The Business of Cities: The New Role of Businesses in City Development

Emily MoirAuthors: Greg Clark and Emily Moir

The last blog in this series explored how companies are restructuring to better serve city markets, as identified in the Business of Cities essay.

In this post we look at how six major trends in the changing relationship between cities and businesses lead to three important new roles for business in cities.

Role 1: Cities’ use of business approaches and tools
Cities are adopting private sector approaches and tools in order to better manage their cities and to become more competitive on the global stage. Cities are borrowing ideas from corporate branding and marketing theory, developing long-term strategic ‘business’ plans and making strategic interventions to increase their investment rate. Their leaders are developing the pragmatic styles honed by private sector CEOs and utilizing international benchmarks and indices to understand and improve their cities’ global positioning.

Role 2: Business and city partnerships
Businesses are partnering directly with city governments for mutual benefits. They are collaborating on the development of new cities, built ‘from scratch’, and joining forces on city marketing so as to enhance exports and attract investment. They are even providing financial support for city development – either as part of their business model or by way of philanthropic initiative.

Role 3: Business and city governance
Business is playing an increasingly important role in city governance, particularly through the formation of business leadership organisations, but also through its involvement in inter-city collaborative networks. Although the role of business in city leadership varies from place to place, not least because of the different perception of the business community in different parts of the world, many firms and group organisations are taking opportunities to fill governance gaps and build delivery capability for cities.

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Role 1: Cities use of business approaches and tools

1.1    Rankings and Indexes
Measurement and comparison of city performance is one of the key ways to assess the success of different approaches to city development.  Until recently, most comparative data on city performance were produced only by national governments, or by international institutions such as the UN and the OECD. Today, though, many of the best and most influential city indexes are produced by big companies – consultancies, banks, professional services firms and international magazines. These firms possess a unique combination of industry expertise, global coverage, analytical insight, and IT capability to fund the time-consuming and difficult task of accurate city and metro benchmarking. Often they pool their resources with public or private research institutions, such as Z/Yen, GFK-Roper, or the Chinese Academy of Sciences. This allows them to combine quantitative rigour with a commercial eye, in order to create accessible and well-designed indexes.

Although produced by commercial outlets, benchmarks are first and foremost a benefit for cities themselves. They allow city governments and the public to gauge progress, make the case for change, attract investment, and raise awareness.

1.2    Business leadership and cities
We are witnessing a new kind of leadership in cities, inspired by private sector examples.  As an OECD study on new city growth and investment strategies since the 2008-9 recession indicated, city leaders all over the world are adopting pragmatic and can-do approaches to adjust to long-term austerity and global competition.[i] They are beginning to plan using long-term, multi-cycle approaches.[ii] In negotiations with higher tiers of government and other city stakeholders, city leaders are taking approaches based on compromise, astute lobbying and openness.[iii] Fiscally, they are increasingly realistic and innovative.[iv]

City leadership is also becoming more actively and positively engaged with the private sector, and many fruitful partnerships have been built to organise the city or regional economy more effectively. One example of such collaboration is in South Africa, where the Western Cape Economic Development Partnership brings together over 130 members from the city and provincial administrations, other public sector organisations, business, academia, civil society and trade unions in order to meet the challenge of economic growth and job creation in the province.[v]  The willingness of city leaders to co-operate across multiple sectors and systems has been recognised and commended by urban commentators such as Benjamin Barber, Bruce Katz and Jennifer Bradley, who argue that city leaders can be the most effective political leaders of our time. [vi]

1.3     City strategy
Long term strategic plans have become much more popular in cities and metropolitan regions as a way of managing complexity. Strategic planning is a key tool that cities and regions have adopted from business that operates as a more holistic managerial practice. Business models such as Porter’s Five Forces, Barney’s VRIN model, or the balanced scorecard have all influenced a strategic approach to city competitiveness.[vii] The World Bank has endorsed this approach by creating an Urban Strategy series and proposing SWOT analysis for gauging developing city competitiveness.[viii]

By developing co-ordinated plans with all stakeholders, cities can prioritise and set targets for attracting investment, people and businesses. They can also plan for land-use, transport and infrastructure investments over the medium to long-term. Through strategic plans, cities can breed continuity of strategic direction beyond individual electoral cycles and encourage consistency despite possible changes in leadership.  Strategic plans aid prudent budgeting and fiscal management, and also encourage cities to consider and address their preparedness for, and resilience to, population growth, environmental and technological change.

1.4     City Branding
Increasingly, cities are using thoughtful promotional brand strategies to better project their advantages, and to foster a clear identity and reputation that will help them win the competition for mobile opportunities over time. These identities and reputations are much more than logos or straplines, they communicate a ‘whole story’ about the value the city can offer to mobile activities. The purpose of the brand is to provide an authentic and aspirational message about the city.

