Fast Company

Detroit Muscle

Chet Huber of GM's OnStar has been working hard to connect automobile drivers to the outside world for seven years. His service has succeeded in ways he never expected -- and faced obstacles he never imagined.

Chet Huber remembers back to the days when he was surrounded by more than 500 Post-it notes. They stretched across his office walls, exhorting and scolding him. "Disconnected 911 calls?" read one. "Screens in the car?" read another. Each note was simple. But taken together, they represented a fiendishly complex map of Huber's long-term strategic agenda. Huber is the driving force behind OnStar, the high-profile service from General Motors that connects automobile drivers to the outside world. More than 2 million people now drive around in OnStar-equipped vehicles, and roughly 5,000 OnStar-outfitted cars roll off the assembly line each day. The service is standard on 34 out of 54 GM models for 2002, and Huber has persuaded Acura, Audi, Isuzu, Lexus, and Subaru to offer OnStar instead of building their own systems. Huber himself is a serious player in the high-tech world. He sits on the board of General Magic, a leader in voice-recognition technology in which GM has made a $15 million investment. He meets with Bill Gates. He travels to China in search of new markets.

None of which means that Huber is prepared to take a victory lap. Far from it. "The tyranny of this business is that today's distractions will become tomorrow's killer app," he says. "Every time I think I have a handle on the edges of this company, something gets added and -- holy cow! -- I realize that it isn't three dimensional, it's four dimensional."

On top of all of the long-term complexity -- Which services will customers want next? How can GM make the system sophisticated and still keep it simple? -- there is short-term pressure for results. Truth be told, OnStar has been better at getting attention than at generating profits. The plan is to break even this year and to deliver real profits in 2003. But it's been a long road to reach break-even status, and many car guys still find it hard to understand pricing in the high-tech subscriber world. (OnStar users get their first year for free. Then they choose from three packages, with monthly fees ranging from $17 to $70, along with prepaid cellular minutes.)

There's likely to be more experimentation with pricing as GM looks for the revenue-generation sweet spot. But there's no denying the hardheaded realities. "OnStar has to be a real business," insists GM president and CEO Rick Wagoner, a big Huber booster. "We need to have change in the cash drawer at the end of the day."

It is a classic challenge for these no-nonsense times. How do you market new-wave services to mainstream customers? How do you grow fast and still deliver plenty of profits? In short, can you be bold and businesslike, out of the box and by the book, disciplined and creative? "We're really at one of those inflection points," Huber says. "We're at that place where we're going from being a startup to being a big company. I don't think we're on an unavoidable path to success. Nothing is risk free. But we are going to be a big business."

The Insider-Outsider

Huber, 47, has one major advantage as he tries to build a solid, reliable company in a sector rocked by economic turmoil and failed promises: He is an insider-outsider at GM -- a company lifer who never worked in the guts of the company. He is a respected executive with enough ties to the establishment to get things done, but not so many that it dulls the imagination.

Back in 1995, OnStar (then code-named Project Beacon) was little more than a pipe dream of GM's top brass. Huber wasn't part of that circle. An engineer with a Harvard MBA, he'd spent his entire career working at the company's electromotive division in Chicago, a world away from GM's power center in Detroit. But he was a rising star. In August 1994, he was chosen to be the first civilian from GM to attend the Industrial College of the Armed Forces. "OnStar would have felt overwhelming if I hadn't gone through the strainer of war college," Huber says. "Every day, we were learning how to navigate and lead in a world where everything around us was white water."

In May 1995, one month away from returning to his job, Huber got a call from Harry Pearce, GM's legendary (and now-retired) vice chairman. Pearce was in charge of everything nonautomotive at the vast company. He handled a hodgepodge of businesses that included Hughes Electronics, GM's interest in EDS, and Huber's electromotive division. "Harry had this idea to bring together three big pieces of GM -- technology, mobile communications, and the automobile -- and leverage them into something that would connect us with our consumers," Huber remembers. What that "something" was and how it would come to life inside GM's bureaucracy were decidedly open questions. "I'll be honest," says CEO Wagoner, who is on the senior executive team that served as OnStar's internal venture capitalist. "There wasn't any huge, brilliant strategy."

Devising a strategy, brilliant or otherwise, was left to Huber, a midlevel executive who had no experience with high-tech gadgetry. "I was just a locomotive salesman," he says. What Huber did have was the right mix of skills and connections to make something happen. He was steeped in GM's Byzantine culture, but he was not a captive of it. Plus, he'd just finished studying at a place that trained admirals and generals to tackle the world's toughest problems. Wagoner puts it this way: "Chet was wired to think different."

