Financial Incentives, Business Models and Procurement For C-ITS Deployment Capital Wp3 Its6 Final 27.5.2019

Topic Study 6: Financial incentives, business
models and procurement for C-ITS deployment
Pekka Leviäkangas, VTT

Katharina Zwick, AustriaTech
Thomas Zunder, University of Newcastle
Simon Edwards, University of Newcastle
Toni Lusikka (Ed.), VTT
This topic study is part of the CAPITAL e-learning platform, a project funded by the European
Union to design and deliver a collaborative capacity-building programme, including training
and further education, for public and private sector practitioners in the field of (cooperative)
intelligent transport systems (C-ITS & ITS).
This project has received funding from the European Union's Horizon 2020 research and
innovation programme under grant agreement N° 724106.
For more information on the CAPITAL e-learning platform, visit https://its-elearning.eu
Legal Disclaimer
The information in this document is provided “as is”, and no guarantee or warranty is given
that the information is fit for any particular purpose. The above referenced consortium
members shall have no liability for damages of any kind including without limitation direct,
special, indirect, or consequential damages that may result from the use of these materials
subject to any liability which is mandatory due to applicable law. © 2019 by CAPITAL
Consortium.
This document was last updated on May 27th, 2019.
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Abbreviations and Acronyms
Acronym Definition
BMC Business model canvas
CAPITAL Collaborative cApacity Programme on Its Training-educAtion and
Liaison
CCAM Cooperative, connected and automated mobility
COTS Commercial “off-the-shelf”
C-ITS Co-operative ITS
EC European Commission
EU European Union
ITS Intelligent Transport System
PCP Pre-commercial procurement
PPI Public procurement of innovations
PPP Public-private partnerships
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Table of Contents
1. Introduction ......................................................................................................................................... 5
1.1. Background .................................................................................................................................. 5
1.2. Objective and scope of the study ................................................................................................. 5
2. Business model frameworks for C-ITS ............................................................................................... 6
2.1. Definitions and key concepts ........................................................................................................ 6
2.1.1. Non-monetary value .............................................................................................................. 9
2.1.2. Service business model canvas ............................................................................................ 9
2.2. Literature review and relevant findings ....................................................................................... 11
3. Stakeholder perspectives on business models ................................................................................. 15
3.1. Definitions and key concepts ...................................................................................................... 15
4. Procurement of C-ITS ....................................................................................................................... 17
4.1.1. Introduction to procurement in general ................................................................................ 17
4.1.2. Procurement of innovation tools .......................................................................................... 18
4.1.3. C-ITS and the specific requirements for procurement ......................................................... 20
4.2.1. Relevance for innovative procurement approaches for C-ITS deployment ......................... 21
4.2.2. Pre-commercial procurement (PCP) as a tool for (C-)ITS deployment ............................... 22
4.2.3. Public procurement of innovation (PPI) as a tool for (C-)ITS deployment .......................... 24
5. Governance and management of the C-ITS ecosystem................................................................... 28
6. References ........................................................................................................................................ 31
List of Figures
Figure 1. Business Model Canvas for generic business model engineering. ......................................... 7
Figure 2. Starting point for design (adapted from Zolnowski et al. 2014). .............................................. 9
Figure 3. Service Business Model Canvas (adapted from Zolnowski et al. 2014). .............................. 10
Figure 4. Global organisation of SCOOP@F (adapted from C-ITS Platform Phase II, p. 71). ............. 11
Figure 5. Perceived and realised value (adapted from Ahituv 1989; Leviäkangas 2009). ................... 12
Figure 6. Information value attributes (adapted from Leviäkangas 2011). ........................................... 12
Figure 7. PCP/PPI chart of the EC ........................................................................................................ 19
Figure 8. Link between technology readiness level (TRL) and procurement actions ........................... 21
Figure 9. Actors, ecosystems, stakeholders and the governance framework. ..................................... 29
List of Tables
Table 1. Stakeholder view added to a value chain. .............................................................................. 16
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1. Introduction
1.1. Background
The road towards cooperative, connected and automated mobility (CCAM) requires new
modes of operation, new business models and new ways of procuring mobility solutions. Much
of the grounding work has been carried out by the C-ITS Platform, the work of which is reported
in the C-ITS Platform Phase II Final Report issued in September 2017. A number of political,
technological, organisational and regulatory issues stand in the way of full-scale successful
deployment of C-ITS. This deliverable seeks to provide starting point information and tools for
managing C-ITS deployment from a financial and economic viewpoint, which itself is
intertwined with the above. Indeed, the topic and the challenges related to it are so vast and
far-reaching that a single study can only make a marginal contribution. However, these small
steps are needed as the critical questions and prospective answers start to diffuse in the
stakeholder community.
This study first takes a look at the individual business model framework, which is needed by
each of the actors planning their business and services within the context of C-ITS. The critical
questions include first and foremost the value propositions that an actor is able and willing to
make. To understand whether this value proposition actually involves value requires
appropriate business model tools and value assessment methods. Secondly, it is necessary
to understand the wider context of the service and value network. The stakeholders’
perspectives and in particular business and service ecosystem structures form the framework
and boundary conditions for each individual actor’s business model and value proposition, as
no single actor can operate in a vacuum. A mobility system is complex and has many
externalities that are critical for socioeconomic and environmental acceptability.
The procurement process is one way of bringing actors together and building business
ecosystems that would not perhaps build up without some external push; at least the build-up
could be delayed and important competitive advantages and opportunities lost. Managing and
governing C-ITS ecosystems is something that is yet to be learned. The final section of this
study covers this essential management function, which is still very much in its infancy.
1.2. Objective and scope of the study

The objective of this topic study is to provide a timely, comprehensive and consistent overview
of the financial incentives, business models and procurement models of selected C-ITS
systems. This is done through an extensive literature review of the topics.
Chapter 2 describes business model frameworks for C-ITS. Stakeholder perspectives on the
business models are described in Chapter 3, and procurement of C-ITS is reviewed in Chapter
4. Finally, Chapter 5 briefly discusses the governance and management of C-ITS ecosystems.
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2. Business model frameworks for C-ITS
2.1. Definitions and key concepts
A business model is simplistically defined as the plan (as well as realisation of the plan) “how
a firm makes money”. However, both academic research and practitioners have gone far
beyond a simplistic view of business models. Business model definitions are manifold and can
be found in the business economics literature in abundance. Below are just a few examples
demonstrating the variety of definitions:
 “The business model concentrates on value creation. It describes a company’s or

organisation’s core strategy to generate economic value, normally in a form of
revenue.” -Bryony Rochester, Financial Times (Financial Times 2018)
 “An abstract representation of an organization, be it conceptual, textual, and/or

graphical, of all core interrelated architectural, co-operational, and financial
arrangements designed and developed by an organization presently and in the future,
as well as all core products and/or services the organization offers, or will offer, based
on these arrangements that are needed to achieve its goals and objectives.” (Al-Debei
and Avison 2010)
 “Business model is a method of doing business, by which a company sustains itself

