How do cities encourage business investment and economic growth in their local areas? Traditionally — and overwhelmingly — it’s been with the use of financial, fiscal, and other incentives. Among these are lower tax rates, tax holidays, special grants or loans, reduced infrastructure costs, and regulatory exemptions or concessions. Conservatively, tens of billions are spent every year by cities and states in the U.S. to attract industries and individual businesses through these means.
A 2018 Brookings report detailed how incentives are poised to remain a core element of economic development policy, meaning that undoubtedly, this practice is here to stay. The same report, however, mentions increasing scrutiny and mounting pressure to limit incentives that may be ineffective or misaligned with broader development principles. It’s true that there are a lot of hard-hitting questions being asked about so-called “ribbon-cutting syndrome,” and that trend is likely to have politicians looking for other ways to promote economic growth.
The discussion is an important one that could even be considered part of the current zeitgeist. Economies are down, ethical concerns are up, and growth and rebuilding are needed across the board. In other words, local governments aren’t just learning to want other means of incentivizing development; they desperately need to explore all possible avenues.
Connectivity is one of those avenues, and given society’s perch on the cusp of Industry 4.0, it may be the single most important one. Tax breaks and interest-free loans are nice, but what most businesses really care about is a long-term competitive advantage — and that’s what connectivity offers.
The Economic Benefits of Connected Cities
Connectivity is about much more than fast, available internet. It’s about the number of connected systems and devices, the processes they enable, and the data they generate. Along with connectedness comes the interwoven problem of security; solving for both will make for an unparalleled economic foundation on which businesses can build for the future. But first: what are the basic advantages of high connectivity for companies?
Empowered Operations
Data-in-motion isn’t reserved for Silicon Valley anymore. It is fundamental to almost every type of modern business, from retailers and construction companies to restaurants and hair salons. Successfully navigating the new digitized economy means not only moving data but moving it quickly and reliably. Whether it’s as simple as processing digital payments or as complex as tracking supply chain dynamics, having unencumbered access to real-time data transactions is vital for businesses. Again, this goes beyond having internet access. Connectivity exists on a spectrum ranging from none to hyper-connectedness, and where cities find themselves on that spectrum will only become increasingly important as the digital revolution deepens.
Empowered Employees
Connectivity is the underlying factor that enables cities to become “smarter.” The smarter the city, the more ways in which its residents can benefit — from next-generation 911 to mobility-as-a-service, to community building, to increased public safety. Put simply, higher connectivity means better, faster, more efficient delivery of public services. A major part of building or expanding a successful business is ensuring the wellbeing of its employees, so investment in a connected location can be seen as an investment in the company itself.
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Empowered Customers
Marketing, sales, feedback, support — every customer-involved action for companies operating in the digital sphere is an important one, as each represents a “gate” through which customership is established or maintained. The more connectivity available, the more opportunities customers or clients have to communicate with businesses and brands, and that can be a make-or-break value proposition in an era where companies are being held to increasingly high standards of both transparency and authenticity. It may be a double-edged sword when competitors have access to mutual, connected markets, but there is still no doubt that connected customers are strong assets to any business.
The Security Paradox
Connectivity is only as useful as the data transactions it enables, and those potential transactions only represent a significant investment incentive to the degree that they are safe and secure. Digital crime is growing, establishing itself as one of the most dangerous threats to both profitability and brand image. That same problem, however, means that high connectivity plus high security equates to a serious competitive advantage for businesses.
This reality presents local governments with a challenge: support increased connectivity, but do so in ways that introduce a minimum of additional internal and external risks. It may seem like a daunting task, but exponential technologies are changing the landscape of both connectivity and security. Cities that find ways to capitalize on their convergence are likely to emerge as leaders in economic growth during the coming years.
