Algiers Smart City paves the way for other cities in the developing world

The goal of smart city design is to improve the standards of living for citizens by optimising resources through digital solutions. In addition to advancing the wilaya (province) of Algiers, the Algiers Smart City envisions setting a new baseline for technology development in other cities in Algeria and further abroad. Although the strategies used by each smart city vary, as they draw on a location’s specific assets and constraints, there are some common challenges, such as retaining local talent and accessing finance for expensive and fast-evolving technological innovations. Faced with these obstacles, the Algiers Smart City team has been empowered by the wilaya to create a framework that provides Algiers and other developing cities with adapted solutions.

Novel Approach

Technology has continued to evolve at a rapid pace, which places financial pressures on aspiring smart cities. However, smart city solutions can contribute to alleviating existing problems. “Cities are attempting to transform in the face of rapid urbanisation, pollution, transportation bottlenecks and the growing need for energy, among other things. A smart city approach can be an efficient way for cities to make use of technologies and find solutions to those major challenges,” Peter Lyons, partnership development lead at the World Economic Forum, told OBG.

Against this backdrop, the Algiers Smart City project is based on a framework that accounts for the challenges of building a smart city within an emerging country. This is identified as the isolation, dependency and lack of confidence (IDC) challenges framework, upon which the Algiers “talent leverage model” is based. The first challenge is isolation. Leading technologies are usually created and developed by global corporations working in prominent tech clusters in advanced economies. This is rarely done in cities such as Algiers, which leads to an acute isolation of the tech industry in cities in emerging markets. Second, there is the issue of dependency, as the absence of technology transfer from global clusters to local initiatives triggers technological dependency vis-à-vis foreign advancements. The third issue relates to a lack of confidence. Domestic tech firms and start-ups often lack the confidence necessary to build and scale advanced commercial solutions, which applies, to some extent, to the majority of emerging economies.

These areas have been focal points of the Algiers Smart City project. “In Algeria we face the IDC challenge first hand, and that is directly linked to not being able to retain and leverage talent. This project aims to fix this via new talent mobilisation models,” Riad Hartani, strategic advisor for the Algiers Smart City, told OBG.

Tech Cycle

The speed and disruption of technological innovation makes it difficult for innovators and authorities to master and deploy them quickly enough to develop viable business models. “This challenge can only be amplified for cities, as public administrations usually prefer implementing technologies with long life cycles. In fact, the business case often mandates that, as it would be difficult to break even with a short cycle,” Frank Rayal, founding partner of the advisory services firm Xona Partners in San Francisco, told OBG. “Evaluating new technologies is a time-consuming process, and cities don’t move fast in making those evaluations.”

In other words, the pace of technological evolution in recent years has tended to exceed the time it takes for the relevant authorities to assimilate the requisite knowledge to evaluate it, make decisions, plan, design and deploy a particular technology at scale. “We aim to find a solution to what we call the cascading technology trap, where technology moves faster than policymakers,” Fatiha Slimani, head of Algiers Smart City, told OBG.

While constantly assessing new technologies is laborious, its disruptive nature can also present leapfrog opportunities. “Timing is unique. It’s the chance of a lifetime to exploit such discontinuities,” Rayal added.

Models

Cities around the world have adopted a range of approaches to smart city development, but there are some fundamental steps common to most of these, such as prioritising problems by urgency, determining what industries will benefit the most from new technology, and ensuring that knowledge sharing takes place between stakeholders and across sectors. A study on global smart city activities by advisory firm Xona Partners identified four main types of strategies.

One approach is to award contracts to start-ups and other parties to address problems with project-driven solutions. For example, the Startupbootcamp Smart City Dubai programme, launched in May 2017, selects start-ups that work towards the emirate’s smart city goals and supports them through intensive three-month mentorship programmes. While this strategy has the advantage of developing the local start-up ecosystem, there are also risks inherent to working with early-stage ventures, which often face difficulties accessing finance, securing customers and setting up stable revenue streams. In Dubai’s case, the stringent selection process is designed to mitigate these issues.

