Patrick Finn (all photos by Asa Mathat)
Partner, McKinsey & Company
Read the full transcript below. (Transcript by Realtime Transcription.)
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Finn: Before I jump into this, I did want to thank Techonomy for bringing this conference back to Detroit. The leader of our location from McKinsey here in Detroit, it is quite energizing for us to have these dialogues within this city that we all work in, in some cases live in and certainly love.
So today I just wanted to share a few minutes on some of our latest research on cities. We spent a lot of time over the last few years studying cities both in emerging economy, developed economies, et cetera. I offer this today, not as a prescription, but rather as a thought starter.
Cities encounter a lot of changes and hopefully this sparks thought. As David said, why cities? Half of the world’s population, around 3.6 billion people, live in cities today. That’s expected to increase to 60 percent or nearly 5 billion by 2030. Cities are a big deal. They are a major driver of the global economy and they are changing.
If you look at what’s happening in the emerging economy, cities are growing at a mind-boggling pace. It stretches the infrastructure of the cities to keep up with the population growth and provide services for those who are moving in.
In the developed economy, in the developed world, we are dealing with the challenge of staying competitive. You’ve got aging infrastructure, the prospects for population growth are less. We have stretched budgets; we have to figure out how to succeed.
Yes, as we look around the world, there are great cities that thrive in that environment. You look at a place like Singapore—30 years ago, 40 years ago, a colonial harbor. Today, one of the gleaming cities of the world. You look here in the U.S. at New York, a remarkable recovery from the economic challenges of the late ’60s and ’70s.
So we set out to study this. And so we looked around the world at 80 different cities. We want to understand what—not who’s doing great, but what they are actually doing. So we spend time interviewing mayors; we spent time looking at the different programs that they have in place, studying them. What’s their impact on the community? What’s their impact on the economy? What is it they are actually doing? What is that special sauce?
So what did we find? We found there are three themes that are generally true if you look across the great cities of world. Number one, they achieve what we would call “smart growth.” I will come back to that. Number two, they tend to do more with less, both in good times and in troubled times. And number three, they win support for change.
If you look underneath these, the specifics in any given city will look markedly different. And at any given time, depending on the challenges of the day, the agenda, the passions of the leadership in that city, the focus may be different across these three. But if you study great cities over time, if you study them over time, they all manage to succeed across all three of these elements.
So what do we mean by these?
Achieve smart growth. So a few important things here. One, we’d say these cities that are successful focus in areas where they have an advantage. They don’t necessarily follow the latest fad and the latest hot topic for job growth. They really think through where is it that we have an advantage and what can we do to make that even better for ourselves.
Two, they plan for that change. They link that view on growth back to their infrastructure planning. Do we have the right transportation, do we have the right housing, do we have the right job training available to go after those opportunities?
Three, they integrate environmental thinking into what they are doing so years down the road they are not left with issues to clean up that can cost billions in some cases.
And, lastly, they insist on opportunity for all. If you look at the great cities, they are providing job growth, housing, stability, et cetera, across the socioeconomic spectrum.
Second, they do more with less. So, again, this is true both when budgets are stretched as well as when budgets are flush. And how do they do this? They take different approaches to budgeting. Things like zero-based budgeting. They took—take a different look at capital allocation. So large capital projects, they are a challenge in the private sector, they are a challenge in the public sector. Cities are starting to innovate around how they do this. Some of it involves public-private partnerships, others involve just different ways of holding accountability to these massive public works projects.
And for this group, they embrace technology, and we’ll go into at least one or two examples of this.
Finally, the third big theme, they win support for the change. So what does that mean? That starts—as we interviewed mayors, that starts with the team that’s in office. Mayors talk about building the talent on that team, providing the environment in which they can be successful, providing the incentives that hold them accountable for results. Second important thing here around engaging the stakeholders around them, winning support for change, whether that be with the business community and engaging them or the other non-profit and other organizations within cities.
So, again, I offer these as themes that tend to be true across some of the great cities in the world, recognizing the details are different. So I’d like now to maybe run through a few case examples. And we picked these out, we thought, you know, on this day as we are talking about the role of technology in the community, the business side of this as well, we thought these might spark some thought.
So I mentioned this up front. First thing, the role of the business community in driving great cities. First, this is not easy. This is not easy in any way, shape, or form. You’ve got to find the places where the business community has a real role to play, and this is not just a group opining on the issues of the day. So there are many examples, and I’m sure everyone in the room could name some of those—those that have not done well.