The concept of city branding is of course borrowed from corporate branding, itself a development of pure product branding. Branding theories developed in the corporate context can be of use in the construction, communication and management of a city’s brand. However differences lurk in the fact that there is often no overarching management body responsible for a city, as in the case of a corporate organisation.  Creating a coherent brand out of disparate images, groups and spaces, is one of the key challenges inherent in developing an effective city brand.

1.5     Cities and Investment
Cities, like businesses, recognise that investment rate matters. It matters to cities precisely because cities are in competition with each other as markets for business, people and institutions. Cities face risks and costs just like corporates, and need investment to enable them to adjust to changing circumstances. Furthermore, investment deficits can be highly visible, impacting on reputation and confidence – and like businesses, cities can get stuck or ‘locked in’ to cycles of decline.

Investment rate acts as an operating platform for the city. It matters because investment creates a virtuous circle of city development – enabling systems integration and city smartness, helping to create a business climate and incentive structure, and assisting in the creation and capture of further value. It also builds city resilience – the greater the investment rate, the greater the speed of adjustment of the urban fabric and infrastructure to changing demands.

Role 2: Business and City Partnerships

Blog imageBusinesses are developing ‘special relationships’ with particular cities. Not only are they developing signature cities initiatives which associate them with specific cities, they are also partnering and collaborating directly with city governments for their mutual benefit. Some of the ways in which they do this include:
2.1.   Collaboration in the development of ‘new’ cities
New cities around the world are springing up from scratch as national governments look for new spaces to house growing populations and for spaces to road-test or showcase new concepts in city building and place making. Businesses – particularly large multinational businesses – often play an integral role in the development of these cities.

The definitive example of collaboration in city building is that of Cisco and the Songdo International Business District, a 1,500-acre new city built on reclaimed land on the coast of Incheon, South Korea. Cisco is an official partner of the city, having signed two contracts worth £29 million to deliver networked-based technologies to the city. Cisco will be installing 10,000 ‘telepresence’ units throughout the city which will enable integrated building and facility management, on-premises safety and security, home networking, and virtual concierge services.  The company will also establish a global showcase for its technologies and applications for smart cities in a trade tower in the city. [ix]

Other new city projects are supported by multiple companies. Tianjin Eco-City is a new sustainable city development co-conceived by the governments of China and Singapore. The city’s development corporation has signed investment and strategic partnership agreements with companies including Panasonic, General Motors, Phillips and Sky.[x] But mega-corporations are not the only companies investing in new city building. In Ghana, RLG Communications – a national ICT company – is financing 30% of the development of Hope City, a new smart city in the Greater Accra region. The city is projected to cost £6 billion and is being developed in collaboration with the Government of Ghana, as part of the national development policy framework which aims to turn Ghana into an active player in the global knowledge economy.[xi]

2.2.   Joining forces to enhance exports and foreign investment
In some cities, businesses are joining forces with city authorities to enhance a city’s international profile and improve its competitiveness as a centre for foreign investment. In Japan for example, Hitachi has signed a partnership agreement in which it agrees to support the development of Yokohama as an international city.[xii]  Again, it is not only multi-national conglomerates which are part of this trend. In Portland, Oregon under a new Metro Export Initiative companies of all sizes which work in the city’s clean tech, tourism and education sectors are clustering together to enhance exports and foreign investment by collaborating with local government authorities in a  “We Build Green cities” branding campaign.[xiii] A similar collective marketing programme is also in operation with sustainable businesses and local government in Copenhagen.[xiv]

2.3.   Businesses providing financial support for city development
Some companies are lending a hand to cities by providing financial support for city development. This could be by way of a philanthropic initiative (such as the IBM Smarter Cities Challenge) or as a part of their business model. Banks are prevalent in this area of city-business collaboration. Citibank has worked with the New York Housing Authority, investing in funds to preserve public housing in the city,[xv] whilst JP Morgan has recently committed to investing in the bankrupt city of Detroit (see case study).

Role 3: Businesses and City Governance

Business is playing an increasingly important role in city governance, particularly through the formation of business leadership organisations, but also through its involvement in inter-city collaborative networks. Although the role of business in city leadership varies from place to place, not least because of the different perception of the business community in different parts of the world, many firms and group organisations are taking opportunities to fill governance gaps and build delivery capability for cities.

3.1.   Business Leadership Groupsshutterstock_33773914_NewYork
Business leadership groups are organisations in which members of the private sector, based in a particular city, join together to develop policies which would enhance that city’s competitiveness. The groups discuss and debate strategy, and inform, lobby and work with local government. They often also seek to collaborate with other stakeholders including academia, civil society and wider public sector organisations.

