Laurent Schmitt is a compact man with an air of old-world politesse. He has worked in several executive capacities in different parts of Alstom, the $26-billion French maker of power and transport equipment. He started with the company in sales in 2000, back when it was Areva T&D (before its acquisition by Alstom). From there, he climbed the ladder through marketing and then roles in strategy and business development.
Although a power engineer by training, Laurent does not match the cliché version of a gadget-happy geek. Okay, he does love gadgets -- he spends part of his weekends tinkering with technology. But he also loves low-tech hobbies such as gardening. And even though he is now leading Alstom's charge into smart cities, he prefers the countryside. He endures a lengthy commute every day so he and his family can live in a sylvan suburb outside Paris. Since he drives an electric vehicle (EV) 75km each way, he claims to be one of the individuals who is testing the outer limits of EV range.
Today Laurent is Vice President of Innovation & Strategy for Alstom's smart grid and smart city line of business -- the man in charge of deciding when, where and how Alstom will tackle this market. That makes him an ideal person to quiz about the smart city sector and its prospects. Here are several things that struck me about his comments. He believes:
· The sector is still three years away from going mainstream
· The need to develop new business models is the biggest hurdle
· Another challenge is breaking down the barriers between different city departments and convincing them to collaborate on such things as open data
· For vendors, smart city success will depend not on products and services, but on the ability to partner
· Partnerships with local universities are paramount
Read on for more insights. You might also enjoy this short video on Alstom's view of an eco city.
Jesse Berst
March 2013
Why the increasing attention to smart cities?
Part of it is about constraints and problems. Some of the same things that motivate smart grids operate in cities as well -- grid congestion, integration of renewables, stability against storms. These problems are made harder by the density of a city. Likewise, the transportation sector is struggling with congestion and pollution. And that is driving investment into solutions -- trams and metros but also some "new animals" -- electric vehicles, hybrids, the Google self-driving car, car sharing, intermodal systems and more. The discussion is very active in Europe. For instance, it was a record year for public transportation investments, despite the financial crisis -- proof of the strength of these market drivers.
Has the smart cities market hit the tipping point?
It will be three years before the real take-off. There's plenty of willingness, but we're still not seeing lots of requests for proposal (RFPs). We'll know we are there when the business models emerge.
In the emerging countries there is a very interesting trend related to building large infrastructure. Quite often it is in relation to the Olympics or the World Cup or another accelerator. In an effort to overcome their problems in time for the event, they build up a new piece of the city with smartness inside.
What stands in the way of rapid adoption?
The business model is still to be found. In many ways a city can be defined as a broker of services to citizens, but it is not the holder of all the money needed to provide those services. So we must establish direct links between vendors (the private sector) and consumers. Cities must find a business model to broker services to citizens and get private sector investment.
Is technology a gating factor? Or do we have the building blocks in place already?
The basic building blocks are all there. It's much more about connecting the silos and creating new standards. Yes, we are pushing some technology boundaries when it comes to the sheer quantity of data, but that will not be a major obstacle. The bigger challenge is the lack of openness to sharing data.
Have you seen any creative ways to solve the financing challenge?
The financial models are still nascent. Some cities are trying to push into open data, but their budgets are severely limited. They need to convince the private sector to provide the data and create the ecosystem. I'm surprised Google hasn't stepped in. For instance, they have invested so much into Google Maps. They could become a data aggregator, and bring a financial model to the city. They could attract the eyes of the consumer and maybe create a new business model. They could connect smart infrastructure with open data.
Can you cite any governments doing a good job with citizen engagement?
In France, the government of Francois Hollande has defined a roadmap for an energy transition. The debate is whether to continue with centralized nuclear or move to distributed and renewables. The decision was made to let regions write their own roadmaps. In the last six months, a least a dozen French cities have started designing their own energy transition roadmaps.
How important is the smart cities market to Alstom?
It is a major and significant theme. It originally started through our smart grid, which evolved into smart power -- that is, getting generation and storage and renewables to plug into the grid in a smart way. Now we need to get transportation to plug in too.
What is Alstom's role in the smart cities ecosystem?
Alstom's main contributions are in energy and transportation. We are currently driving 20 innovation programs around the world where we are trying to align all of our technologies. But we are doing that in an open environment. A smart city couldn't and shouldn't be end-to-end Alstom, so it is very important to be able to work in an open environment
What does Alstom do better than any other company?
Whether you look at it from the transport or the grid side, it has to do with energy optimization. Some competitors are segmented and siloed. We have a lean organization that is focused and coordinated with interoperable and limited redundancy. And there's another element -- we recognize we are not a player in all smart city spaces, so we have been building an ecosystem of partners for the last four years.
When Alstom wins in a competitive situation, why does it win?
When it comes to smart cities, we're starting to win on an innovation play that is as much about the business model as the technology. There's less price negotiation. It's more about demonstrating true innovation, not just "greenwashing." And it's about partnerships. We've discovered that the local university is key to getting around the traditional competition. The university brings independent refereeing, since vendors are not seen as objective.
There's another element that we learned from telecomm. When you look at smart phones it is about early adopters. Universities are full of early adopters who are open to changing business models. For instance, they are open to car sharing. And to getting their energy data by mobile phone not by paper. It's a very fertile environment. Cities partner with universities. Alstom brings the middleware to let the young people create great stuff.
Are there any common misconceptions about Alstom and its capabilities?
We are seen as company supplying heavy infrastructure, which is true. But smart cities are more about IT and automation, so Alstom is not an obvious partner. When you talk about open data, you don't think of Alstom. We have a lot of image changing to do.
What is a favorite smart city pilot or project?
IssyGrid is France’s first smart grid eco-district. It is a demonstration project aimed at optimizing energy usage in the French town of Issy-les-Moulineaux, near Paris. It was actually initiated by the city. It now consists of a consortium of industrial partners including Alstom, Bouygues and EMBIX. Through energy monitoring and control technologies it aims to let the eco-district keep its carbon footprint and energy costs to a minimum.
What is the single most important thing city leaders should do today to ensure smart city success?
Creating a roadmap is very important. Define your strategy with the help and involvement of citizens. We need more vision and leadership in designing an energy strategy. And in designing the transport system citizens truly want. From there, they need to establish an open data strategy so the different departments start coordinating. For instance, the French state is asking cities to build their own roadmaps and define what they want to become. If you are going to build something new, citizens need to understand why. It's a new type of dialog.
What's the right way for a city to get started?
First, appoint someone to administer the program. Then engage the staff to start building the roadmap. From there, consult with a core group of vendors to help you understand the technical issues and possibilities -- to give your plan the acid test and make sure it is right-sized. But it starts by rethinking the urban plan and deciding what kind of city they want.