and generates value.” (Chesbrough and Rosenbloom 2002)
A business model can also be something defined as a construct rather than a semantic model.
Osterwalder’s and Pigneur’s (2010) ontology [structure] of a business model is called the
business model canvas (BMC). It shows the different elements of a business model with which
a company can generate value and make it profitable to itself. The canvas allows different
types of business models to be designed by splitting the critical questions into separate issues
that then build up the ontological structure.
The generation of value is the crucial element. Unless somebody finds value in the service or
product, it will not be used and certainly not paid for. It is value that makes the service or
product worth something. The BMC’s key partners, key activities and channels by and large
define the value chain that is needed to create value. Customer segments, channels and value
propositions are part of the marketing management functions of any firm or organisation.
Managing cost and resources is a part of production management functions. Revenue
management falls between financial and marketing management functions.
In a C-ITS context, the BMC is useful in a number of ways. It provides a tool with which the
services can be designed such that the needed value chains can be constructed, pricing and
revenue logic can be considered, and key partners needed to build-up C-ITS services can be
identified and invited. For example, the automotive industry, public authorities and digital and
physical infrastructure providers are among the actors needed to realise C-ITS. Therefore, the
C-ITS context requires planning of entirely new business models and hence the need for the
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canvas is obvious.
The value propositions in the C-ITS context not only include revenues in monetary terms but
also socioeconomic impacts such as safety and reduction in emissions and energy
consumption. Therefore, the puzzle of the canvas becomes more complex and demanding.
We adopted the definition from Osterwalder and Pigneur (2010) which stated: “A business
model describes the rationale of how an organisation creates, delivers, and captures value.”
It can be said “that value proposition, value architecture, value finance, and value network
articulate the primary constructs or dimensions of business models.” (Al-Debei and Avison
2010).
Figure 1. Business Model Canvas for generic business model engineering.
The BMC shown in Figure 1 contains nine building blocks—the different elements that could
be used to define a proposed operations and value configuration. The demand side on the
right includes customer segments, relationships, and channels. The supply side on the left
comprises key partners, activities and resources. The revenue streams generated from the
business are in the bottom right segment, with the cost structure in the bottom left. The value
proposition—accrued goods, services and benefits—sits in the centre and is the meeting point
of the ongoing transaction between supply and demand.
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To develop a BMC requires a collaborative stakeholder workshop at which those with an
interest, mandate and resources to plan a new sustainable business organisation can help
populate the BMC with an eye to people, planet and profit.
 Key partners
• Identify the key partners in each pilot, their aim and their role
 Key activities
• Identify the key activities needed to deliver the measure/solution
 Key resources cost structure
• Identify the resources needed to “produce” the measure/solution
 Cost structure
• Identify the cost categories (give figures if known)
 Value proposition
• Identify the value proposition/added value that is being offered by this
measure/solution
 Customer relationships
• Identify the type of relationship that is being used
 Customer segments
• Identify the customer segment that is being addressed with this. For whom are
we creating value?
 Channels
• Identify how we are reaching the customer in terms of communication channels
 Revenue streams
• Identify the revenues to be achieved
Examples of key questions that arise when using the canvas as an aid to devising a C-ITS
business model for the individual actor:
 REVENUE STREAMS: How can we price the reduction in emissions? Who is willing
to pay for increased safety and how much?
 KEY RESOURCES: How do we ensure interoperability between different systems of
different manufacturers? Who hosts the needed databases and registers?
 COST: who is paying for the needed standardisation work and interoperability
engineering?
 CHANNELS: what fixed or nomadic devices are feasible and how are different apps
certified?
 CUSTOMER RELATIONSHIPS: How do we engage people to use C-ITS related
services and ensure feedback in unsatisfactory service cases or other conflicts?
 Etc.
The BMC is a step towards the concept of a business ecosystem. Business ecosystems work
for incorporating innovations (Moore 1993) and strengthening market position by bringing
synergies of different companies and public actors together towards a common innovation and
share benefit. The common grounding of an ecosystem is the shared fate of the involved
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actors (market players, customers, regulators) and the need to understand an organisation’s
own role in the ecosystem (Iansiti and Levien 2004).
2.1.1. Non-monetary value
Value, according to Porter (1985) and in the early business model literature, was focused on
monetary value and indeed profit generation. Combined with a value-chain focus on cost
reduction, this limited any focus on value that was not inherently monetary, or where the
capture and reward to value was complex. Arend (2013) addressed this clearly, identifying
that business models needed to address more than simple monetary outcomes and consider
the gains and losses of all affected parties, and that better business models should not be a
contest but instead a collaboration. This holistic view, that control may be more likely shared
among participants, had already been incorporated into the BMC by Osterwalder and Pigneur
(2010). In short, value need not be monetary. It is possible to generate value that does not
affect profit margins, or is difficult to assess in a traditionally defined cost benefit analysis. This
does not exclude it from a canvas; if it is seen by the participants as part of the value
proposition, and if there is a reward in capturing that proposition, then it clearly has value and
should be stated and seen as part of the business model.
2.1.2. Service business model canvas
Of note for C-ITS is the alternative service model canvas (Zolnowski, Weiß and Böhmann,
2014) which adopts the core building blocks of the BMC but also adopts a parallel vertical
approach which can encompass the different perspectives of partner, customer and company.
Figures 2 and 3 represent the service model canvas.
Figure 2. Starting point for design (adapted from Zolnowski et al. 2014).
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Figure 3. Service Business Model Canvas (adapted from Zolnowski et al. 2014).
However, the BMC is meant to work primarily only in a single-actor context, i.e. it is able to
capture business model prerequisites and boundary conditions regarding one actor only—the
one who is doing the business model design.
The Working Group – Business Models in C-ITS, which was formed as part of the C-ITS
Platform of the European Commission DG MOVE, stated that the BMC is too static and overly
focused on individual stakeholders to describe C-ITS business models capturing the C-ITS
framework. In that case, a cluster of canvas models for each stakeholder would be needed;
but the different models are often not complementary but rather in conflict, and do not
represent the whole ecosystem. Therefore, the Working Group determined that the value
chain and value network models and their combinations are the most useful methods to
describe and discuss C-ITS business models covering multiple stakeholders. Nevertheless,
the business model canvas was considered as good support in highlighting internal and
external components of a C-ITS business model. The Working Group therefore used the
canvas model as a checklist to ensure the capturing of the whole relevant ecosystem.
Generic value chain or network models are illustrations or visualisations of the network,
sometimes of the entire ecosystem. For the project SCOOP@F, a value network model was
developed and is depicted in Figure 4. It is the result of a negotiation process between different
stakeholders. Due to the different technologies covered by SCOOP@F, several combinations
are possible and adjustments very likely. Therefore, the representation of the SCOOP@F
business model form of the value network model is only a current snapshot of ongoing
activities. The model represents the organisation and flows between stakeholders. Figure 4
includes the global organisation. With additional value network models the different aspects
(like legacy situation, service provider organisation, G5-based organisation, etc.) are detailed
in further steps.
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Figure 4. Global organisation of SCOOP@F (adapted from C-ITS Platform Phase II, p. 71).
2.2. Literature review and relevant findings

