A Multimethod Approach for Creating New Business Models: The General Motors OnStar Project

Authors:
Vince Barabba;Chet Huber;Fred Cooke;Nick Pudar;Jim Smith;Mark Paich
Affiliations:
-;-;-;-;-;-
Venue:
Interfaces
Year:
2002

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Abstract

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 telematics industry, 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. The OnStar 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.