As president, Huber made some unconventional moves from the start. First, he assembled a core team that embraced the insider-outsider dynamic. Fred Cooke, who recently retired as OnStar's vice president of commercial development, had started at the Allison engine division in the 1960s. Dave Acton, now executive director of global telematics, was a senior electrical engineer who had worked on Project Beacon. Meanwhile, Huber poached a key engineer, Walt Dorfstatter, from Ford's nascent program, code-named RESCU. To this core GM team, Huber added expertise from outside the company. (Nearly 60% of OnStar's employees aren't from the auto industry.) Bruce Radloff, OnStar's CTO, came on board from IBM in 1997. In 2000, Huber hired Rod Egdorff, who started out with Craig McCaw's pioneering cellular service before moving on to Sprint PCS, to take over OnStar's wireless business.

Next, Huber insisted that his project be an independent venture inside GM, free to operate with its own strategy, metrics, and culture. The initial plans had called for Project Beacon to be controlled by a three-way partnership between EDS, Hughes, and GM. But Huber thought that such a structure would make the project virtually impossible to manage. Over the years, many of Huber's key players have worried about their unit's elbow room inside GM. "Would we be given the freedom to pursue our dream?" wondered Radloff, who knew from his IBM days what it was like to innovate inside a huge company. "But Chet was true to his word. He went to battle for us and got tremendous support."

There was one last big organizing principle behind OnStar: Huber felt that the unit had to be free to operate at its own pace -- one that embraced the short product cycles of the consumer-electronics world, as opposed to the five-year product cycles of the auto business. "I needed to persuade a company that doesn't like risk or change to accept that we would be risking and changing a lot," Huber says. "I told them that if they made me conform to car cycles, we'd be selling eight-track tapes when our competitors would be selling CDs."

GM's brass signed up for the ride, including the fast pace. Huber then focused on the shop floor. He knew that full-fledged backing from headquarters didn't mean a thing if he didn't have support from the factories. The essence of OnStar, Huber believed, was that it had to operate like an extension of the car -- it had to be a seamless part of the driving experience. That meant working closely with engineers and assemblers to build a simple user interface and limit production costs.

Huber encouraged his outside recruits to work on the technologies behind the new service. But he relied on GM veteran Acton to manage the factory-installation project. Acton had grown up in GM's car divisions, and he was passionate about OnStar. But he knew how difficult it was going to be to get OnStar's technology (cost: $800 in 1996 but just over $100 today) into cars. "At GM, you often got mandates from the boss telling you that you had to add something new to the car," Acton says. "The problem was that there was rarely any money or extra people in the budget to make it happen."

Acton's solution? Put frontline champions (called OnStar resident engineers) in the 15 assembly plants that would install the system. These resident engineers would make the case for the technology on the shop floor -- and respond to the tactical concerns of the assembly lines. For example, just one year after Acton started working with the teams, the engineers had the idea to use the rearview mirror in certain car models as the OnStar delivery device. The idea reduced costs and maximized flexibility. "I knew that the plants wouldn't want any extra parts," Acton says. "And I couldn't affect quality on the line." Winning over GM's factories means winning a big victory in the marketplace. Today, thanks to its factory-installed status, OnStar adds close to 5,000 new subscribers a day.

Connecting With Customers

Huber's wins inside GM set the stage for a fight on the real battleground: the market. From the start, his goal was to create a mainstream service, which meant putting customers first and technology second. OnStar had never been the most cutting-edge or feature-rich wireless service on the market. "We didn't always go with the prevailing wisdom," he says. "We knew that if we were going to be mass market, we had to be simple and easy to use. OnStar had to feel like it was part of the car."

The two most obvious examples: OnStar's three-button interface and its reliance on voice commands. Using OnStar is as easy as choosing a color-coded button: A blue button activates the main system, a red button activates emergency services, a black button provides access to new services. From the beginning, OnStar unlocked car doors for people who had lost their keys (or locked them in the car). It dispatched help when an airbag deployed. It tracked down cars that had been stolen. The basic insight: To a mainstream customer base, safety and security mattered above all else.

In the past three years, as OnStar's subscriber base has grown from 200,000 to more than 2 million, the service has added an array of features, such as phone calls, its Virtual Advisor service, and remote-engine diagnostics. But Huber and his colleagues have also forced themselves to limit OnStar's features and to roll out new ones slowly. Even as its services expand, OnStar sticks to its second design principle: Voice speaks volumes with a mainstream audience. OnStar Personal Calling provides hands-free service that relies on a robust voice-recognition system (hence Huber's seat on the General Magic board). Utter the words "virtual advisor" in a growing number of OnStar-outfitted cars, and you're connected to real-time traffic and weather, sports, news, or stock quotes that you have preselected from your personal OnStar Web page. That information is delivered to you by voice through the vehicle's audio system.

