Why Enterprises Cannot Compete On Their Own

ByEdwin Diender

July 16, 2020

Edwin Diender

In part 4 of my blog series on the universal framework of smart cities, I look at what cross-industry collaboration means for enterprises and the evolution of intelligent cities. This builds on the first three parts in which I examine the interplay of the framework, governance, and the intelligent city concept.

  1. Visualizing the Universal Framework for Smart City Construction
  2. The Role of eGovernment in Smart City Construction
  3. Industry Convergence in the Intelligent City Ecosystem

Say Goodbye to Monopoly

Thanks to a Reddit user you can always win at Monopoly. In a post named “How to win at Monopoly and lose all your friends”, the gamer revealed the best strategy for victory. But it’s already saying it, right there. It’ll make you lose all your friends.

In economic terms, a monopoly is defined as a market structure that’s characterized by a single seller that sells a unique product in the market. In a monopolistic market, the seller faces no competition as the sole seller of goods that have no close substitute or alternative supply.

In this scenario, there’s no innovation, as there’s no incentive. There are no new challenges from which new business models can be born.

Read more: Can You Put a Price on Competitive 5G Markets?

The Whole Is Greater than the Sum of Its Parts

However, the world of today is a world of shared economies. Integrated global supply chains comprise a wide array of suppliers, partners, goods, and services.

In fact, not one single product of today is the product of a monopoly.

The value of a shared economy is the economies of scale and shared benefits whereby the whole is greater than the sum of its parts. How does that play into intelligent cities? A city by nature and origin does not compete and does not have a competitive advantage, do they? Or do they?

Dependency

The universal framework for intelligent city construction is like a wireframe in which all its pieces can move independently without making it fall apart. As such there is a link between the separate pieces. Even in a true monopoly, there is a dependency of some sort. The end product might be sold as unique and one-of-its kind. But the manufacturing, its production, the supply chain, logistics and distribution; they are all crucial parts of the whole.

Without its place of all separate pieces in the overall structure, the whole thing would fall apart. And the monopoly would not be able to operate.

This model is represented in our Global Connectivity Index 2019 report in the context of the value chain that an Intelligent Connectivity system creates, with each enterprise adding its own unique value.

Enterprises Drive City Economies

Back to the city context and some years ago, Deborah Talbot published an article in Forbes about businesses being the engine of cities. She reflected on Jane Jacobs, who’s well known for her work on the nature of cities and the problems of mass scale urban renewal. Her work on The Economy of Cities  is less understood, though.

In those days, Jacobs argued that cities were more critical economic units than government gave them credit for – they were, she said, the cause not the consequence of economic development. And that seems even more relevant nowadays in digital transformation terms.

Economic development came about as a result of innovation and the sharing of new knowledge. The city was the best conditions in which innovation and new knowledge could emerge. Why? Well, Richard Florida unpacked this idea further in his analysis of the creative economy in The New Urban Crisis.

Cities offer a density of highly skilled people who interact, share ideas, work together, and through this lateral synthesis, are more likely to come up with new ideas and initiatives. It’s no accident that most startups like to be in cities, because only in cities can they find the skills they need.  

Cross-sector Collaboration Leads to Innovation and New Business Models

In the previous post, I looked at how new business models and industries can work together in the context of industry convergence. I gave an example of road work, traffic camera images, and predictive analytics for road maintenance and repair.

Now, let’s dive a little deeper into that and explore how cross-industry collaboration drives innovation, new business models, and digital transformation.

Example 1 – Downstream Partnerships: The early days of online shopping and e-commerce dates back quite a while. These companies were digital natives from the moment they started. But already in these early days, the online retailer actually needed a strong alliance with physical logistics and delivery services companies. In turn, the mail and package delivery industry (a non-digital native industry) has gone through a complete back-end digital transformation process.

Yes, the package gets physically delivered to your door, but you don’t sign a piece of paper anymore to confirm delivery. You don’t pay they delivery person at the door, and certainly not with cash – it’s digitalized.

Example 2 – Partnerships for Transformation: The classic example here is banks and fintech companies, with banks providing the ability to scale and brand equity and fintechs providing the unique solutions and flexibility. Indeed, 81% of banking executives surveyed by Finextra last year believe that working with partners is by far the best strategy for achieving digital transformation.

And it’s not just a marriage between banks and fintechs – Standard Chartered has teamed up with PCCW, HKT, and trip.com to offer a new virtual banking service, Mox, that offers retail financial services and unique telecom, entertainment and travel products – a business model that is indeed greater than the sum of its parts.

Example 3 – Technology Partnerships: Operating more than 1 million elevators and escalators globally, the Swiss-based Schindler Group is one of the world’s leading providers of elevators, escalators, and related services. In the past, Schindler’s elevators were mainly operated and maintained manually, resulting in high maintenance costs and inherent safety risks in the event of human error or negligence.

Now, we’re working with multiple stakeholders together to provide Schindler with an industry-leading “Internet of Elevators” solution. The solution will manage over 1 million elevators around the world on a single platform, automate operations and maintenance, and help Schindler overcome safety challenges.

Our AI-enabled industrial predictive maintenance solution collects and transmits elevator data in real time to reduce the need for physical inspections. Using sophisticated data analytics on the cloud, it is possible to identify potential issues and send an alert in advance of a likely elevator malfunction. The solution helps reduce downtime by 90% and maintenance costs by 50%.

AI-enabled predictive maintenance not only eliminates safety risks, but also extends elevator service life. The solution allows for new services, such as in-elevator advertising and innovative digital services for data monetization, which can create additional business value.

Basically, we’re innovating new business model to further enhance the digital transformation of all passengers in an elevator’s vertical journey.

Tying It All Together

The world today is a world of shared economies. Integrated and global supply chains are comprised with a wide array of suppliers, partners, goods and services. Collaboration across industries is leading to innovation and new business models where a shared economy means economies of scale, shared benefits, and the business engine of intelligent cities.

For enterprises, it means a new approach to partnerships, innovation, and transformation.

Stay tuned for part 5 in which I will describe how intelligent cities will evolve into an intelligent, connected cities ecosystem.

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Disclaimer: Any views and/or opinions expressed in this post by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Huawei Technologies.

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Edwin Diender

Chief Digital Transformation Officer & VP, Government & Public Sector Business Dept, Huawei

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