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The Russian Cities Digitization Index
Of the many factors now affecting the development of the economy and society, there are two universal trends that stand out: digitization and urbanization. From Nairobi to Oslo and from Portland to Shanghai, we see not just a sharp increase of digital devices and information networks but also brand new business models, social systems, and personal growth and life success strategies based on new digital technologies. Along those lines, the world is going through more than just a period of urban population growth – cities are being transformed into full-scale ecosystems, each of which is a unique combination of the economic, societal, and technological aspects of life. These ecosystems are engulfed in an ever-growing competition with one another much like the Greek poleis, the cities of the medieval Hanseatic League, or the traditional city-states of West Africa. Global business decisions are based more and more on the ‘Guangzhou or São Paulo?’ or ‘St. Petersburg or Dublin?’ paradigm, whereby country-level factors take a backseat to the qualities and capabilities of cities and their environments.
Is it possible to draw a link between phenomena like explosive digital technology growth and the rise of powerful cities across the globe? On the one hand, the digital space is undoubtedly global in nature. On the other hand, a more in-depth analysis shows that microsystems and the capabilities of individuals in their immediate environments play a surprisingly important role. On Facebook, you can find a friend in any corner of the world, yet the vast majority of users cultivate friendships with people in their own cities or, oftentimes, even with their next-door neighbors. There is no clear statistical data to back up this trend, but it is easy to trace the role that local communities play in social networks, such as residents of a specific borough, parents whose children go to the same school, or members of a sports club. Ultimately, the development of e-commerce turns out to be driven more by the quality of pizza delivered from a local restaurant rather than by purchases made from global giants like Amazon.com. When it comes to transport, people do not merely want to book tickets to exotic destinations but also to find detailed routes and local bus schedules.
Cities from the BRICS countries are widely represented in the index. However, nearly all of them ended up in the bottom half of the list. Beijing is only ranked 62nd, which is above average, while Shanghai (the second-highest ranking BRICS city) is in 77th position. Overall, Chinese cities tend to show better results when it comes to management, human capital, and involvement in International Projection. The latter parameter is also quite developed among cities in Brazil and South Africa, though these two countries also share a weak spot, which the developers of this index refer to as social cohesion
Global Competition between Cities
Cities or modern poleis tend to carry the same weight in the global virtual space as they do in real life. They also end up as singularities in cyberspace that attract (or repel) resources, which are then used to build unique ecosystems, thus giving birth to the concept of a ‘smart city.’
This complex interpretation of the ‘smart’ concept is among other things that were factored in when naming the Cities in Motion index developed by the IESE Business School. It is used to measure 135 cities around the world, based on parameters like Urban Planning, Management, Technologies, Human Capital, Environment, Transport, Social Cohesion, and so forth. Cities from the BRICS countries (unfortunately Indian cities have not been included in the sampling) are widely represented in the index. However, nearly all of them ended up in the bottom half of the list. Beijing is only ranked 62nd, which is above average, while Shanghai (the second-highest ranking BRICS city) is in 77th position. Incidentally, Shanghai placed higher than many Old World cities, including Torino, Valencia, and Lisbon. Overall, Chinese cities tend to show better results when it comes to management, human capital, and involvement in International Projection. The latter parameter is also quite developed among cities in Brazil and South Africa, though these two countries also share a weak spot, which the developers of this index refer to as social cohesion. These cities are suffering from acute social and wealth distribution inequality, racial and ethnic tension, and high crime rates. South African cities have also been underperforming in terms of technologies, while Brazilian metropolises such as São Paulo and Rio de Janeiro proved to be stronger in this area.
The only two Russian cities included in the Index were Moscow and St. Petersburg, ranked 84th and 111th respectively. Despite their high score in human capital (the traditional domain of Russia’s strength in various international rankings) and regional governance, both proved to be weaker when it comes to mobility and transport, social cohesion, technology, and international projection. Still, the two Russian cities enjoy a far better position than many other famous cities around the world, and especially those from emerging nations. Moscow, for instance, has gotten significantly farther ahead of new globalization centers such as São Paulo, Buenos Aires, and Guangzhou – cities that are ‘hot’ in the business media nowadays – while St. Petersburg is ranked higher than Rio de Janeiro, Johannesburg, or Harbin.
