Aplicacion De Onstar

A Multimethod Approach for Creating New Business Models: The General Motors OnStar Project
Vince Barabba
General Motors Corporation, Corporate Strategy and Knowledge Development, 400 Renaissance Center, P.O. Box 400, Detroit, Michigan 48265

Chet Huber • Fred Cooke
General Motors Corporation, OnStar Headquarters, 1400 Stephenson Highway, Troy, Michigan 48083

Nick Pudar
General MotorsCorporation, Corporate Strategy and Knowledge Development, 400 Renaissance Center, P.O. Box 400, Detroit, Michigan 48265

Jim Smith
General Motors Corporation, OnStar Headquarters, 1400 Stephenson Highway, Troy, Michigan 48083

Mark Paich
Decisio, 320 West Cheyenne Road, Colorado Springs, Colorado 80906 vince.barabba@gm.com • chet.huber@onstar.com • fred.cooke@onstar.com • nick.pudar@gm.com •jim.smith@onstar.com • m.paich@att.net

We developed a multimethod modeling approach to evaluate strategic alternatives for GM’s OnStar communications system. We used dynamic modeling to address some decisions GM faced in 1997, such as the company’s choice between incremental and aggressive marketing strategies for OnStar. We used an integrated simulation model for analyzing the new telematicsindustry, consisting of six sectors: customer acquisition, customer choice, alliances, customer service, financial dynamics, and dealer behavior. The modeling effort had important financial, organizational, and societal results. The OnStar business now has two million subscribers, an 80 percent market share of the emerging telematics market, and has been valued at between $4 and $10 billion. TheOnStar project set the stage for a broader GM initiative in service businesses that ultimately could yield billions in incremental earnings. Most important, OnStar has saved many lives that otherwise would have been lost in vehicle accidents. (Industries: communications. Transportation: automotive.)

G

eneral Motors (GM) assembled a project team consisting of the authors of this paper to developits OnStar telematics business. Telematics is the provision of communications services to cars, including crash notification, navigation, Internet access, and traffic information. We used a multimethod modeling approach to design the OnStar business model and to analyze the fundamental strategic decisions GM faced in 1997. We explain the modeling process and some

specifics of the model that we usedto analyze the strategic choices, and we present the financial, organizational, and social impacts the project created. OnStar is GM’s two-way vehicle communication system that provides a variety of services that enhance safety, security, entertainment, and productivity (Figure 1). The vehicle communicates with either an automated system, called the virtual advisor, or with a human advisor througha cell-phone connection. Two-way
0092-2102/02/3201/0020$05.00 1526-551X electronic ISSN

Interfaces, 2002 INFORMS Vol. 32, No. 1, January–February 2002, pp. 20–34

BARABBA ET AL. The General Motors OnStar Project

Figure 1: OnStar provides safety and security, Internet, and communications services.

communication enables safety and security services, such as crash notification, in whichthe call center is notified if the vehicle crashes or the airbag is deployed. A built-in global positioning system (GPS) precisely locates the vehicle and, if necessary, the call center dispatches emergency services to the accident scene. Two-way communication facilitates a variety of other services that provide information and enhance the user’s productivity. For example, users can obtainreal-time traffic information through the virtual advisor in most major cities. In addition, they can access content, such as the Wall Street Journal, and have it read to them. Many other services have either been implemented or are currently in development. OnStar began in 1994 as a promising communications technology. A GM engineering group proposed Project Beacon to test the application of advanced...