Public transport international_magazine_2012_english

14 PTI March/April 2012

Tomorrow’s lifestyles

How business can help solve the urban mobility challenge

One thing is certain: the future will be urban. Of the world’s total population of 6.8 billion people in 2010, 51% were living in urban areas. This urban share will rise to 61% of 8.2 billion people in 2030, and to 70% of 9.2 billion people in 2050. Likewise, urban areas will ac-count for 86% of world GDP in 2025, up from 80% in 2007, thus represent-ing an enormous economic potential. No surprise then that urban mobility, measured as the number of person-kilometres travelled per annum, is ex-pected to almost triple between 2010 and 2050, accounting for 64% of total mobility and that, if current trends continue, urban mobility systems are going to break down spectacularly and exact a heavy toll.

In this article we will first present the results of our assessment of urban mobility in 66 cities around the globe. We will then explore the factors that

explain differences in mobility per-formance, as well as the requirements and strategies to improve perform-ance. Finally, we will discuss three business models that urban mobility providers can adopt for establishing long-term sustainable solutions for the benefit of all stakeholders.

Measuring urban mobility performance

In order to assess mobility perform-ance of cities and identify the factors that explain differences in perform-ance, we developed an “urban mobil-ity index”. This index is an aggregate indicator for the effectiveness and ef-ficiency with which a city fulfils mobil-ity-related goals (such as travel time, carbon emissions and number of fatal accidents) and of the extent to which it has implemented innovative mobil-ity concepts (as measured, for exam-ple, by the prevalence of cycling, car sharing and the penetration of smart-cards). When comparing cities, we considered their size, prosperity and

prevalence of public vs. individual motorized transport.

The analysis reveals a number of re-markable results. First, there is a clear correlation between the use of inno-vative mobility concepts on one hand and mobility effectiveness and effi-ciency on the other hand. Cities that promote walking, cycling, bike shar-ing, car sharing and smart mobility cards as part of an integrated mobility vision and strategy do reduce travel times, fatal accidents and carbon emissions. All but two of the top ten performing cities have a strong focus on public transport, walking and cy-cling, with individual motorized mo-bility commanding less than half of the modal split.

Second, the average score achieved by the 66 cities in the sample is 64.4 points on a maximum of 100 points. Only 15% of the cities score above 75 points (see opposite – Global ranking Arthur D. Little Urban Mobil-

Wilhelm Lerner is a Partner in the Frankfurt office of Arthur D. Little’s Strategy & Organisation practice and leads the Arthur D. Little’s future of urban mobility lab and François-Joseph Van Audenhove is a Partner in the Brussels office of Arthur D. Little where he leads the Travel & Transportation practice and is a member of Arthur D. Little’s future of urban mobility lab

The future of urban mobility: towards networked, multimodal cities in 2050

Management consultancy Arthur D. Little’s new global study of urban mobility assesses the mobility ma-turity and performance of 66 cities worldwide and finds most not just falling well short of best practice but in a state of crisis. Indeed it is not putting it too strongly to say that many cities’ mobility systems are standing on a burning platform and if action is not taken in the very near future they will play a major role in slowing the growth and development of their host nations.

What is needed is innovative change. This article highlights what is holding them back and identifies three strategic imperatives for cities and three business models for mobility suppliers that will enable cities to meet the urban mobility challenge.

For the full report of the “Future of Urban Mobility” study, please visit the Arthur D. Little website (www.adlittle.com/multimodal-cities-of-2050.html).

15PTIMarch/April 2012


ity Index). In other words the aver-age city achieves only two-thirds of the potential that could be reached today by applying best practice across all operations. This analysis indicates the significant perform-ance improvement potential cities have and highlights the urgency for cities to address the urban mobility challenge proactively.

Third, even for cities that score high-est, namely Hong Kong (81.9) and Amsterdam (81.2), the scope for im-proving toward the maximum score of 100 is still significant. Hong Kong, for example, scores very high in terms of smartcard penetration – allowing people to use one and the same con-tactless payment card across trans-port modes – but lags in terms of car and bike sharing. In other words, a near-perfect mobility system does not yet exist in the world today.

Fourth, city size does not really matter when looking at the mobil-ity score. For example, the small cities of Rome (57.9) and Athens (53.3) have much lower scores than the large cities of London (78.5) and Madrid (71.8). However, the two other characteristics that we studied, namely city prosper-ity and the prevalence of public transport (“modal split”), do have a significant influence on the mo-bility score. The richer the city and the lower the share of individual transport, the higher the score.

Finally, cities in mature regions are not necessarily a model that cities in emerging regions should aspire to emulate. Many of the former, such as Tokyo, Prague, Moscow, At-lanta and Miami, still do not appear to have a vision and documented strategies that clearly articulate what they want their future mobility systems to look like. Furthermore, if cities in emerging regions replicate the pathway that cities in mature regions have followed, they risk in-troducing the very same problems of poor modal split, high carbon emissions and low travel speed.

