Smart cities: Digital solutions for a more livable future

Smart City 02

Smart cities have reached a turning point. After the concept was introduced a decade ago, the early results often fell short of the initial hype. Today cities are moving beyond the pilot stage and using data and digital technologies to deliver results that are more relevant and meaningful to residents.

A new McKinsey Global Institute (MGI) report analyzes how dozens of smart city applications can perform in different types of urban settings. It finds that they can improve multiple urban quality-of-life indicators by 10–30 percent. The report also takes a snapshot of deployment in 50 cities around the world. While it shows a flurry of activity and innovation, it also indicates that even the most cutting-edge smart cities on the planet have achieved only two-thirds of what is feasible today.


The report, Smart cities: Digital solutions for a more livable future, offers the most comprehensive guide available to the current generation of smart city solutions. It covers dozens of applications such as predictive policing, real-time public transit information, e-hailing, intelligent traffic signals, smart parking, telemedicine, and data-driven public health interventions, to name just a small sample. It provides a realistic gauge of how each application can help cities address their priority issues, such as crime, congestion, or pollution, and improve quality-of-life outcomes.

The results are often impressive:

Public safety. MGI finds that smart applications could reduce urban fatalities by 8–10 percent. To put that in perspective, a high-crime city of five million could save up to 300 lives each year. A more data-driven approach to policing could reduce crime incidents such as burglaries and assaults by 30–40 percent. Cities could also get first responders to the scene of emergencies 2–17 minutes faster, depending on their starting point.

Time and convenience. MGI finds that cities can use smart technologies to cut commuting times by 15–20 percent. This would give the average worker back 15–30 minutes every workday, or 2–4 full days every year.

Health. The report argues that cities could be catalysts for better health, driving a shift to a more digitally enabled, wellness-oriented approach. MGI finds that cities could use smart technologies to reduce their health burden by 8–15 percent. Cities of the developing world could make significant strides through data-driven public health interventions (particularly centred on maternal and child health), as well as infectious disease surveillance.

Environment. Cities can use a range of smart applications to cut emissions by 10–15 percent, save 25–80 liters of water per person each day, reduce unrecycled solid waste by 30–130 kg per person annually, and reduce the negative health effects from air pollution by 8–15 percent.

The report finds that the current generation of smart city applications could help cities make significant or moderate progress toward meeting 70 percent of the United Nations Sustainable Development Goals. But the results associated with individual tools vary widely in different urban settings given legacy infrastructure systems and baseline starting points.

“Cities can’t just install technology systems and have them replace infrastructure by flipping a switch,” said Jonathan Woetzel, a senior partner in McKinsey’s Shanghai office and a director of the McKinsey Global Institute. “Integrating smart technology into infrastructure helps users and service providers make better decisions and reduce inefficiencies. Ultimately, it helps the public get the services they want, when and how they want them.”

MGI also offers an extensive snapshot of deployment in 50 aspiring smart cities around the world. It looks at three layers of “smartness” in each city: its technology base, the applications it has introduced, and public adoption. The results do not constitute a ranking, but they do show the full sweep of activity under way around the globe.

The report finds that even the most digitally advanced cities on the planet aren’t as smart as they can be. No city amassed more than two-thirds of the possible points that represent full potential deployment today. They all have more work to do—and much more potential to realize. Since technology never stands still, the bar will only get higher. Furthermore, many places have not yet implemented some of the applications that could have the biggest impact on their priority issues.

MGI also conducted surveys in all 50 cities to gauge how residents feel about the technologies being deployed around them. While the responses were surprisingly lukewarm in European and some other high-income cities, the surveys found striking levels of awareness and usage in Chinese cities. With its young population of digital natives and big urban problems to solve, Asia will play a big role in shaping the future of smart cities.

Using data and digital technologies to solve public problems will largely fall to city agencies—but not exclusively. MGI finds that the public sector would be the natural owner of 70 percent of the applications it considered, but 60 percent of the initial investment could come from private actors. Local governments don’t have to provide every type of application and service themselves. Many smart cities take an ecosystem approach, with innovation and investment coming from companies, non-profits, and partnerships.

The report notes that smart solutions are changing the economics of infrastructure and causing local governments to rethink service delivery for everything from transit to waste collection. Smart cities also create opportunities and disruptions for companies. In multiple industries companies are already beginning to alter their existing product and service lines to incorporate smart solutions. These include drugstore chains that are becoming telemedicine providers and real estate developers that are integrating automation systems, sensors, and mobility options into their properties. Companies looking to enter smart city markets will need different skill sets, creative financing models, and a sharper focus on civic engagement, the report notes.

The report also explores some of the societal questions surrounding smart cities. “Smart cities won’t be equitable and inclusive unless leaders make that a priority,” says Jaana Remes, an MGI partner based in San Francisco. “They have to make it a point to include seniors, people with disabilities, and disadvantaged neighbourhoods in their strategies. Technology might have the potential to be isolating, but cities can use it to build community and give residents a greater voice in shaping the places they call home.”