•• Our research has shown that the rewards
often mask potential downsides. How How sustainable is your vision of the
resilient to risks are your plans? And do digital future?
you understand the range of risks faced by •• Have you solved for the next two decades,
other stakeholders? not just for tomorrow?
•• Have you mapped where other
stakeholders could – and should – play a
role in the future?
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Authors Valuable Contributors
Christian Pedersen Jacob Hook Laura Gunarso
Wolfram Hedrich Kaijia Gu Jessica Koh
Ana Kreacic Dustin Irwin Marco Chan
Timo Pervane Stephen Szaraz Sam Ladow
Glenn Seah Edward Harding
Jose Lopez Ari Muljana
About the About the Singapore Summit About MMC Insights
Oliver Wyman Forum Established in 2012, the Singapore Marsh & McLennan Insights uses the
The Oliver Wyman Forum is Summit is one of the foremost unique expertise of our firm and its
committed to bringing together events that brings together business networks to identify breakthrough
business, public policy, and social and thought leaders from Asia perspectives and solutions to
enterprise leaders to help solve and around the world to discuss society’s most complex challenges.
the world’s toughest problems. global trends in business, finance
The Oliver Wyman Forum strives and geopolitics, and the impact Our work draws on the resources of
to discover and develop innovative on regional and global growth, Marsh, Guy Carpenter, Mercer and
solutions by conducting research, prosperity and stability. It is a key Oliver Wyman – and independent
convening leading thinkers, platform to share Asian perspectives researchers. We collaborate
analyzing options, and inspiring on global issues, and one where with industry, government, non-
action on three fronts: Reframing ideas on deeper partnerships governmental organizations, and
Industry, Business in Society, Global between the public, private and academia around the world to explore
Economic and Political Change. people sectors are developed new approaches to problems that
Together with our growing and and shared. Attendance is by require shared solutions across
diverse community of experts invitation only. economies and organizations.
in business, public policy, social
enterprises, and academia, we think The Singapore Summit is organised Marsh & McLennan Insights plays a
we can make a difference. by Temasek Foundation with the critical role in delivering the MMC
support of the Singapore Economic Advantage – Marsh & McLennan’s
For more information, Development Board, GIC, the unique approach to harnessing the
visit www.oliverwymanforum.com Monetary Authority of Singapore collective strength of our businesses
and Temasek. to help clients address their greatest
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More information about the
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at www.singaporesummit.sgCopyright © 2019 Oliver Wyman Forum. All rights reserved.
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