Such devotion to simplicity means that OnStar has undeniable shortcomings -- flaws that press reviewers rarely fail to point out. For now, though, simplicity trumps virtuosity. Indeed, the defining feature of the OnStar service is its nationwide crew of "live advisors" -- actual human beings who come to the aid of subscribers with a push of OnStar's blue button. To Huber, there is no easier way to grasp OnStar's connection to customers than by visiting the Live Advisor Center in Troy, Michigan, about a half-mile from OnStar headquarters. In huge, cubicle-filled rooms, 500 reps field calls from subscribers. (There's a second large center in Charlotte, North Carolina.) In a typical month, OnStar advisors unlock 15,000 doors, find 375 stolen cars, and monitor 300 airbag deployments.

Critics have pounded OnStar for sticking with its call centers. They're costly, hard to scale, and so, well, undigital. But Huber maintains that they are a killer app. He says that they aren't just a way to deliver service, but also a powerful listening post into what mainstream customers might want next, as opposed to what the techies might want to offer. Matt Handlon, who runs the Michigan center, sits with an advisor at least once a week to listen to the voice of the customer. New OnStar employees visit once a month during their first year. Senior executives come in at least once a quarter. "We can put dancing holograms on the dashboard," says Huber. "We can do things that people haven't even dreamed of. That doesn't mean that our customers want those things."

Nor does it mean that Huber doesn't have far-out dreams of his own. In mid-March, some Michigan homes were outfitted for a project called OnStar@Home. They got "smart" thermostats, electronic doors, and smoke detectors. These in-home devices are linked to OnStar's in-car service as well as to handheld computers outside the vehicle. The goal? "To see what happens when you put this stuff together," says Ron Bellow, the GM executive overseeing the project. For example, if you say "welcome home" as you pull into your garage, OnStar could disarm your home-security system, unlock the door, turn on the lights, and even crank up the heat on a cold winter evening.

Huber and his team have traveled a long distance in seven years. OnStar has gone from being a pilot project to having more than 2 million customers, from being a working group to being a fast-growing business unit with 400 full-time employees, plus a cast of more than 1,000 call-center operators. But the next big challenge is to handle the pressures of fast growth, to add even more discipline to OnStar's operations without introducing bureaucracy and rigidity.

"We've got to put more structure behind the vision," says Don Butler, one of Huber's recruits from GM. Butler, a former GM brand manager, started out as executive director of OnStar's Virtual Advisor service. Now he is head of commercial development, a post left vacant after the retirement of OnStar pioneer Fred Cooke. At the same time, Butler adds, OnStar can't let the vision get fuzzy: "In the early days, it was easy to stick to the vision, because everyone was in on it."

That's less true today, which is why Huber works to maintain the feel of a small operation, even as OnStar gets huge. At his monthly staff meetings, Huber makes it a point to read favorite letters and emails from OnStar customers. Then there are the "Chat with Chet" sessions, informal gatherings where Huber takes the pulse of OnStar as well as the pulse of GM. In March, he invited GM's new head of North American operations, Gary Cowger, to his chat.

"The most important thing we can do right now is maintain what we all felt early on at OnStar," says Butler. "We all had our fingerprints on this business. We have to keep that direct connection."

Fara Warner (fwarner@fastcompany.com) is a Fast Company senior writer. For more articles on General Motors, visit our A-Z Fast Companies Directory.

Sidebar: Disciplined Imagination: Chet Huber's Road Map

OnStar has made impressive strides along a tough road because president Chet Huber has embraced disciplined imagination -- offering cutting-edge services to mass-market customers and pressing for growth without losing sight of profits. Here's his road map.

Innovate from the inside out. Radical innovation can happen inside big companies if you build a team that respects insiders and listens to outsiders. "Everyone sees that there's no opportunity to succeed if others aren't succeeding," Huber says. "You can't look good at your end of the boat if the other end is sinking."

Have the courage of your convictions. Staying true to its business plan and its technology strategy has kept OnStar on course. The basic insight: Put customers first and technology second. For example, despite carping from high-tech critics, OnStar has stuck with a simple three-button system that relies on voice commands.

Maintain your peripheral vision. Few sectors of the economy change as quickly as wireless communications. Huber's challenge has been to keep to his technology blueprint without overlooking the next game-changing technology. "You can't surrender to all the things you could do," Huber says. "But you also don't put them in a drawer and never look at them. Somewhere in that pile is something that you should be thinking about."

You gotta make 'em pay. Ultimately, Huber understands clearly that launching innovations is about generating revenue and profit. Getting subscribers to stick with and pay for OnStar has been one of his biggest challenges. While Huber says that more than 50% of OnStar users re-up after the first free year, analysts believe that the pay-up rate is lower. OnStar is working on new payment plans, with less reliance on flat monthly fees, to retain more paying subscribers.

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