Prize winning system dynamics study: GMs OnStar

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John Sterman
Senior Member
Posts: 117
Joined: Fri Mar 29, 2002 3:39 am

Prize winning system dynamics study: GMs OnStar

Post by John Sterman »

Many of you know that General Motors does a lot of excellent system
dynamics modeling work. You may not know that one of their system
dynamics studies won second prize in the prestigious Franz Edelman
competition, run by INFORMS. The Edelman award is given for the best
applications of operations research and management science methods to
important real-world problems (see
http://www.informs.org/Prizes/EdelmanPrize.html). The project,
designing the business model and strategy for GMs OnStar telematics
system, was done by a team including Vince Barabba, Nick Pudar, and
Mark Paich. A paper describing this terrific work was published in
INTERFACES earlier this year (see abstract below). This is a
terrific piece of integrative system dynamics, in which the SD
modeling was tightly linked to other valuable analytic tools.
Congratulations to Vince, Nick, Mark, and the whole GM OnStar team
for a great job.

John Sterman

Vince Barabba, Chet Huber, Fred Cooke, Nick Pudar, Jim Smith, and
Mark Paich (2002) "A multimethod approach for creating new business
models: the General Motors OnStar Project," INTERFACES 32:1 Jan 2002
pp:20-34.

ABSTRACT
From: John Sterman <jsterman@MIT.EDU>

We developed a multimethod modeling approach to evaluate strategic
alternatives for GMs OnStar communications system. We used dynamic
modeling to address some decisions GM faced in 1997, such as the
companys 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.
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