Business models are revenue-generating logical structures, where the supplier receives
money and customers receive benefits. This applies to ITS services also. ITS services do not
function without data, and from thereon information is refined from the data. Data and
information are the core “produce” delivered to intermediate and end users. When consumed
and used in the right way, they improve safety, enhance the efficiency of operations and
increase the productivity of the transport system as a whole, as well as cutting the harmful
effects of transport, like emissions. In other words, information and data create value.
There are two different angles relevant to information value: the perceived value and the
realised value (Ahituv 1989). Typically, the former is associated with design and decision-
making (we think and anticipate the value to be realised), whereas the latter is an empirical
observation (we have witnessed how the value has realised). Perceived value is hence always
speculative in nature, while the realistic value is empirical and observable as described in
Figure 5 (Leviäkangas 2011). This is particularly important to note when thinking of the
deployment of new technological solutions in transport, where empirical experiences are often
limited in terms of both scope and time.
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Figure 5. Perceived and realised value (adapted from Ahituv 1989; Leviäkangas 2009).
“The outcomes, i.e. the impacts, of information on the decisions and actions of users are
mostly uncertain or at least stochastic: the impacts do not always manifest in exactly the same
ways, and different users react differently even in identical situations with the same
information” (Leviäkangas 2011).
Often, information is considered as a singular concept with a singular value. However, in reality
there are several value attributes that build up the aggregate value, which in the best case
has enough potential to lead to transactions between suppliers and customers. Based on an
extensive review of prior research done by Herrala et al. in 2009, a list can be drawn of the
value attributes of information. (Ahituv et al.1981, Ahituv 1989, Anderson et al. 2006, Bates et
al. 2001, Brownstone and Small 2005, Cykana et al. 1996, Feltham 1968, Freiden et al. 1998,
Hilton 1979, O’Reilly 1982, Strong et al. 1997, Wand and Wang 1996).The attributes can be
linked to the concept of a value chain or network, since at each stage of the service production
process the attributes’ value is (in the best case) added, thus increasing the aggregate value
of the information. This is exemplified in Figure 6.
Figure 6. Information value attributes (adapted from Leviäkangas 2011).
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The value chain highlights one of the main problems in making ITS services work: there are a
number of actors that need to contribute to the value creation process and make transactions.
The multitude of transactions that have to be agreed and frameworked beforehand increase
the risks of having problems and disturbances in the chain—the longer and more complex the
chain, the lower the resilience against failures.
Modern business models in digital (information) services are more than chains; rather they are
dynamic networks. The value capture becomes more challenging, the revenue logic more
complex and the value creation process multi-dimensional. To manage the value creation
process and the network, a strong actor is needed. Usually large companies, even if lacking
the required expertise to cover all aspects of the value creation process, have the resources
to mobilise and manage these value networks and even business ecosystems.
This might be even more complex when focusing on C-ITS, and some basic facts need to be
considered:
As the final report of C-ITS Platform Phase II related to business models in C-ITS clearly
pointed out, deployment of C-ITS requires the involvement of a number of stakeholders from
the public sector but also from different industries. Furthermore, the cost-benefit analysis of
the first phase of the C-ITS platform (2016) showed that the potential benefits of C-ITS will
outweigh the costs. The benefits will also materialise over time, but this depends strongly on
harmonised and coordinated but also accelerated deployment. In addition, it has to be
considered that large parts of the benefits will directly affect the users or the society at large,
while the costs of investment are assigned to the road operators or car manufacturers. (C-ITS
Platform 2017)
As another issue, the deployment of C-ITS and other related technologies—such as mobile
Internet, cloud technologies, the Internet of Things and automated vehicles—are relevant in
moving towards connected, cooperative and automated mobility, and can be transformative
and disruptive to existing business processes. Therefore, a C-ITS business model needs to
consider these facts and reduce uncertainties, and must create value for every stakeholder
that has to invest in C-ITS. (C-ITS Platform 2017)
According to the C-ITS Platform (2017), “C-ITS is a dynamic market that will need progressive
investment over several years. At this moment it is not yet feasible to fully integrate quantitative
financial features (revenues, costs, profitability) when describing the business model.” Thus,
business models for C-ITS need to be adaptable to its environment, as the system scope
needs to be adapted over time so that new stakeholders can be integrated and the relations
between them updated. With this in mind, the value chain model or value network model, or a
combination of both, is most useful in this context. (C-ITS Platform 2017)
The value chain model focuses on activities, processes and roles throughout the ecosystem.
It can be used to describe the C-ITS ecosystem by aggregating different value chains for
different C-ITS use cases (e.g. V2V, I2V, V2I or P2V services). The Value network approach,
on the other hand, is more systematic and in a way more open to new stakeholders that can
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join at any moment. Therefore, it is also adaptable to the evolvement of the C-ITS ecosystem.
The Working Group on Business Models of the C-ITS Platform used a combination of both
approaches. Value chain models have been developed for various use cases in different C-
ITS projects and the value network approach was used to describe the Scoop@F business
model. Based on this, key issues were identified to further define business models for C-ITS.
The Working Group also identified some key motivations and issues for the different
stakeholder groups deploying C-ITS and, based on that, developed a description of business
models from various stakeholder perspectives. As these are based on discussions with a small
group of C-ITS stakeholders, the results are not representative from a statistical point of view.
Nevertheless, the results of the Working Group summarizse some main aspects in regard to
C-ITS business models.
The analysis of value chains for the different projects or C-ITS use cases showed that—from
the perspective of the public authorities—it is very likely that different business models will
operate in parallel in the EU, and that no single business model can be prescribed but will be
influenced by the different phases of deployment. The main motivations for public authorities
to invest in C-ITS are improving road safety, making traffic management more efficient and
optimising infrastructure management costs. In general, road safety, fluent traffic flow,
reliability of journey and reduction of environmental impacts are the key motivators for all
stakeholder groups. Whereas for the individual user the main focus is the added value of the
service, for private sector stakeholders it is the increase of revenues and enhanced profitability
of operations.
The Working Group also formulated some key issues in relation to the business models for C-
ITS followed by some recommendations and further actions. One of the major issues the
involved stakeholders, especially from the public sector, have to deal with is the determination
of costs and benefits of C-ITS. What is stated is that there is a progression from determining
the costs and benefits to the calculation of benefit-cost ratios and, in a later step, the
development of shared business models for public and private stakeholders. Therefore,
concrete evidence is needed on the investment, operation and maintenance costs and cost
savings due to the use of C-ITS. Furthermore, similar evidence will be necessary for the
impacts and social benefits.
Summarising the information provided in the C-ITS Platform (2017) Phase II final report, the
C-ITS market is constantly evolving and changing. Due to the nature of C-ITS the framework
is complex and a multitude of stakeholders from the public side or private sectors are involved.
There is no clear business model at the moment. Depending on the implementation-specific
framework, different business models will be possible. Also, the different roles will be covered
differently depending on national or project-specific requirements and framework conditions.
Models like the value chain or value network enable the analysis of different approaches and
reveal similarities, but also differences. The increased use of cost-benefit analysis or impact
assessment will be necessary to develop a specific business model.
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3. Stakeholder perspectives on business models
The Merriam-Webster (2018) online dictionary gives three definitions for a stakeholder:
 “A person entrusted with stakes of bettors.”
 “One that has a stake in an enterprise.”
 “One who is involved in or affected by a course of action.”
It is easy to see that the last definition applies to the C-ITS deployment context—or in fact any
systemic context where a large number of actors are affected by an investment, decision or
action. Stakeholder theory is an important concept as well. Introduced by Edward Freeman
(1984), the theory states that business ethics and moral values play an important role in the
management of business. The idea is not just to make money, but to satisfy the needs and
aspirations of a larger group of actors, the stakeholders. This theory is actually quite new and
confronts the traditional view of agent theory, where the idea of a firm is just to make money
for shareholders. Since its introduction it has spread widely and seems to dominate the
modern perception of managing business.
Practically everything in the C-ITS context relies on stakeholder theory. Alone the fact that
successful C-ITS deployment requires multiple commitments of different stakeholders, that
there are some conflicting interests that need to be managed, and that there is a substantial
socioeconomic public good justification for C-ITS, makes this context a fruitful application
ground for stakeholder theory.
An actor is someone who has a role to play in the form of action, be that an investment or an
operational activity. Stakeholders always include all actors, but not necessarily vice versa.
Sometimes a stakeholder may not be an active party but is still affected e.g. by the externalities
created by a system, such as C-ITS. The C-ITS Platform (2017) identifies four main types of
actors that are needed for the successful incorporation of C-ITS:
 Public authorities (state, regional, city/local)
 Private road operators
 Service providers
 Vehicle manufacturers.
However, there are many other stakeholders that are either a part of the C-ITS deployment or
affected by it, such as:
 End users (drivers)
 Public transport operators
 Other mobility system end users, e.g. cyclists, pedestrians
 Insurance companies
 Other mobility service providers (rental companies, MaaS providers, parking services,
etc.)
 Technology and system suppliers.
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All these stakeholders are affected by C-ITS and hence need to be appropriately engaged in
the development and deployment of C-ITS. Some of them are motivated by business potential,
others by the opportunity to provide better public service and create more sustainable mobility
systems. In this sense, these stakeholders have their ‘own’ business models they are trying
to realise. The challenge in C-ITS deployment is to bring these ‘business models’ into
congruence, so that at aggregate level the benefits are maximised without making any
stakeholder seriously worse off than before. Using the value chain and value network models
it is possible to identify both the actors and the stakeholders, as well as identify which type of
motivations (benefits, costs or impacts) these stakeholders might have with regard to the
particular C-ITS service or service bundle. Table 1 gives an example.
Table 1. Stakeholder view added to a value chain.
Stakeholders
Actors
Passive Affected
Actor Actor1 Actor2 Actor3 End-user
actor Non-users
raw data
distribution Other
raw data purchase data service
Function and service mobility
gathering and refining consumption
packaging system users
distribution
Revenue Revenue Revenue Private
Revenue
Benefit from from from End- benefits from
from Actor2
Actor1 Actor3 user the service
Externalities
No direct
Payments Payments Payments to Payments to
Cost additional
for data to Actor1 Actor2 Actor3
cost
Actors 1–3 and the end users are the active stakeholders, whereas the passive actor (raw
data source) and other users have passive roles but are nonetheless affected. The business
model for the entire service is not sustainable if, for example, the raw data is not available or
if non-users suffer from negative externalities. On the other hand, if there are significant
positive externalities for the non-users, for example in terms of less congestion, there are
possibilities to supplement revenues for Actors 1–3 with public-funded subsidies.

