Are vendors pushed to reinvent their commercial approach to deal with Smart Cities?

In a recent post, I discussed the necessity for companies, that supply solutions, to group together to propose more value to Smart Cities than the single deployment of a simple collection of smart applications.

To have the most global possible offer does not modify this need.

But how to maintain a high level of margin by participating in such consortia? Is it necessary to take a leading role? How commercial processes have to evolve? What positioning to take in the various emergent projects?

Two characteristics of the Smart Cities’ projects seem to me to be considered to define a possible positioning of the solutions suppliers:

– Often in lack of vision, local authorities (cities, metropolises, regions) are not convinced of the necessity, the utility, the viability of the various proposed options. They thus need to experiment in order to believe and make their opinion: as a consequence, we see a number of pilot projects which do not represent sufficient amounts to make profitable a strong commitment of the suppliers.

– Every Smart Cities project requires an engineering work, a global design and coordination between businesses, that are today difficult to value as the communities who do not still see their real impact.

This work is nevertheless, for vendors, a prerequisite which is essential to the sale of Smart Cities solutions; by this extend, it can be seen as a kind of commercial investment.

In broad outline, these two characteristics open the way to three main positionings:

1- The company gets involved, directly or not, in the leadership of the Smart City’s project: it tries to value at best its commitment, it contributes to reduce the deadline of gestation of the project even avoids the abandonment, it develops a strong reliable link with the local authority. In short term, it bears high commercial costs and plans the return on this investment later thanks to the acquired awareness and global design skills. This kind of bet did not always show itself winning in the past: in a public context, it is sometimes suspicious and not always seen well or simply authorized to be the adviser/designer and the beneficiary of the advice or of the global design.

2- The company participates in various projects as a follower, without being involved in the global design of the Smart City’s (that avoids having the necessary skills). It takes place as an observer to gather some teachings, simply verifies that its interests are taken into account and, by over-communicating on its participation to the project, tends to maximize the return in term of awareness and public relations. Due to a lack of means, this positioning is mandatory for small and medium-size enterprises who want to participate in Smart Cities’ projects. It is necessary to them to imagine collaborative associations to take a stronger role.

3-The company does not participate in the current projects and wait that the others bear the initial risks. It does not develop particular skills but does not lose operating margin in risky commercial costs. Large companies can be tempted by this positioning: they will enter the Smart Cities market later, once a certain maturity reached, by buying the necessary skills.

I do not know today if a positioning is more advisable than the others: it seems to me important that every decision of positioning is taken consciously with a clear description of the analysis made of the main criteria of decision.

The attitude of local authorities in front of these 3 groups of companies will be probably a key factor influencing the evolution of the market. Working with them in an opportunist and minimalist way, as sometimes suggested by the public tenders’ regulation, may favour the waiting-game and thus the even slower development of the market.

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