Under the second strategy, major internet and cloud technology players are involved in the smart city design, disrupting the existing data and IT industries in order to spark progress. Seoul, for example, utilised this approach by having the national telecoms company, SK Telecom, lead development. While this approach ensures that the latest technologies are deployed, it is worth noting that competition within the ICT sector can make this option politically sensitive under some circumstances, especially regarding data residency.

The third approach – adopted by cities such as Hong Kong, Paris and London – follows an incremental smart city roadmap based on proven business cases. The blueprint is then led by various government groups within the city. This strategy has the benefit of optimising the cost of deployment, but making decisions on a technology before it has moved into its next development iteration has proven difficult in some cases.

Lastly, Barcelona illustrates the fourth strategy the study identified, where a consortium of government bodies, technology players, research and development labs, telecoms operators, start-ups and universities is involved in the decision-making process. Solutions are chosen based on a cooperative model that involves all these parties in order to share experiences and minimise risk. While this model can encourage synergies along the smart city value chain, it can be inefficient if streamlined governance practices are not in place.

Unique Method

The Algiers talent mobilisation model is unique in that it combines elements of all four of these four outlined strategies with new tactics that account for the IDC framework and other challenges specific to Algiers. While it is designed to deal with Algiers’ needs and constraints, the model could also be applied to other cities in emerging markets that face IDC issues. Its strategy is based on four guiding principles: start-up involvement; global benchmarking; linkage to technology leaders; and local talent mobilisation.

To encourage and enable start-ups and innovative companies to engage in the design of smart city solutions, the Algiers Smart City team is working to improve its processes, become more innovation-friendly and prioritise the incentivisation of start-up engagement.

Global benchmarking of other smart city models is helping to create partnerships and exchanges with cities around the world. Importantly, it optimises learning from other cities and allows Algiers to adapt this knowledge. Even though Algiers faces unique challenges, solutions to many smart city problems have already been developed elsewhere, and solutions that have worked effectively can help to inspire local initiatives.

Involving global technology leaders – starting with Facebook, Apple, Microsoft, Google and Amazon – will be essential to tackle the issues of isolation and dependency in Algiers. To this end, the authorities are introducing incentives, such as more favourable regulatory regimes, for these firms to dedicate resources to smart city experimentation models.

Lastly, accessing talent will continue to be crucial to solving IDC problems. The success of a smart city project depends on the quality of its experts, and thus relies on the project’s ability to leverage local and diaspora talent. Aware of this need, the talent mobilisation model hinges on encouraging targeted members of the diaspora to participate in smart city projects. In the past it has been difficult to stem the emigration of talent, but now, with much of the work being done online, there is a chance to tap a global talent pool. Under the talent mobilisation model, a quality core team leads a project and rapidly scales it, using human resources abroad if needed. Policymakers play a prime role in identifying diaspora talent and defining projects for them to lead and develop. According to Hartani, effective leadership is imperative in both areas. “These projects could leverage technology shifts to bypass the linear nature of technology evolution and, as such, technology dependency,” he explained to OBG.

Building an Ecosystem

The project aims to foster synergies by bringing together domestic and foreign players. Leading global institutions, including the World Bank, the World Economic Forum, the African Development Bank, the OECD and the UN, have been involved thus far. “Algiers Smart City involves a wide range of profiles, as well as expertise from fields as diversified as engineering, urban planning, economics and finance. This is unprecedented in Algeria,” Amine Bouabdallah, founder of the local start-up Isiniaa, which specialises in intelligent data management, told OBG. Key to the Algiers strategy is the involvement of carefully selected start-ups in most initiatives. Their integration in the project has the double effect of mobilising local talent and boosting the local start-up ecosystem. “Access to talent with the right expertise, linkages and passion to tackle the core problems is at the heart of the Algiers Smart City strategy,” Slimani added.

