Taiwan has created several new programs that offer promising opportunities for application developers.
It is estimated that by 2050, over 70% of the global population will live in cities, including at least 29 “megacities” with populations exceeding 10 million people. Surging urban populations will increase challenges with regard to transportation, security, pollution, healthcare, and other governance/social issues. At the same time, finding ways to solve these issues would spur entrepreneurial opportunities and economic benefits.
An array of technologies developed in transportation, communication, and others sectors – collectively known as “smart city” applications – promise to help cities not only to meet these challenges but to thrive. According to a World Bank forecast, once the usage of a smart application reaches 85% in a city with over one million population, its potential economic return could be 2-2.5 times its investment. In addition to economic value, smart city development can help promote cultural heritage, enhance historical preservation, and increase environmental sustainability.
Over the last 10 years, Taiwan’s central government has initiated several smart city development projects, and a variety of smart city applications have been launched through various forms of development strategies and funding. Most of them effectively leveraged Taiwan’s strengths in ICT technologies, and as a result many cities in Taiwan have won worldwide recognition and accolades, such as the Intelligent Community Forum (ICF) awards.
One of the most successful examples of a smart city application in Taiwan has been the freeway Electronic Toll Collection (ETC) system, which adopted a single standard throughout Taiwan. Built in line with a national mandate to automate all toll stations starting December 2013, eventually over 6 million car owners joined the ETC system. The large amount of user feedback has helped to continuously improve the system, which has been able to achieve an 88% penetration rate among auto owners, 94% usage rate, and 99.9% accuracy. Moreover, it is estimated that the system has saved over 128,000 tons of CO2 emissions, 5.3 million liters of gasoline, and toll tickets equivalent to the height of 550 Taipei 101 towers. As a result of the successful implementation in Taiwan, many opportunities to install similar systems in Southeast Asia and South America are being discussed.
However, Taiwan still faces many challenges in improving its future smart city development strategy to capture more business opportunities:
- Lack of coordination between the central and local governments to roll out successful pilot cases from one city to another. Every city prefers to adopt unique smart city applications to impress its own constituents, but due to incompatible standards, systems are unable to function across different cities.
- Overly conservative development and adoption of innovative applications (e.g. third-party payment) and business models (e.g. Uber). Consequently, local companies find it’s a challenge to either develop differentiated solutions or scale up business operations quickly.
- Inadequate involvement of young people in collaborative innovation ecosystems (e.g. crowd sourcing, crowd mining). Taiwan’s industrial development has seen more achievements in hardware than in software or systems, making it difficult to maximize the value of the digital economy and social networks.
New approach in 2017
This year the Taiwan government has decided to adopt a new national approach to smart city development in hopes of fostering more business opportunities and cultivating the next ETC success. The long-term vision is to formulate a national smart city development strategy for “resolving local issues with an eye on global business opportunities.” The three major strategic directions should include: 1) integrated planning for sustainable cities, 2) systematic and fast rollouts of successful pilots, and 3) a collaborative innovation mechanism for citizen involvement. Referencing the EU’s smart city framework, Taiwan should consider six categories of KPIs for measuring future outcomes: Economic benefits, social benefits, environment sustainability, city governance, mobility network, and people participation.
The following major principles must be incorporated:
- Adopting a people-oriented approach to resolving local urban issues.
- Promoting service-based system solutions to create a “User-centric Applications Ecosystem.”
- Limiting pilot tests of new applications to one application per city, with no more than two similar applications to cultivate fair competition.
- Encouraging large enterprises to help smaller ones to drive development of the industry ecosystem.
- Establishing Public-Private-People Partnership (4P) to promote innovation and entrepreneurship platforms. In addition to governments and corporations, participants should include individuals, research institutes, universities, and special interest groups.
- For regulators, allowing the practice of a “regulatory sandbox” to enable experimentation on new technological innovations.
- Collaboration between the central and local governments to incubate successful pilot tests and roll-outs to different cities.
- Selecting national teams from Taiwan to join international teams for capturing overseas business opportunities.
The “Smart City Challenge” conducted by the U.S. Department of Transportation (DOT) in 2015 provides a successful model for benchmarking. The program invited medium-size cities with a population of 200,000 to 850,000 people to submit smart transportation applications. In the first round, roughly 300 companies from 80 cities submitted their proposals. Seven city winners were awarded US$100,000 each. For the second round of competition in 2017, Columbus, Ohio was the overall winner and received awards of US$40 million from DOT and US$10 million from the Vulcan Partners private investment fund. The broad participation and the high quality of submitted proposals were beyond DOT’s original expectations and were considered a huge success.
Another important worldwide trend for Taiwan to embrace in its smart city development strategy is to establish a “User-centric Applications Ecosystems” (see graph) by strengthening its industry competitiveness through a fusion of soft power and hard power. The ecosystem can be pictured as a circle that extends upward from the famous “smiling curve” devised by Acer’s Stan Shih. The extension beyond “branding” and “innovative R&D” include user services and behavioral studies, big data analyses, application software, and system integration.
At the top of the circle is the high-ground position maximizing the value-add by orchestrating the roles and activities of different key stakeholders among manufacturing, branding, and R&D. Leading companies like Apple, Google, Amazon, and Alibaba have firm control of their ecosystems’ high-ground positions and therefore receive greater valuation from capital investors.
Taiwan’s high population density and such other characteristics as its YouBike program, 24-hour convenience stores, and public transportation system of rail plus buses gives it an advantage in creating unique “Smart City Applications Ecosystems” in smart transportation, smart communities, smart healthcare, and other applications.
After extensive research and discussion across major cities, government organizations, corporate leaders, research institutes, and universities, the Taiwan government in April set up a new round of requests for proposals (RFPs) for smart city pilot projects. The RFPs will be administered by the Industrial Development Bureau from the Ministry of Economic Affairs, with supervision from the Asia Silicon Valley Program overseen by the National Development Council. Several key features of the RFPs include:
- The targeted applications are smart transportation, smart healthcare, and Internet of Things (IoT) platforms.
- The proposal must be created by a team of domestic business enterprises led by a private company.
- Local government support is required for the pilot tests of each smart city application.
- The first-phase timeframe for completion of the Proof of Concept (PoC) and Proof of Service (PoS) is six months. Specific milestones should then be proposed and achieved before moving on to completing Proof of Business (POB) within another 18 months.
- To encourage large corporations to value pilot opportunities more than budget, the maximum government matching fund is set at 30%.
- The deadline for proposal submission was mid-June this year. Another wave of proposal solicitations should follow in early 2018.
Taiwan will have difficulty assembling an all-Taiwan team able to compete in the world market. By being part of an international effort, however, the Taiwan team can play a key role in the international smart city ecosystem in helping resolve city-related problems in Taiwan before capturing business opportunities in overseas markets. For the latest Smart City RFPs by the Taiwan government, bidding company teams are highly encouraged to include strategic global partners with complementary strengths in technology, solutions, business operations, or market channels.
By including strategic partnerships with leading international parties, Taiwan’s smart city development strategy will be able to achieve greater competitiveness and impact in the worldwide market.