Improving urban mobility performance

While poor urban mobility is a source of daily frustration to citizens, busi-nesses and governments, many people see it as an inescapable con-sequence of economic development and wealth creation. But urban mo-bility needs not to be an unmanage-able problem. Solutions to address the pressing mobility challenges are widely available. This appears clearly from the progress the top-performing cities are making as well as from our comprehensive review of 39 technologies and 36 urban mo-bility applications. Some of these technologies are fairly mature (think of electronic tolling, advanced park-ing systems, the automatic mono-rail, the Segway, …), while others are still in the embryonic phase (think of access to the CAN commu-nication network in a car, the auto-mated car, the solar roadway, the straddling train, …). Likewise some applications are mature (e.g. bike rental), while others are embryonic (e.g. cargo pipelines).

If the availability of good-practice examples, technology and business models is not the bottleneck, what then is holding back resolution of the mobility challenge? Our study reveals that the root cause of the performance gap is the aversion to innovation within the urban mobil-ity system. By “system” we mean groups of stakeholders, the rela-tionships between these, the rules and incentives that govern their behaviour, and the assets and ca-pabilities through which they seek to achieve their objectives. Cur-rent mobility systems adapt poorly to changing demands, are weak in combining single steps of the travel chain into an integrated offering, find it difficult to learn from other systems, and shun an open, com-petitive environment. Collaboration on solutions is rare. Rewards for investors are rather meagre.

Mobility stakeholders should jointly work on four axes to enable the emer-gence of innovative and effective mobility concepts:

21% below average 64% average 15% above

average45 55 65

Sample average

75 80

Ranking

Global ranking Arthur D. Little Urban Mobility Index

Global average 64.4

Urban Mobility Performance Index

Source: Arthur D. Little Mobility Index; xx% : share of cities in this performance cluster; 100 index points for city that would achieve best performance which is achieved today on each performance criteria.


• Establishacollaborativeplatformtoalign objectives and prioritize com-mon initiatives for the city’s mobility system;

• Establishandexecuteavisionandstrategies that clearly articulate what the future mobility system for the city should look like;

• Discover and respond to user needsand usage patterns with the aim of of-fering seamless multimodal services;

• Introduce market mechanisms thatensure fair competition between different transport modes, business models and types of infrastructure, and enable entry by new players.

Strategic imperatives for city management

What this means in practice for sen-ior city executives depends on the type of city they lead. For mature cit-ies with a modal split already orient-ed toward public transport, “network the system” should be the strategic imperative. They should aim to fully

integrate the travel value chain so as to increase citizen convenience and acceptance and launch programs such as car taxation and tolling, in combination with an aggressive ex-tension of public transport systems, to further restrain individual motor-ized transport. This strategy is rel-evant mainly for the top performing cities primarily in Northwest Europe and selected cities in North America and Asia Pacific (see above – Stra-tegic imperatives for urban mobility systems).

For mature cities with a modal split still characterized by a high share of individual motorized transport, “rethink the system” should be the strategic imperative. They should shape the political agenda towards the idea of a fundamental redesign of their mobility system, in which sustainable public mobility takes centre stage. Each city should as-sess rigorously all building blocks – infrastructure, transport modes, traffic management and transport

information, planning and payment systems – for a tailored, compre-hensive overhaul of its urban mobil-ity system. This strategy is relevant for the majority of cities in North America and Southwest Europe.

For cities in emerging countries, the strategic imperative should be to “establish a sustainable core”. They should focus on establishing a sus-tainable system that is capable of satisfying short-term demand at a reasonable cost. Given the plethora of available technologies and business models, these cities have the unique opportunity to become the innovative breeding ground for tomorrow’s urban mobility systems.

Business models for suppliers of mobility solutions

Having city leaders articulate a vi-sion and strategy for their mobility system is one thing. Getting com-panies to contribute and commit to the development and subsequent realisation of the vision is another.


Establish sustainable core:

invest in sustainable urban mobility infrastructure

Emerging cities with party underdeveloped

mobility systems

Strategic imperatives for urban mobility systems

Source: Arthur D. Little.

Rethink the system:shape political agenda towards shift to public

& sustainability

Network the system:integration of different

market players and networking of citizens

Features:• innovativethinking• seamlessintegra-

tion with “one key” for citizens

• highconvenience• sharingconcepts...

Mature cities with high proportion of registered

vehicles

Mature cities with high share of public transport

/ walking & cycling

Integration of all modes to reduce share of indivi-dual motorized transport

Maturity

Time

17PTIMarch/April 2012

Commercial enterprises will do so only if they can earn a fair return commensurate with the risks taken. Solving the urban mobility challenge requires system-level innovations. These are notorious for “chicken or egg” situations: before a company invests in, say, charging stations for electrical vehicles, it needs reassur-ance that there will be a sufficient number of users buying electrical vehicles; but users will buy only when they are reassured there will be a sufficiently dense network of charging stations. So the question is: which business models can com-panies adopt when seeking to par-ticipate in urban mobility solutions – profitably?

Arthur D. Little has identified three long-term sustainable models for ur-ban mobility suppliers, named after a trio of iconic internet-age compa-nies, that will help them adjust to the changing demand landscape (see above – Business models for suppli-ers of mobility solutions).