The smart city concept requires much more than just saturating cities with technological capabilities. A smart city is not filled to the brim with sensors and it is not managed by supercomputers, even though such systems are becoming increasingly realistic and useful in resolving certain issues, say, in transport (the ‘smart grids’). However, implementing smart cities as a social and psychological phenomenon will primarily require the willingness and ability of people, communities, and organizations to seek and develop new behavioral models and new ways of decision-making and communication. This premise has been confirmed by a Skolkovo School of Management study entitled ‘The Russian Cities Digitization Index,’ which analyzed the level of penetration of digital technologies in key aspects of modern city life
Curiously enough, the city does not have to be a nation’s capital or even an economic center to develop its own ‘smart’ environment. The high cumulative position enjoyed by many countries is a function of how well a large group of their cities have performed in the index. For instance, the largest three cities in Switzerland (Zurich, Basel, and Geneva) are among the top 10 worldwide. If we look at the American cities that made it into the top 30, we will not only find New York, Chicago, and Los Angeles, but also Baltimore, Dallas, Philadelphia, and Minneapolis–Saint Paul. Moreover, even relatively smaller cities sometimes end up higher in the ranking than their larger neighbors or even their respective national capitals. For instance, Nottingham in the United Kingdom is ranked higher than Liverpool, Manchester, or Glasgow, while Bursa in Turkey is seven positions ahead of Ankara, and Monterrey in Mexico is winning the race against Mexico City by a mile.
This is the essence of new global competition among cities; powerful global players may emerge in each country, and not just in the niche of the capital cities (those competed with one another in the past as well), but also in medium-size cities and even small towns, which appear to be increasingly sought after in the processes of globalization. Engineering development centers, data centers, and even corporate headquarters are finding that small towns attract employees. In addition to competitive salaries, they also provide a balanced lifestyle with more housing availability, fewer transportation problems, opportunities to socialize with colleagues outside the workplace, and a chance to integrate into the local community by doing things as diverse as participating on the parents’ council at school, playing in the city orchestra, or joining a football team. Moreover, these opportunities become more and more integrated, forming a single perception of a smart environment. From the psychological standpoint, comfort is absolutely vital outside the workplace – it makes employees more efficient in tackling new generations of business processes that require the ability to make high-stakes decisions independently, deal with uncertainty and exceptions, and be flexible and engaging communicators. Taking on such tasks demands significant psychological resources and a certain emotional state. By extension, ensuring greater psychological comfort for employees is a pragmatic business step.
The smart city concept requires much more than just saturating cities with technological capabilities. A smart city is not filled to the brim with sensors and it is not managed by supercomputers, even though such systems are becoming increasingly realistic and useful in resolving certain issues, say, in transport (the ‘smart grids’). However, implementing smart cities as a social and psychological phenomenon will primarily require the willingness and ability of people, communities, and organizations to seek and develop new behavioral models and new ways of decision-making and communication.
This premise has been confirmed by a Skolkovo School of Management study entitled ‘The Russian Cities Digitization Index,’ which analyzed the level of penetration of digital technologies in key aspects of modern city life. The researchers’ main conclusion was that in order to integrate advanced digital technologies into the very fabric of urban life, there were two requirements: digital ‘demand’ must develop in line with ‘supply’ (or vice versa), and both supply and demand have to be distributed evenly across different areas of life. Fulfilling these conditions would produce what research literature refers to ‘network externalities’ (or the ‘positive network effect’) – the relative value of innovations for a user goes up as these innovations continue to spread. In addition, the Skolkovo research shows a significant correlation between the degree of digitization in a given region and its economic growth indicators (such as per capita gross regional product, or GRP), and, what is more important in the context of our analysis, the level of satisfaction with the quality of life among citizens.
What constitutes the synergy between digitization and urbanization processes, especially for cities in rapidly growing markets? In an era of global competition among urban ecosystems, human capital and investment resources will be subject to particularly fierce competition. Moreover, the possibility to attract the former and the ability to raise the latter are in many ways interconnected. The factors that have been traditionally classified as ‘subjective’ (with somewhat lesser importance) are now coming to the fore. These include the satisfaction of citizens, social cohesion, opportunities to foster creativity and development, and the overall level of existential comfort. Cities in the BRICS countries that often go through periods of explosive quantitative growth are in many respects merely embarking upon a journey to create an environment oriented toward better quality of life, even though several of them – primarily those in China – have been skillfully combining both objectives. In other countries, such as Brazil and South Africa, the traditional market orientation in urban planning led to the creation of the stand-alone ‘smart environment’ zones offering a high level of comfort; however, the fact that general problems persist in the surrounding metropolitan areas significantly impedes the possibility to pursue this development. Alas, Johannesburg and Rio are not only known for their personal and professional opportunities but also for their high crime rates and low levels of daily comfort predicated on a lack of social cohesion.
The key challenge for BRICS cities on track to global leadership (Russian cities included), is harmonizing the quality of development across a city. One of the key tools in this process may be digital technology that offers the possibility of creating micro communities and providing new personal, social, and economic opportunities. This will gradually transform communities into more universally beneficial systems.