C-ITS is about creating value. The value should be created not only for carmakers but also for
stakeholders around the C-ITS context. Value-creation questions have been discussed in a
number of academic and professional works (e.g. Argandona 2011, Crane et al. 2009, Flak
and Rose 2005, Harrison and Wicks 2013, Kochan and Rubinstein 2000). The common
message is by and large (excluding the criticism of stakeholder theory) that modern, systemic
challenges such as climate change, social justice, equity, environmental concerns, etc. require
businesses to adopt a stakeholder approach in their business planning and engineering. For
C-ITS, the simple fact is that the stakeholder approach is nothing less than absolutely
necessary, regardless of whether one views the business potential or the socioeconomics of
the system or service under consideration.
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4. Procurement of C-ITS
4.1.1. Introduction to procurement in general
In many sectors, as in the ITS sector, public authorities are the key players and therefore also
the principal buyers of goods and services. According to the data available from the European
Parliament (2017), around 250,000 public authorities in the European Union spend about 14%
of GDP on the purchase of works, services and supplies every year. These public authorities
are subject to public procurement. Public procurement refers to the process conducted by
public authorities (e.g. government ministries or local authorities) to purchase services, work
or goods from companies. European law sets out some minimum rules that are harmonised
around the European Union and transposed into national legislation. Transparency, equal
treatment, open competition and sound procedural management are the core principles of
those directives. The directives are designed to achieve a procurement market that is
competitive, open and well regulated. For tenders below a certain amount only national
procurement laws apply, but for higher amounts the European laws must be followed.
Additionally, national procurement rules also have to respect the general regulations outlined
in the European legislation. (European Commission 2017)
According to the European Commission (2017b), the European legal framework consists of
three directives that have to be transposed into national acts:
 Directive 2014/23/EU on the award of concession contracts

 Directive 2014/24/EU on public procurement
 Directive 2014/25/EU on procurement by entities operating in the water, energy,
transport and postal services sectors.
In addition, European guidelines for contracts that are not covered by these three directives,
either fully or in part, are presented in the Commission’s interpretative communication from
2006 (European Commission 2017b). It is applied in the following situations:
 “Low-value contracts below the Directives’ thresholds that still have cross-border
interest;
 Contracts above EUR 207 000 for which the Directives only provide limited rules (e.g.
health and legal services).” (European Commission 2017b)
The communication interprets existing case law from the European Court of Justice and
suggests best practice to obey internal market requirements. This includes the non-
discrimination provisions and minimum transparency that are required when granting low-
value contracts. (European Commission 2017b)
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In October 2017 the European Commission (2017c) adopted the public procurement strategy
COM(2017)572, which focuses on six strategic policy priorities for improving the European
Union’s public procurement practices in collaboration with public authorities and other
stakeholders. The priorities include new guidance for ensuring wider uptake of innovative
procurement, specific measures for further professionalisation of public buyers, enabling
better access to procurement markets, boosting digital transformation, and fostering
cooperation between procurers. The communication also mentions the encouraging steps that
have already been taken in several European Member States to reform procurement practices
and structures. However, it highlights a crucial hampering factor: strategic procurement
possibilities are not sufficiently used, because more than half of the procurement procedures
still use the lowest rate as the only award criterion, although the public procurement directives
from 2014 allow public buyers to opt for purchases based on cost-effective quality-based
criteria (European Commission 2017c).
The EC communication also refers to the study on “Strategic use of public procurement in
promoting green, social and innovation policies”, which showed that on the innovation side,
innovation procurement is hindered by various barriers like enhanced risk on the part of the
buyers, increased workload, lack of maturity of goods and services demanded, and last but
not least a lack of flexibility in the procurement process (European Commission 2017d).
The primary goal of a purchasing manager is to achieve best value for money within the
context of legal requirements and sustainability commitments made, such as the EU
directives on public procurement and sustainability standards, e.g. SA8000 (Baily et al.
2005, pp. 112–124, 484–503).
4.1.2. Procurement of innovation tools
To deal with these challenges, different approaches were developed that should foster the
further procurement of innovative solutions, namely PPI, PCP, innovation partnerships, or the
PPP model:
 Public Procurement of Innovative solutions (PPI) is applied when challenges can

