1Q 2021

Ecosystem Strategy for Smart Cities: Business Model Innovation Beyond the Status Quo

Funding remains the biggest challenge to large-scale smart city innovation. Despite considerable effort by the public and private sectors, the task of establishing common models for innovation financing that can easily be deployed at scale across multiple cities has proven difficult. The financial challenges have been increased further by the devastating impact of COVID-19 on city operations and revenue.

However, new approaches to smart city funding are emerging. These span city-led initiatives, private equity investment, new business models, and platform innovations. A post-pandemic alignment of city objectives and national and international priorities around economic recovery, sustainability, and social equity offer tantalizing prospects for the transformation of urban services. In the process, cities can become a catalyst for a broader techno-economic transformation combining the potential of digital and green technologies. 

This report examines how smart city business models and finance options are evolving to meet long-standing and emerging challenges in an age of uncertainty. Recommendations are provided for city strategists, technology providers, service partners, and other stakeholders. 

Pages 20
Tables | Charts | Figures 4
  • What are the barriers to better funding for smart city projects?
  • What new approaches are being developed to address the funding gap?
  • What examples are there of city innovation?
  • How is the financial sector supporting smart city projects?
  • What is the role of technology providers in helping bridge the funding gap?
  • What is the role of new approaches to asset management and value recognition?
  • How are city platforms enabling new business models?
  • What are the opportunities in different segments of the smart city market?
  • Municipalities
  • State and regional government 
  • City service providers 
  • Smart city solutions providers 
  • IoT and city platform vendors
  • IT, networking, and telecommunications vendors
  • Transportation and mobility providers
  • Energy management hardware and software vendors
  • Utilities
  • Government agencies 
  • Investor community


Executive Summary

The Capacity Challenge

The Evolution of Smart City Funding and Finance

How Cities, Investors, and Suppliers Accelerate Innovation

Public Sector Funding Innovation and Capacity Building

Private Sector Smart City Investment

Asset-Based Value Creation

Platform Innovation

Capturing Value in the Smart City Ecosystem

Investing in Infrastructure and Innovation

Business Model Innovation across Sectors

Market Accelerators and Inhibitors

Supplier Ecosystem Perspective

Conclusion: Political, Economic, and Technological Transformation Is Needed

Key Recommendations

Additional Resources


  • Circular Approaches to Value Creation and Investment
  • Annual Smart Energy for Smart Cities Technology Revenue by Region, World Markets: 2020-2030
  • Annual Air Quality Monitors Revenue by Region, World Markets: 2020-2029
  • Market Accelerators and Inhibitors