Model 1: The Google of urban mobility

The key here is that there must be a single point of access for both mobil-ity and supplementary services: iden-tification, information, booking and payment. The introduction of such schemes requires the involvement of stakeholders such as policymak-ers and public transport operators, as well as banks and payment firms, telecommunications companies and technology suppliers.

A supplier adopting this business model offers any traveller a platform through which he can get travel in-formation, plan a journey, make a booking and/or pay for the journey. As he acts as an aggregator of un-derlying services offered by third parties (e.g. parking managers, bike sharing providers, point-of-interest search application devel-opers, …), sourcing and contracting are critical capabilities. He gets his revenues through fees from part-ner transactions, fees from rent-a-

place on the platform, advertising, interest income from the float on e-wallets, etc. We estimate that about one third of the 66 cities we studied lend themselves to this business model, that is mostly mature cities with already a large public share of the modal split.

Model 2: The Apple of urban mobility

This business model is centred on in-tegrated mobility services, of which we can distinguish between a B2C and a B2B version.

A supplier adopting the B2C model offers individual high-end travellers a personalized seamless journey to get as fast as possible from A to B, what-ever combination of transport modes it requires. This business model typi-cally is the domain of premium car manufacturers that are in a position, for instance, to provide small pickup cars (e.g. the Smart car), branded parking spaces where the pickup car can be left, and a branded first-class section in a suburban train. This seg-


Business model:

Business models for suppliers of mobility solutions

Source: Arthur D. Little.

• Integratorofmobilityandsupplementaryservices (identification, information, booking, payment) => Networking of citizens

• Focusondatavolumesandpenetrationratesin population

Business models of future urban mobility

"Google of mobility"

• Solutionspeciallyforpremiummobilityproviders•BrandedservicesfromAtoB(e.g.BMW

"worldwide journey": first class seats in subur-ban railways branded with premium OEM's logo if roads are congested)

"Apple of mobility"

•Basicoffering,e.g.carorbikesharing, no networking

• Alsodisruptivetechnologicalsolutionstomake"Google"and"Apple"modelspossible(e.g.drive-in-drive-out transponder systems for garages)

"Dell of mobility"

Vision: Insights:


ment in principle can exist across all 66 cities worldwide. Clearly it takes a strong brand and a dense service net-work (or at least trusted partners) to make and deliver on this promise.

A supplier adopting the B2B model targets cities instead of travellers. He offers cities tailored integrated mul-timodal mobility solutions on a turn-key basis, acting as a system inte-grator and contractor for the various components of the solution. These could include parking infrastructure, charging infrastructure for electrical vehicles, automated fare collection, a bike sharing system, city buses, financial services, mobility planning, etc. This is an area where public-private partnerships and so-called BOOT (build-own-operate-transfer) schemes can play a very useful role. Clearly the market for this offering is global. This business model fits quite naturally with infrastructure companies or with consortia of such companies. Siemens, for example, has established a special Infrastruc-ture & Cities business unit to address this market.

Model 3: The Dell of urban mobility

A supplier adopting this business model targets cities and/or city mo-bility solutions providers. He offers technologies (e.g. for rolling stock, infrastructure, traffic management and travel planning and information) and targets cities to which he sells

standalone solutions or targets city mobility solutions providers as sys-tem integrators. This business model is the prevailing current model for all mobility providers worldwide.

Insights for the executive

Improving urban mobility is a chal-lenge of epic proportions. As the ur-ban population grows and economic prosperity increases, cities are in-creasingly stressed to deliver fast, safe and environment-friendly trans-port to citizens and businesses. For-tunately, there is a wealth of good-practice examples, technologies and applications on which the vari-ous stakeholders can draw to devise effective and sustainable mobility solutions. The stakeholders – users, city government, infrastructure and service providers, technology sup-pliers, financiers, regulators, etc. – should commit to four actions:

• Establishacollaborativeplatformtoalign objectives and prioritize com-mon initiatives for the city’s mobility system;

• Establishandexecuteavisionandstrategies that clearly articulate what the future mobility system for the city should look like;

• Discoverandrespondtouserneedsand usage patterns with the aim of of-fering seamless multimodal services;

• Introduce market mechanisms thatensure fair competition between

different transport modes, business models and types of infrastructure, and enable entry by new players.

Once these conditions are fulfilled, there is plenty of scope for com-mercial enterprises to commit to the development and realisation of mobility solutions, thereby earning a fair return commensurate with the risks taken. Which business model any specific company adopts – i.e. how it makes money – depends on the assets and capabilities it can put to use, the customer segments it targets (the traveller community at large, individual high-end trav-ellers, cities themselves, …), and the unique products and services it offers (a consumer interface, a personalized service, a turnkey infrastructure solution, …).

Clearly urban mobility is a major societal challenge. But human inge-nuity and innovation, if feeding off a well-articulated and politically-backed vision, can bring solutions for the benefit of all.

Contact: [email protected] and [email protected] copying [email protected]


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Public transport international_magazine_2012_english