be solved with innovative solutions that are nearly market ready or already available
in limited quantity, and R&D (Research and Development) is no longer needed.
(European Commission 2017e)
 Pre-Commercial Procurement (PCP) is used when there are no nearly market ready
solutions, and R&D is needed. Pros and cons of alternative solutions can be compared
during PCP and risks of the most promising innovations can be eliminated step by step
via solution design, prototypes, developing and pilot product testing. PCP is based on
the exemptions for procurement of R&D services currently included in the Procurement
Directives. (European Commission 2017e)
18
Figure 7. PCP/PPI chart of the EC (adapted from European Commission 2017e).
Figure 7 demonstrates how public procurers can drive innovation from the demand
side by developing a forward innovation procurement strategy that utilises PCP and
PPI in a complementary manner. (European Commission 2017e)
 Innovation partnerships were defined in Article 49 of the European procurement

directive of 2014 (2014/24/EU) for the first time to enable public authorities to create
structured partnerships with a supplier with the objective to develop an innovative
product, service or works, with the subsequent purchase of the outcome. In innovation
partnerships, procedural rules and negotiation should be applied to the competitive
procedure. Also, contracts should be granted solely based on the best price-quality
ratio, as it is the most suitable option for tender comparison of innovative solutions.
The innovation partnerships should be organised so that they have market pull, which
is necessary to ensure that the market is not foreclosed. Thus, authorities awarding
the contracts should not use innovation partnerships to distort, restrict or prevent the
competition in the market. It is possible that establishing innovation partnerships with
multiple partners can be beneficial in avoiding unwanted distortion of the market.
(European Commission 2014)
 Public-private partnerships (PPPs), according to European Commission (2013), are

“long-term contracts between two units, whereby one unit acquires or builds an asset
or set of assets, operates it for a period and then hands the asset over to a second
unit. Such arrangements are usually between a private enterprise and government but
other combinations are possible, with a public corporation as either party or a private
non-profit institution as the second party.” Thus, PPP provides a legal structure to pool
resources, gather critical mass, and make research and innovation funding across the
European Union more efficient by sharing human, financial and infrastructure
resources. Furthermore, an internal market is created for innovative products and
services. This construct enables innovative technologies to get to the market faster.
PPPs can provide the right framework for international companies to anchor their
research and innovation investments in Europe, and last but not least enable the scale
19
of research and innovation effort needed to address critical societal challenges and
major EU policy objectives. (European Commission 2017f)
4.1.3. C-ITS and the specific requirements for procurement
C-ITS is a complex framework, as it requires the involvement of a number of stakeholders

from the public sector but also from different industries. Especially public authorities play a
major role in the funding of new services and fostering the deployment of new innovations.
Rapid developments in the C-ITS sector in recent years have allowed moving relatively quickly
from basic research to a maturity level of the technology that is very close to market. The legal
framework is adapting more slowly than the technology. Various funding initiatives and
programmes have fostered the deployment of C-ITS by public authorities, but C-ITS solutions
are not available as commercial “off-the-shelf” (COTS) solutions. In the framework of C-ITS,
the procurer typically has a good understanding of the needs, functional requirements and
technical specifications of the solution to be procured (P4ITS consortium 2016), but given the
frequent lack of COTS solutions, even if the technology framework can be defined there are
no products or services on the market that can match it.
As public authorities (transport authorities, ministries, cities, etc.) are important drivers for C-
ITS implementation, it must be remembered that they are subject to public procurement law
also when it comes to the deployment of an innovative solution. Thus, the constraints of the
procurement directives have to be considered for the deployment of C-ITS. This means that
for “buying” innovative solutions, like C-ITS services, public authorities need to make use of
innovative or alternative approaches for procurement, like PPI (as a very general term used
in this context), PCP, innovation partnership or certain open or restricted procedures.
In general, there is not only “one procedure” that is adequate, but different procurement
procedures that have advantages and disadvantages, depending on the general framework
for the procurement, the maturity level of the procured solution, and other aspects.
The P4ITS consortium (2016) developed a scheme to illustrate the correlation between
technology readiness level and actions according to the EU procurement directives, which is
depicted in Figure 8.
20
Figure 8. Link between technology readiness level (TRL) and procurement actions (adapted
from P4ITS consortium 2016, p.22).

4.2.1. Relevance for innovative procurement approaches for C-ITS
deployment
As summarised by the SPICE project (2017, p. 17), “the fast development of technologies
creates many challenges for traditional public procurement. In many cases the innovative
solutions are difficult to be purchased within the traditional procurement framework. The EU
directives (e.g. Directive 2014/24/EU) provide the legal framework for public procurement
procedures, such as:
 Wide possibilities of market consultation prior to the procurement actions (art. 40);
 Competitive procedures with negotiation (art. 29) or dialogue (art. 30);
 Innovation Partnership (art. 31) – the “commercial extension” of PCP;
 Design contest (art. 78);
 Competition based on innovative characteristics (art. 67) or life-cycle costing/total cost
of ownership (art. 68).
These possibilities can help procuring innovations.” In addition to the different tools mentioned
by SPICE, PCP should be considered as one additional approach which is based on the
exemptions for procurement of R&D services currently included in the Procurement Directives.
The use of innovative procurement tools—especially in the area of C-ITS—has also been
stressed in the C-ITS platform (2016), which recommends that the European Commission
should support public investment by means of harmonised C-ITS pre-commercial
procurement schemes and practical tools such as investment guidelines for infrastructure
managers (C-ITS Platform 2016). Furthermore, the report included the following
recommendation: “Facilitating procurement and providing guidance to city authorities are
21
some actions that need to be taken in order to facilitate C-ITS investment in cities” (SPICE
project 2017, p. 17). The promotion of innovative public procurement processes and the
stimulation of sharing of knowledge among stakeholders, especially public stakeholders, were
also addressed by the C-ITS platform (SPICE project 2017, p. 17). WG9 of the C-ITS platform
(Implementation Issues) recommended “To support public investment, by means of
harmonised C-ITS pre-commercial procurement schemes, which could be as well an effective
tool to help bridging this gap” (SPICE project 2017, p. 17). Furthermore, it stated that the
European Commission and other actors should contribute together to develop practical tools,
such as pre-commercial procurement, to support C-ITS deployment, which could stimulate the
launch of C-ITS at local, regional and national levels. (SPICE project 2017, p. 17)
In Phase II of the C-ITS platform (2017), procurement issues were of minor relevance.
Nevertheless, the report included a separate recommendation regarding Urban C-ITS
standardisation to support procurement and deployment:
 “Launch a dedicated activity to describe required functional requirements, technical
specifications and communication profiles for C-ITS services and equipment for
operators. Extend described supporting actions to build up technical/financial capacity
to develop and improve test standards and field operational testing as a whole.
Accelerate the development process of conformance tests for infrastructure-based
messages, e.g. SPaT/MAP. Common definitions to be addressed. To be potentially
addressed within relevant on-going projects - in particular the development of an 'urban
specification profile' based on common functional requirements.” (C-ITS Platform
2017, p. 50)
Thus, at present we can see that specifications and profiles are under development that will,
hopefully, simplify the procurement of C-ITS in the future. Nevertheless, the relevance of
innovative procurement approaches is uncontested.
Although these procurement tools are enablers for the deployment of C-ITS by public
procurers, knowledge about the tools and implementation of these innovative approaches is
often lacking, as e.g. the iMobility Support (2013) project has shown.
The following provides a short overview of PPI and PCP in the relation of (C-)ITS deployment
to provide a basic understanding of the tools. A number of platforms and projects have
developed guidelines, recommendations and supporting material that will help public
procurers dig deeper into the topic.
4.2.2. Pre-commercial procurement (PCP) as a tool for (C-)ITS

