Business Model for Malaysian Local Councils’ Sustainable Smart City Initiatives

In Malaysia, there are many goals that have been adopted as compasses for smart city initiatives, such as the United Nation’s Sustainable Development Goals (“SDG”) and New Urban Agenda (“NUA”). At the national level, several policies have been formulated towards achieving the same goals, including the Eleventh Malaysia Plan (“11MP”), the National Physical Plan 3 (“NPP3”) and the National Urbanisation Policy 2 (“NUP2”). As at June 2021, there are 150 local councils, or “Pihak Berkuasa Tempatan” (“PBT”) in Malaysia. Through their respective PBTs, cities around Malaysia are beginning to embrace digital city services, in line with the global movement to achieve cities that are smart and sustainable. However, they don’t seem to have enough funding allocated for that purpose. PBTs primarily operate on conventional business model. Most PBTs receive their funding from the federal government, and then they in turn spend the funds by appointing vendors. It is likely that the PBT’s current financial operating model is not efficient enough to sustain any smart city initiatives. With the many challenges surrounding the financing of smart cities, practitioners and academics are exploring alternative approaches for smart city funding. Traditional business models usually mainly consider how much value that the model can contribute into the equation, but with the increasing complexity of the smart city ecosystem, new business models must also be considered. Identifying ways on how to do more with less is also paramount, hence the investigation on the applicability of frugal innovation theory to the development of smart city business model. Purpose – This paper presents practice review in relation to PBT’s financial and non-financial challenges in implementing smart cities, and the possible business model that can generate new fund to support the city services sustainably. We also explored the applicability of frugal innovation theory towards developing a smart city business model.