These groups have become a driving force in almost all of the world’s most successful cities.  London First is a key player in advocating for pro-London finance and infrastructure policy, and the New York City Partnership plays a similar role in New York. Bombay First, World Business Chicago, Edinburgh Business Forum, Barcelona Global, the Committee for Sydney and the Committee for Auckland play similar roles in their cities. The groups are not only relevant to the world’s biggest and most globalised cities. In Colombia, ProBarranquilla and ProAntioquia have been vital forces in city and regional development. ProBogota has been recently established following their success.[xvi]

3.2.   Business involvement in City Networks
Cities are increasingly joining together in networks to share best (and worst) practice, advocate for change and innovate on cross-border issues such as climate change, terrorism, economic resilience, drugs, poverty and inequality. Joining together in this way not only allows cities to share ideas and expertise, but also gives them a louder voice on the world stage. Indeed city networks have a growing influence in world politics, a fact which has been recently recognised by urban commentators including Barber (2013) and Acuto (2013).[xvii]  Collaborative city networks are particularly active – and effective – in trying to address global issues where nation states have struggled to make collective progress, for example in climate change and global security.

Increasingly, businesses are joining, funding or working in collaboration with city-networks, seeing them as an influential means of shaping policy, building relationships with city authorities and other stakeholders, or fulfilling CSR initiatives.  Some city networks are collaborating on specific projects with global businesses (see case study), whilst others are allowing corporates to become fully fledged network members. The City Protocol is one such example – it is an online network which seeks ‘to promote, guide, and accelerate the responsible transformation of cities for the benefit of all urban communities throughout the world.’[xviii] Members include cities such as Amsterdam, Barcelona, Moscow and Quito, and also companies such as GDF Suez, Cisco, Microsoft and Schneider-Televent, as well as academic institutions.[xix]  The partnership of global cities with some of the world’s largest businesses benefits both groups by creating a global governance force to be reckoned with.

 

[i]OECD (2013) Delivering Local Development: New Growth and Investment Strategies
[ii]Katz B & Bradley J (2013) The Metropolitan Revolution: How Cities and Metros are Fixing Our Broken Politics and Fragile Economy: Brookings Institution
[iii]As for example, with Manchester’s City Deal (See Case Study box)
[iv]Katz & Bradley The Metropolitan Revolution
[v]Western Cape Economic Development Partnership (EDP) ; The South African LED Network (Accessed 23 September 2014)
[vi]Barber (2013) If Mayors Ruled the World: Dysfunctional Nations, Rising Cities (Yale University Press);  Katz& Bradley The Metropolitan Revolution
[vii] Michael Porter (1998). Competitive Strategy. New York: Free Press; Jay Barney (1991). Firm Resources and Sustained Competitive Advantage. 17(1): 99-120; Robert Kaplan and David Norton (1996). The Balanced Scorecard. Cambridge: Harvard Business Review Press.
[viii]World Bank:Urban Competitive Assessment
[ix] Songdo IBD: Press Release (Accessed 23 September 2014)
[x] SSTEC: News Release
[xi] CNN: Africa’s ‘new cities’: Urban future or utopian fantasies?; BBC: Ghana’s John Mahama launches Hope City project
[xii] Hitachi: Collaborative Innovation with Yakohama City
[xiii]Greater Portland Export Plan
[xiv] Quartz: Forget big suburban campuses, innovative corporations are moving downtown
[xv] Citi: Financing New York City public housing development.
[xvi] http://www.colombiareports.co/bogota-entrepreneurs-create-foundation-promote-projects-better-city/;Larepubic (Accessed 22 September 2014)
[xvii]Barber, If Mayors Ruled the World
[xviii]City Protocol Society
[xix] City Protocol Society

About the Author

Greg Clark has spent more than two decades putting his passion for cities to good use, by advising and mentoring global cities, firms and institutions. He has worked with over 100 cities around the world and holds senior advisory roles at international bodies including the OECD, Brookings Institution, ULI, and the Future Cities Catapult. A prolific author, Greg has published ten books to date on cities and investment practices, with three more in the pipeline for 2016-17. And as Chairman of The Business of Cities research and intelligence group, Greg leads a small high calibre team that advises and reports on global trends and changes in cities. In his academic life Greg is Hon Prof of City Leadership at UCL and co-chairman of the UCL City Leadership initiative, Visiting Professor at Strathclyde University, and Global Fellow at LSE Cities. He has received international awards for his work from cities as far afield as Barcelona, Brisbane, London, and Toronto and in 2016, Greg was honoured by HM Queen Elizabeth II with a CBE for his services to city and regional economic development. Meanwhile, outside of the day jobs, Greg is an avid tennis player, wine enthusiast, and lifelong follower of Arsenal FC.

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