deployment
Within the iMobility Support (2013) project a specific “PCP for ITS Guide” was developed that
summarised the key issues of PCP. The deployment of ITS solutions started some years ago.
Nevertheless, the deployed solutions are often isolated proprietary systems ending at
geographical or institutional borders. Harmonised solutions and deployment of innovations are
the key prerequisites for ITS to have an impact. Interoperability, harmonisation and cross-
22
border cooperation are the main aspects of this, but broad deployment of these services and
systems requires several stakeholders to be involved with the public sector, resulting in a need
for new, innovative methods of procurement. Further instruments must follow R&D activities.
These should also include the development of innovation-oriented procurement strategies,
and the new instruments should be used to encourage deployment. The European
Commission promotes additional financial instruments to support the demand for innovation
and innovative procurement. For every organisation that by law has to follow the European
Public Procurement Directives, PCP is a way to finance the Research and Innovation (R&I)
tasks that are necessary in developing innovative solutions to their problems. PCP offers an
alternative option to the traditional financial means to support innovation, and it gives
possibility to public procurers to be buyers who demand innovation. (iMobility Support 2013)
PCP can be seen as an approach to support public authorities in answering these complex
needs for mobility solutions and ensure the development and deployment of innovations for
crucial areas such as the mobility sector.
The definition of PCP differs from source to source and from organisation to organisation. In
principle, it can be stated that the PCP is a demand-side oriented innovation policy instrument.
PCP aims to solve the socioeconomic needs and challenges of a public procurer, which
require R&D to find new solutions. PCP is adequate if the problem can be clearly defined, but
there are either no adequate solutions available currently or the pros and cons of several
potential competing solutions have not been compared or validated yet. Therefore, the public
sector procures R&D from several suppliers in parallel and in the form of competition, as they
compare alternative solution approaches. An evaluating process takes place after each critical
milestone: design, prototyping, and test phase. The benefits and risks of R&D (e.g. IPRs) are
shared together with suppliers to maximise incentives for wide commercialisation. According
to the PCP model of the European Commission, it can be distinguished between a preparation
phase and the PCP process itself consisting of three main phases: solution design, prototype
development and first development of test products. Ideally the PCP process is followed by
the commercial procurement of the developed services or products. (iMobility Support 2013)
The PCP process itself does NOT include actual procurement of the developed solution.
Thus, PCP is an approach “for procuring R&D services which enables public procurers to:
 share the risks and benefits of designing, prototyping and testing new products and
services with the suppliers; in a way that is in-line with international WTO legislation
and relevant EU legislation on public procurement without involving State aid;
 create optimum conditions for wide commercialisation and take-up of R&D results
through standardisation and/or publication;
 pool the efforts of several procurers.” (iMobility Support 2013)
PCP is based on the special exemption from the Procurement Directives related to R&D
services formulated in Article 14 of the 2014/24/EC and Article 32 in 2014/25/EC. These
exemptions apply to public contracts for R&D services only, not for R&D supplies or R&D
works.
The main formal documents from the European Commission relevant for PCP are
23
COM(2007)799 and SEC(2007)1668 (European Commission 2007). The document defined
the concept of PCP based on the application of risk-sharing according to procuring of R&D
services to market conditions so “that does not constitute State aid. As a rule, the relationship
between the public purchaser and the company within the pre-commercial procurement
should not include an aid element, and this should be excluded through the appropriate design
of the contract. Where public authorities buy R&D from companies at market price, there is no
advantage and consequently no element of State aid.” (European Commission 2007, p. 5)
The iMobility Support (2013) developed a step-by-step Guidance for PCP, which is a helpful
basis for creating a better understanding of the tool. Furthermore, the Guide is complemented
by a number of case studies and recommendations for the use of PCP.
A number of PCP projects have been supported by the European Commission. Information
on these projects is available on the platform of the European Commission dedicated to Pre-
Commercial Procurement.
It has to be stated the PCP is a tool that has advantages and disadvantages. Especially in
relation to the tool of “innovation partnership” all potential options have to be compared to
identify the right solution for the procurer. (Kapl and Zwick 2015)
4.2.3. Public procurement of innovation (PPI) as a tool for (C-)ITS

deployment
According to the Procurement of Innovation Platform (2018a) PPI can be defined as follows:
“Public procurement of innovation (PPI) occurs when public authorities act as a launch
customer for innovative goods or services. These are typically not yet available on a large-
scale commercial basis and may include conformance testing.”
The Procurement of Innovation Platform (2015) has also developed a practical guide on PPI,
which will facilitate preparation and implementation of public procurement of innovative goods
and services, and it is available online.
Furthermore, according to the European Commission (2017g), PPI is defined as follows: “PPI
facilitates wide diffusion of innovative solutions on the market. PPI provides a large enough
demand to incentivise industry to invest in wide commercialisation to bring innovative solutions
to the market with the quality and price needed for mass market deployment. This enables the
public sector to modernize public services with better value for money solutions and provides
growth opportunities for companies. Public Procurement of Innovative solutions (PPI) happens
when the public sector uses its purchasing power to act as early adopter of innovative
solutions which are not yet available on large scale commercial basis.”
The legal bases for PPI build the European procurement directives that were mentioned earlier
in this document. Within the update of the Directives in 2014, changes to the procurement
procedures were included that are expected to increase the uptake of PPI. According to the
Procurement of Innovation Platform (2018b), these changes include:
24
 “Increased flexibility and simplification on the procedures to follow, negotiations and
time limits;
 Clearer conditions on how to establish collaborative or joint procurements which,
through bulk purchasing, can provide the necessary demand to launch new solutions;
 Strengthening the use of life cycle costing, which describes all the phases through
which a product passes from its design to its marketing and the discontinuation of its
production;
 The creation of innovation partnerships which enable a public authority to enter into
a structured partnership with a supplier with the objective of developing an innovative
product, service or works, with the subsequent purchase of the outcome;
 The exemptions for procurement of R&D services currently included in the new
Directives (which are the basis for PCP) will be maintained. Public procurers can
therefore continue to undertake pre-commercial procurement.”
In the context of PPI, the official definition of the term ‘innovation’ has to be considered:
“’Innovation’ means the implementation of a new or significantly improved product, service
or process, including but not limited to production, building or construction processes, a new
marketing method, or a new organisational method in business practices, workplace
organisation or external relations inter alia with the purpose of helping to solve societal
challenges or to support the Europe 2020 strategy for smart, sustainable and inclusive growth”
(European Commission 2014).
Thus, as stated in the P4ITS consortium (2016), “implementation of a new or significantly

