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

Author

Listed:
  • Vince Barabba

    (General Motors Corporation, Corporate Strategy and Knowledge Development, 400 Renaissance Center, P.O. Box 400, Detroit, Michigan 48265)

  • Chet Huber

    (General Motors Corporation, OnStar Headquarters, 1400 Stephenson Highway, Troy, Michigan 48083)

  • Fred Cooke

    (General Motors Corporation, OnStar Headquarters, 1400 Stephenson Highway, Troy, Michigan 48083)

  • Nick Pudar

    (General Motors Corporation, 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)

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.

Suggested Citation

  • Vince Barabba & Chet Huber & Fred Cooke & Nick Pudar & Jim Smith & Mark Paich, 2002. "A Multimethod Approach for Creating New Business Models: The General Motors OnStar Project," Interfaces, INFORMS, vol. 32(1), pages 20-34, February.
    • Handle: RePEc:inm:orinte:v:32:y:2002:i:1:p:20-34
    DOI: 10.1287/inte.32.1.20.18
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    References listed on IDEAS

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    3. Shafer, Scott M. & Smith, H. Jeff & Linder, Jane C., 2005. "The power of business models," Business Horizons, Elsevier, vol. 48(3), pages 199-207.
    4. Wang, Kuang-Cheng Andy & Liang, Wen-Jung & Chou, Pin-Shu, 2013. "Patent licensing under cost asymmetry among firms," Economic Modelling, Elsevier, vol. 31(C), pages 297-307.
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