Prior to the Algiers Smart City summit of June 2018, and as part of the first phase of the start-up competition, over 20 start-ups, most of which are focused on leapfrog technologies, were selected on the basis of management quality and their potential for developing mutually beneficial partnerships with multinational firms. Reciprocally, multinationals and larger companies are selected according to their willingness to partner with start-ups and implement technology-transfer models. Incubators could represent another key stakeholder in the ecosystem once their model is reviewed. For local start-ups, the Algiers Smart City project is an opportunity to demonstrate expertise and prove their abilities to deploy advanced technological solutions that were seen as too difficult only recently.

Tailored Financing

Among the most pressing issues facing smart city initiatives are accessing adequate finance and creating revenue, which are exacerbated by the fact that cities tend to operate on tight budgets. “The budget allocated to IT is a relatively small part of the overall budget,” Hartani told OBG. However, the idea that funding is not necessarily the main problem is key to the thesis of the Algiers Smart City project. “The biggest challenge is building sustainable revenue with the right technology transfer model,” he added. While angel and venture-capital funding are starting to emerge as financing models, development will likely rely on both public and private funds for some time. However, developing new partnership models that secure revenue streams for start-ups remains a priority. “Some of the funding should come in the form of government grants and subsidies, but other sources of financing are likely to originate from private investment that will be targeted at specific initiatives,” Hartani said.

These initiatives will include new education programmes, the launch of coding schools, acceleration programmes for local firms and innovation competitions, in addition to strategic partnership projects such as those related to Smart Africa, among others.

Experiment Lab

The country’s regulation of the ICT sector has developed significantly since the 2000s, although according to many stakeholders, it still needs to evolve to more closely align with the regulatory frameworks of leading global economies, especially given the disruptive nature of leapfrog technologies.

In this regard, the newly created Experimental Lab and Technology Innovation Hub in Algiers, which launched in April 2018, will be paramount. The lab will relax the regulatory framework to incentivise innovation by provides a live environment where smart solutions can be tested prior to being launched citywide. This will allow research and development labs, universities, incubators, accelerators and start-ups to fast-track the validation of their concepts.

Having a concentrated physical environment where students, multinationals, small and medium-sized firms, start-ups and local decision-makers can collaborate will also promote synergies. It will be easier for innovators to adjust new technologies and their applications in response to the concerns of policymakers, and allow the innovations to be deployed more quickly. Furthermore, this environment will help Algiers to develop each stage of its value chain more effectively.

Defining Priorities

Properly defining and continually redefining the priorities of the project will be essential to its success. “To harness the power of external waves of technological innovation into internal sources of growth and job creation the region will need to adapt several key areas, including its internet and payment systems, its regulatory framework, its education systems, its tech-state capacity and the financing architecture for start-ups,” Rabah Arezki, chief economist for MENA at the World Bank, said to local media on the topic at the Algiers Smart City summit in June 2018. For its part, the Algiers Smart City team has identified transportation, water and energy as some of the priority sectors for the time being, with the internet of things, cloud technology and innovation to be integrated across these areas.

“While the project is expected to be large in scale, issues such as urban planning, including waste management, and the optimisation of water consumption should be given priority,” Nizar Jegham, a smart city expert based in Dubai, told OBG. “These challenges have already been made explicit by the wilaya of Algiers, and once the overall strategy is in place, what should be tackled first will need to be determined.”

Measurable Impacts

Notwithstanding the ongoing challenges that are being progressively addressed, the Algiers Smart City project is expected to have a significant impact on the quality of life of the city’s citizens. “We need to reinforce the angle of approaching the smart city from the perspective of it being a means to an end, rather than an end in itself,” Hartani told OBG. “It provides the opportunity to leverage new leapfrog technologies, innovation models and investment strategies to adapt the various economic development roadmaps into an internet and data-first era that will be with us for the coming decades.”

Crucially, the economic impact of successful smart cities could help to bridge the development gap between mature and emerging markets. In fact, cities in these markets may be better able to effectively implement various smart city components than their counterparts in advanced markets. “Emerging countries are positioned very well to capitalise on the latest breakthroughs in technology and create a new generation of governance,” Anurag S Maunder, vice-president of US artificial intelligence company Kindred, told OBG.