improved product, service or process” is the key aspect of the definition of innovation in the
context of PPI. When it comes to “traditional” procurement, award criteria like the lowest price
do not foster the procurement of new and significantly improved solutions, as the price will in
many cases be higher than for other solutions because they are not yet available on a large-
scale basis. Thus, PPI provides a path to procure new, innovative solutions. (P4ITS
consortium 2016, p. 11)
PPI is procedure neutral, and in principle any procedure within the procurement directives is
applicable in a PPI action, although some Member States in national legislation or guidelines
may require procuring authorities to follow specific procurement procedures or procedural
steps when procuring new, innovative solutions. Therefore, and conversely to PCP, PPI
actions can be understood as supporting initiatives enhancing procurement of innovation.
(P4ITS consortium 2016, p. 20)
According to the P4ITS consortium (2016, p. 20-21), PPI can be understood as:
 “European, national, regional or local programmes/strategies/policies supporting

procurement of innovation, such as strategies on making daily procurement more
innovation friendly (e.g., target to carry out with a PPI approach 20% of all procurement
actions) or multi authority cooperation with a certain economic mass, allowing market
penetration of new (yet undiscovered) innovative solutions in grand joint procurement
projects
25
or
 The technical or legal approaches one can adopt to enhance the possibilities of new
innovative solutions to win a tender (in this document also referred to as ‘PPI
approaches’). Hence, on an operational level the PPI approaches are the very
fundamental preconditions for PPI actions and the principles behind PPI approaches
can be used in any public procurement procedure, including day-to-day ‘conventional’
procurement, to enhance the possibilities for obtaining new solutions for the needs of
the procuring authority.
PPI might therefore be part of a mix of policies aiming to encourage the procurement of both
R&D and innovation in the performance of public tasks or to address societal challenges and
needs. Such a policy mix can therefore comprise both PCP and PPI strategies”.
PPI does not necessarily include R&D, but especially in the area of C-ITS, it might contain
elements of R&D for adapting, modifying and integrating a solution already available on the
market. This is to make it meet the requirements, if this adaptation has not already been made
during the initial market dialogue phase. PPI might include elements of R&D, as C-ITS
solutions are still not available on a wide commercial scale or not yet ready for implementation.
(P4ITS consortium 2016, p. 21)
The chosen tender procedure should always be based on market investigations. Suppliers
might carry out some supplementary R&D during a market dialogue phase. However, if the
procurer cannot reasonably anticipate the need for supplementary R&D to be carried out
outside a tender procedure, the procurer must choose a tender procedure for the PPI action.
(P4ITS consortium 2016, p. 21-22). As depicted in Figure 8, different approaches are available
based on the maturity level of the relevant service.
The P4ITS consortium (2016) prepared an overview of different PPI approaches, including the
pros and cons of each approach (e.g. market consultation, early announcement of
procurement intentions, forward commitment procurement, functional/open specifications,
total cost of ownership, life-cycle costing, using ”innovative characteristics” as evaluation
criteria, remuneration for participation, free test sites/living labs, joint procurement...).
Guidance like this can help procurers identify their appropriate procurement approach, based
on the related C-ITS solution.
Especially some of the C-ITS Day 1 services have a significant level of maturity or are even
ready on the market, so commercial solutions will in some cases already be available on the
market. Other services are already piloted in operational environments. Therefore, “standard”
procurement procedures could be the appropriate tool. For other C-ITS services, or especially
those services summarised under Day 1.5 services with a lower maturity level, different
approaches may be needed so that the means of PPI are relevant.
Given the complexity of the problem, the procurement of innovative solutions for C-ITS may
require a multidisciplinary team, which includes ITS and procurement specialists, lawyers and
strong project management. Procurement should not require bureaucratic procedures, which
regulate the PPI, but rather a new cultural approach. In this manner, experts cooperate to
26
accomplish common understanding and mutual learning, and then to implement procurement
actions of C-ITS solutions. (P4ITS consortium 2016, p. 32) In addition, PPI actions are also
an opportunity for new cooperation between procurers and suppliers to find solutions together
while gathering knowledge important for both sides (P4ITS consortium 2016, p. 31).
As emphasised by the P4ITS consortium (2016), it is important for a successful market launch
and large-scale deployment of innovative solutions to subsume reflections about procurement
even from early phases of development to be communicated to the market. Planning and
communicating the PPI approach ahead to the market gives a clear vision of the project to
both procurers and the suppliers, which makes it easier to define the main tasks and
milestones. As technologies in the field of C-ITS are not very mature, short-term PPI actions
may be a better support option than long-term R&D actions. This is due to the challenges
related to the last steps of deployment, when roles, responsibilities, and objectives of different
actors can be defined in more detail when compared to exploratory research and high-risk
development. (P4ITS consortium 2016, p. 32-33)
As discussed, PPI is so much more than a simple procurement process; it requires cross-
sectorial, long-term and strategic thinking (P4ITS consortium 2016, p. 45; Kapl and Zwick
2015). As the Procurement of Innovation Platform (2018a) concludes: “While much of the PPI
and PCP discussion relates to scientific research and development, there is more to it than
this alone. Innovation in the public procurement context very much takes into account:
 Innovation in the design and delivery of public services

 The procurement of innovative goods and services
 Innovative procurement processes and models
Therefore, PPI and PCP cover a large range of the industrial market through all development
phases—from research to the final stage of the product—giving public buyers the opportunity
to influence the market towards innovative solutions” (P4ITS Consortium 2016).
27
5. Governance and management of the C-ITS ecosystem
As business ecosystems are networks of firms which collectively produce a holistic, integrated
technological system that creates value for customers (Agerfalk and Fitzgerald 2008, Bahrami
and Evans 1995, Basole 2009, Lusch 2010, Teece 2007), management and governance of
the ecosystem is the function that facilitates and enables this network to deliver the value—in
simple words, make sure that the ecosystem is a) coming into existence and being formed, b)
once in place, creating value. The first step to take is to make the ecosystem actors aware
that they belong to an ecosystem and of the other ecosystem actors’ existence. After this ‘self-
realisation’, it is easier to start building links between the ecosystem actors. Partly this link-
building may be evolutionary and partly it may be deterministic. If there is a general aspiration
to boost the ecosystems and their readiness in value creation, deterministic, goal-oriented
work is required. Hence there is a need to govern and manage the network of actors.
Governance means action or manner of governing a state or an organisation (Oxford

