Zpryme Trendz Volume 2

Like veins that form the network transporting blood through our bodies, roads and electric lines transport energy and resources through cities. As people and companies share the desire to move from point A to point B as cheaply and quickly as possible, city systems evolve to become more efficient, thanks to continuous feedback mechanisms. However, communities still must utilize resources within the constraints of availability.

Two laws in the realms of systems and networking can help us understand where people are ‘going’ and provide a framework for understanding, and even predicting, how customers in cities who are constantly bombarded with new products and technologies will adopt them.

Geoffrey West’s Law of Urban Scaling suggests, “that essential properties of cities in terms of their infrastructure and socio-economics are functions of their population size in a way that is scale invariant and that these scale transformations are common to all urban systems.” In simple terms; cities follow a predictive model based on population size, and as a city grows it benefits from economies of scale. For example, the bigger the city, the fewer the number of gas stations needed on a per capita basis. A gas station in a larger city serves more people and sells more fuel/month on average than in a smaller city. With each doubling of population size, a city needs 85% more gas stations, instead of double the number. This economy of city scale applies in every city and country in the world.  The interconnectedness among all elements that comprise a city make it a complex adaptive system – a network – bringing us to the second law.

Metcalfe’s Law states that a network’s impact is the square of the number of nodes in the network. If a network has 10 nodes, its inherent value is 100 (10*10), suggesting that as the amount of people and networked infrastructure grows in a city, the value the city derives from them grows exponentially. But only if the links between the nodes are present.

What ideas can we draw from studying these laws and the cultural changes that influence them? What does it mean for a utility as more and more people move into urban areas that are increasingly connected technologically? We can take a cue from forward-thinking companies that are taking a post-demographic approach to marketing:

  • Innovative real estate firms are targeting profiles that cut across traditional demographics and are instead focusing on dwellers more alike in social markers..
  • Netflix focuses on ‘taste profiles,’ another segmentation that ignores demographics and borrows from shared behaviors to determine what movies or TV shows to commission.

These two examples bring us right into the customer home, the smallest and most personal of city units. Our homes are the last bastion against the world and the city. We want to control what happens inside, but we still make decisions based on the outside signals we receive from our cities. ‘Who will my neighbors be?’ or ‘Is this a good school zone for my kids?’

Smart cities can ultimately provide the signals that customers truly need about what they allow in their home, offering utilities an enormous opportunity. Even as tech companies capture the three current connected home use cases (safety, security and convenience), utilities can take the lead on providing the signals from the city to residents in their homes. But utilities must take a fresh, post-demographic look at the customer and take a system view of cities and the role they can play in shaping them (Urban Scaling and Metcalf’s Laws).

Using surveys, trend analysis, and strategic frameworks, Zpryme and Asha Labs will be providing a trends platform for interested utility executives. Jason and I will also host 5-10 person executive workshops where we deep dive into these trends and recommend/discuss strategic responses that the utility can consider. Email Jason.Rodriguez@zpryme.com or Seyi.Fabode@Zpryme.com to learn more.

Next week, we’ll talk upstart companies raising $100’s of millions in cryptocurrency and what their model of ‘baked in customer adoption/funding’ can teach us as we explore our customers.