Analyst Insight: Emerging Business Models in Smart Cities

The constraints on public sector finances indicate that smart cities require innovative approaches to project funding. Public-private partnerships (PPPs) are widely recognized as key sources of investment and business model innovation. Smart city projects that utilize PPP investment models allow for more collaboration between municipalities and private companies. Combining the expertise of the private sector with the in-depth understanding that a government has for public needs typically results in a greater mutual impact for the city inhabitants and the private entity.

More sophisticated approaches to value recognition and risk sharing can provide better frameworks for aligning multiple stakeholders in smart city projects that deliver significant social and environmental benefits. This Guidehouse Insights study focuses on three emerging business models—revenue sharing models, asset-based value creation models, and accelerator programs—that PPPs can utilize to create sustainable and resilient cities. Revenue sharing business models allow PPPs to distribute the benefits and risks of a project among more stakeholders. Asset-based value creation enables PPPs to manage a tangible asset to catalyze smart city growth. Accelerator programs funded by PPPs provide startups with industry experts’ oversight to inject innovative solutions into the market. Based on the Smart City Tracker 1Q23, this Analyst Insight includes an assessment of tracked smart city.

PPP projects, case studies for each business model, and recommendations for stakeholders in the smart city industry.