Authors: Greg Clark and Emily Moir

The last blog in this series, looked at the suitability of commercial strategies for city governance, as identified in the Business of Cities essay. In this post we explore the future relationship between businesses and cities.

In the new global era, cities and businesses have become strongly inter-connected and inter-dependent. They are, and will remain, distinct types of entities. But both future businesses and future cities can reap rewards from understanding, enhancing and utilising their mutual interests.

Cities are now the most important markets for businesses. Businesses therefore need to embark on a journey to become city savvy. Mega-corporations like Siemens and IBM are leading the way, but there are benefits for businesses of all sizes and in all sectors. Businesses should be looking to adopt the ideas of the first movers and innovators. Those that are slow to adapt will find it difficult to reposition and rebrand.

Cities must also look to take advantage of their new relationship with businesses in order to secure their best possible futures. They can do this by:

• Being business friendly and investment ready. Business friendliness is not a code word for tax cuts and low regulation. Being business friendly in a deep sense means learning to partner and serve businesses in order to be prepared, agile and competitive in the global marketplace. It means ongoing collaboration, relationship-building, and co-advocacy to ensure that the long-term interests of both are achieved. Investment readiness on the other hand means cultivating a reliable supply of opportunities for inbound capital (which match investors’ risk appetites and funding demands), and developing a credible and efficient framework and process for investment.

Our recent report for the Urban Land Institute also noted this key trend:

Despite the growing importance of business and investment climates in cities, the report notes that there is currently no standard definition of “business-friendliness” and “investment-readiness” in a city context.  To remedy this, the report provides a comprehensive set of criteria and essential outcomes for business-friendly and investment-ready cities, and proposes a new definition for both concepts:

–      Business Friendliness: The level and quality of attention paid by city managers and leaders to improve upon national framework conditions at the local level to develop a positive and differentiated approach to attract and retain firms and corporate locators, and to support their trading needs.

–      Investment Readiness: The demonstrated capacity of a city to prime itself towards the needs of external investors, by providing a credible and efficient framework and process for external investment, coupled with a development pipeline of bankable propositions and opportunities that meet the specific process, asset, scale, and risk management requirements of the investors.

Business-friendly cities must “be attractive for new businesses by providing such essentials as market access, market confidence, tax and licensing frameworks, and a pool of qualified and diverse labour; make it easy for companies to stay as they grow, evolve and enter new relationships and supply chains; and help companies to grow by facilitating sites, knowledge, seed capital and customer access.”  Meanwhile, investment-ready cities must have “a stable, predictable, transparent and consistent environment for external investment, with planning that minimises the risk of oversupply, or firm cannibalisation; a process for investment characterised by low risks and predictable costs; attractive risk-adjusted returns for the different classes of investors; and to be able to leverage its own assets, including public land and contracts.” Click here for the full report.

Apart from becoming more business friendly and investment ready, what else can cities do to prepare for the growing business and cities agenda?

• Drawing inspiration and lessons from the private sector, and borrowing techniques and tools. Businesses have the potential to help cities to develop new skills such as operational efficiency, budgetary discipline, and new ways of working and engaging with stakeholders. The adoption by cities of branding and marketing strategies shows the transferability of many private sector tools. There is still plenty for cities to learn from business, particularly in areas such as city finance and city leadership.

• Collaborating with business for hugely beneficial outcomes. City-business partnerships have the potential to enhance innovation, governance and competitiveness.  Innovation partnerships in particular can help cities to develop their own bespoke solutions to future challenges – solutions which they would not have the resources to finance, conceive or implement alone.

• Seeking support from the corporate world to negotiate desired future outcomes with higher tiers of government. Where cities may have insufficient influence on their own, support from the business sector can add clout to advocacy for certain policies or futures.

• Welcoming diverse and international populations. The presence of a talented workforce is a major consideration for businesses deciding where to locate. Open cities are attractive to diverse populations, and have a better chance of attracting the interest of international business in turn.

• Remaining mindful of their distinctiveness from business, and the separate, but complementary roles that cities and businesses each have to play.