But let me share with you an example of one we do think is doing well called the Itasca Project in Minneapolis. The Itasca Project is a group of about 50 leaders in the Minneapolis area. This includes CEOs of private companies, includes the governor, mayor, presidents of universities in the region, et cetera.
There’s—they are focused on creating a thriving economy, creating great places to live and reducing socioeconomic disparities. The unique few things they are doing—which we think really contribute to their success—are a few. So one, this is an organization where the agenda is set and executed. Set and executed by the CEOs in the group.
When this group meets, their agenda is based on what the individuals there are passionate about, and there’s an expectation that those CEOs will then pick up—or the leaders, et cetera, will pick up the agenda and move with it.
Second, it’s a virtual organization. There is no overhead. This organization solely lives and dies by its agenda and the initiative and the pushing.
Thirdly, it is nonpartisan and it works to collaborate with the other non-profits and economic development groups in the area rather than compete with them. They have had success. They have set up university, business partnerships in the area, they have done work on benchmarking the region and setting some objectives that everyone started to align around, and they have done real work in early education and improving what’s happening there in Minneapolis.
There’s many other examples of this. Here in Michigan, there’s a similar group, Business Leaders for Michigan; south of us in Ohio, The Ohio Business Roundtable, doing similar work, but these can be quite impactful in great cities.
The second example I’d share, and I know our panel is coming up—Bruce may talk more about this; he’s written extensively on clusters, But if we look at great cities, we’d say those who build clusters based on an existing advantage tend to do well. The important term here, based on an existing advantage.
So you look at Tech City in the east end of London. A few years ago, it was recognized there was a small group of tech companies that had already kind of set up shop here. There was a great transportation infrastructure, a great skilled workforce, lots of available office space. And so the government looked and said, what are the further barriers that are preventing this from becoming a strong cluster? And they put programs in place. They put in a confidential and free program to counsel businesses on what it takes to set up in London, what are the regulatory requirements, et cetera.
They put in an entrepreneur’s visa program, so you take care of immigration issues. And they also worked to help get IP taken care of. So they put the programs in place and these are the remaining barriers. And they have been quite successful.
Within a few years, this has grown from a 15 companies to nearly 300. Today, there’s some of the biggest names in tech that have located there, created over 1,000 new jobs in three years.
The third I’ll share—and I think this group will probably be excited about this—technology’s role in improving productivity within a city. I think we’re probably at the tip of the spear on this, but we see great potential. Let me share the real example, which had been written about extensively, and some of you may know—Rio is a challenged place, it’s a big city, it’s growing fast. Development is outpacing the ability to manage it. It’s a mountainous geography. It floods. There’s massive congestion. This is a tough city to manage.
The mayor set up a command center, which brought in data from 30 different agencies, brought in centralized the phone calls, e-mails, social media, the databases, et cetera, so they could get a handle on what’s happening in the city.
In the early days they’d say, they’re making some progress. They’re—they have reduced crime rate, they are able to target where crime’s likely to happen, reduced emergency response times by 30 percent, and their coordination for big events and disasters has improved markedly. And there’s, you know, other examples of this as well.
In the U.S. here, in Boston, there’s a group experimenting with an app that commuters use that measures acceleration to identify potholes. It then sends a GPS location from the GPS back to the streets department so they know where there’s potholes and can get to them more quickly.
In New York, they have combined data from sewer backups with data from restaurants who hadn’t reported a registered waste hauler, because the theory was it’s illegal dumping of grease from restaurants that’s actually clogging the sewers. Turns out, when they put the program in place and when inspectors now go visit restaurants looking for this, they have a 95 percent hit rate for illegal dumping. Just incredible things. We are at the tip of the spear on this, and I’m sure there will be more conversation the rest of the day about these sorts of things.
Finally, just a comment on offering opportunity for all. It’s important, as we’re thinking about great cities across the socioeconomic spectrum, we create opportunity. In Singapore 50 years ago, half the population lived in squatter’s huts. In 1960, they made a concerted effort to build public housing. And not just build public housing, but create policies, which across the socioeconomic spectrum brought folks together to live in the same place. Today, 80 percent of that population lives in subsidized housing, and there’s a 95 percent satisfaction rate with that. So remarkable programs.
These are—there are programs across the globe like this, but hopefully these are just a few interesting ideas to get the conversation started.
I know I’m running short on time, so if folks are further interested, if we could jump to the last slide, we’ve just released our report on how to make a city great. It’s on the landing page at the www.McKinsey.com, so thank you for your time. Enjoy the rest of the day.