Dictionary). It means also the highest level of management and the systems for exercising the
management (Cambridge Dictionary). Hence governance can be regarded as the strategic
system of managing an organisation, be that organisation large (e.g. a state or multinational
corporation) or small (e.g. an SME). Different types of organisations require different types of
governance system. The same applies to business ecosystems. And since a business
ecosystem is usually associated with a particular service or set of services, the service
systems require different types of governance, i.e. system of management.
Governance is not operational management, but strategic. The management system is built
on strategic level and is therefore more permanent, meaning that it has strategic dimensions
on a chronological scale, but that it also is implemented by the high-level management of the
organisation(s). The management system is the tool for the strategic management to set
guidelines, priorities and modus operandi for the entire organisation. In ecosystem
management and governance, the ecosystem actors’ strategic management dictate the
governance models. The clarity and functionality of the governance depends on three things:
1) how complex the ecosystem is, 2) how dominant the key actors are and 3) how the actors
are able to build a consensus among themselves about the governance.
Since ecosystem governance can be regarded as ‘agreements’, a ‘set of rules’ or ‘operating

principles’, the tools for governance must explicitly include, for example:
 Framework contracts between actors
 Strategic agreements and memorandums of intent
 Alliances and partnership agreements
 Commonly agreed standards and performance criteria
 Etc.
In the C-ITS and CCAM context, the above tools must be available or they must be
constructed before scalable implementation is possible. Otherwise, the C-ITS services are
28
built on a case-by-case basis that may vary from one place and one context to another. This
in turn may result in market islands and lack of economies of scale. On the other hand,
however, natural evolutionary competition between companies (technology, services) and
even ecosystems requires overlapping and differing experiments and market trials.
A successful governance system takes into account also external effects, that is those
impacts and consequences that fall outside the ecosystem and are faced by stakeholders
external to the ecosystem. Managing side effects—externalities—is in many cases
mandatory, and particularly so in the mobility context where the requirements for safety and
environment are strict. Figure 9 illustrates the complex governance sphere, including
internalities and externalities of the ecosystem.
Figure 9. Actors, ecosystems, stakeholders and the governance framework.

The research body of knowledge is becoming extensive. A good literature overview has been
given by Mäkinen and Dedehayir (2012). The literature has identified a number of different
types of ecosystems:
 Industrial ecosystems (Desrochers 2010, Sharma and Henriques 2005)
 Product ecosystems (Frels et aI. 2003)
 Service ecosystems (Lusch 2010)
 Technology-oriented ecosystems (Santos and Eisenhardt 2005, Zulkarnain et al.
2014)
 Innovation ecosystems (Autio and Thomas 2014)
 Spatially-oriented business or innovation ecosystems (Aapaoja and Leviäkangas
29
2015, Majava et al. 2016)
 Etc.
This means that markets where the value is delivered are different for various ecosystems and
that these markets may overlap, as may the ecosystems. Also, for some ecosystems the word
‘business’ might be misleading. It would actually be more correct to talk about ‘value creation
systems’ than business networks or business ecosystems.
For C-ITS, all the aforementioned ecosystems may apply, depending on the perspective one
adopts. A C-ITS service may appear in a particular city or region with particular features and
it may thus be regarded as a spatial system. It may also be that only certain vehicles are
capable of offering some services and the functionality is either service- or product-oriented,
or both. At an early stage of C-ITS development there are surely innovation ecosystems that
are involved in the research, development and innovation.
The art is to understand which ecosystem actors are the most relevant, around which the
ecosystem can be built. These are called keystone actors (Iansiti and Levien 2004). Without
the keystone actors, be they companies or other organisations, the ecosystem will not evolve.
For example, if a city is launching a call for tenders for a C-ITS and uses the tools of innovation
procurement, one of the keystone actors is definitely the city itself. The other actors, depending
on the type of service that is called for, may comprise vehicle manufacturers, vehicle fleet
owners, or specialised mobility service providers.
30
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Topic Study 6: Financial incentives, business

models and procurement for C-ITS deployment

Pekka Leviäkangas, VTT

For more information on the CAPITAL e-learning platform, visit https://its-elearning.eu

This document was last updated on May 27th, 2019.

1.2. Objective and scope of the study

 “The business model concentrates on value creation. It describes a company’s or

 “An abstract representation of an organization, be it conceptual, textual, and/or

 “Business model is a method of doing business, by which a company sustains itself

Figure 1. Business Model Canvas for generic business model engineering.

2.1.1. Non-monetary value

2.1.2. Service business model canvas

2.2. Literature review and relevant findings

Figure 6. Information value attributes (adapted from Leviäkangas 2011).

Table 1. Stakeholder view added to a value chain.

3.2. Literature review and relevant findings

 Directive 2014/23/EU on the award of concession contracts

4.1.2. Procurement of innovation tools

 Public Procurement of Innovative solutions (PPI) is applied when challenges can

 Innovation partnerships were defined in Article 49 of the European procurement

 Public-private partnerships (PPPs), according to European Commission (2013), are

4.1.3. C-ITS and the specific requirements for procurement

C-ITS is a complex framework, as it requires the involvement of a number of stakeholders

4.2. Literature review and relevant findings

4.2.2. Pre-commercial procurement (PCP) as a tool for (C-)ITS

4.2.3. Public procurement of innovation (PPI) as a tool for (C-)ITS

Thus, as stated in the P4ITS consortium (2016), “implementation of a new or significantly

 “European, national, regional or local programmes/strategies/policies supporting

 Innovation in the design and delivery of public services

Governance means action or manner of governing a state or an organisation (Oxford

Since ecosystem governance can be regarded as ‘agreements’, a ‘set of rules’ or ‘operating

Figure 9. Actors, ecosystems, stakeholders and the governance framework.

5.2. Literature review and relevant findings

Agerfalk, P.l. and Fitzgerald, B. (2008). Outsourcing to an unknown workforce: Exploring

Ahituv, N. (1989). Assessing the value of information. Problems and approaches,

Arend, R. J. (2013). The business model: Present and future—beyond a skeumorph.

Bahrami, H. and Evans, S. (1995). Flexible Re-Cycling and High-Technology

Basole, R.C. (2009). Visualization of interfirm relations in a converging mobile ecosystem.

C-ITS Platform. (2016). Final Report, pp. 14, 42, 127ff.

European Commission. (2007). COM(2007)799. Pre-commercial Procurement: Driving

European Commission. (2013). REGULATION (EU) No 549/2013 OF THE EUROPEAN

European Commission. (2014). DIRECTIVE 2014/24/EU OF THE EUROPEAN

European Commission. (2017). Public Procurement. Available:

European Commission. (2017b). Legal rules and implementation. Available:

European Commission. (2017c). COM(2017)572 final. COMMUNICATION FROM THE

European Commission. (2017d). Studies, data and expert groups. Available:

European Commission. (2017e). Innovation Procurement. Available:

European Commission. (2017f). Public Private Partnerships. Available:

European Parliament. (2017). Directorate-general for internal policies. Policy Department A:

Flak, L. S. and Rose, J. (2005). Stakeholder Governance: Adapting Stakeholder Theory to

Freeman, E. R. (1984). Strategic Management: A Stakeholder Approach.

Leviäkangas, P. (2009). Valuing meteorological information. Meteorological Applications, 16,

Leviäkangas, P. (2011). Building Value in ITS Services by Analysing Information Service

Lusch, R.F. (2010). Reframing Supply Chain Management: A Service-Dominant Logic

Merriam-Webster. (2018). Definition of Stakeholder by Merriam-Webster. Available:

Mäkinen, S and Dedehayir, Ö. (2012). Business Ecosystem Evolution and Strategic

Osterwalder, A. and Pigneur, Y. (2010). Business model generation: A handbook for

P4ITS consortium. (2016) - P4ITS - D6.2. - Final recommendations, 52 p. Available: