Huber argued that OnStar could turn competitors into partners, to the benefit of both, and keep competitive information secure. GM would realize significant economies of scale by signing up additional customers. Rivals would get a way to add customer value and enhance brand loyalty without having to take an enormous hit to their own bottom lines by developing their own systems. "Huber has created a unique partnership between the new business and the existing parent company, GM, which allows OnStar unpre-cedented autonomy to reach out to competitors and broaden its customer base," says Adrian Slywotzky of Mercer Management Consulting Inc.
Huber's mold-breaking strategy worked. Today, OnStar provides its service to Lexus, Audi, Isuzu, Acura, Volkswagen, and Subaru cars, in addition to GM's own lines. OnStar now controls 70% of the market. Ford folded its competing telematics business, outsourcing it to OnStar's distant competitor, ATX Technologies Inc. GM's service now has 2.5 million customers, and 2003 revenues were estimated at nearly $1 billion. "We are proud of our partnerships because it obviously means we've delivered on what we promised," Huber says.
When the Sony PlayStation burst onto the scene in 1994, it almost instantly grabbed 70% of the market from two well-entrenched incumbents, Nintendo and Sega. It was, by any measure, a remarkable debut, and it stemmed from a single insight: If the best and most exciting games were being developed for Sony's console, the gamers would surely follow. Seems obvious enough. But how to make sure those games were created for Sony? Nintendo and Sega leaned heavily on the internal development of games by staffers and on refurbished old hits. From the beginning, Sony wanted to be open to the best ideas, wherever they came from. So it used outside developers to produce most of its games, and even reached out to gamers themselves. "We didn't want outside developers to be peripheral to our business model," says Andrew House, an early PlayStation team member and executive vice president of Sony Computer Entertainment America. "We knew that the widest variety of content possible was the best way to build the largest consumer base possible."
C.K. Prahalad, professor at the University of Michigan, calls the strategy a "transformation of the value-creation process." In increasingly competitive environments, it's not enough to seek talent in the usual channels. Especially in the gaming industry, where users know what they like to play and often have the skills to create what they want, it's a strategic advantage to reach out to them for innovation.
Soon, the company was searching high and low for talent. In 1997, it launched a developer kit aimed at hobbyists. "We sent it to budding college developers who wanted to try their hands," House says. Ideas from those amateurs made their way into commercial games in Japan. Meanwhile, externally developed titles like Final Fantasy, Madden NFL Football, and Grand Theft Auto helped put Sony's second-generation console, the PlayStation 2, at the top of the heap in 2001. Sony also launched a Linux developer kit for just $199 in 2002. "It's our way of feeding the market for the future. Some of the first great games were developed by people at home in their garages. If we're not getting people involved and looking for opportunities very early on, we really are missing out," says House. The payoff for all this reaching out? In 2003, PS2 titles generated $80 million in revenue and included 9 of the top-10 U.S. games in December--all but one of them developed by outsiders.
China is the pot of gold for companies with global aspirations. Its billion-customer market and seemingly endless supply of cheap labor beckon seductively, yet the market seems always out of reach. Many have failed by trying to entice Chinese customers with brands to which they cannot relate, or with products they simply do not want. As a result, most foreign companies have turned simply to exploiting the cheap sourcing possibilities, exporting their finished goods right back to the West.
The Boston Consulting Group senior vice president George Stalk says that's a huge mistake. "If companies don't take advantage of developing the emerging local market, people will take the training and technology and simply become their biggest competitors," he says. "They'll be cannibalized by local versions of their very own products."
Stalk's Shanghai-based partner Jim Hemerling identifies General Motors as one company to avoid this trap by establishing its Buick cars as a coveted premium brand in China, then quickly moving to introduce successful mid-range and entry-level vehicles. Though GM currently controls just 10% of the Chinese market, ranking second among foreign automakers behind Volkswagen (with 30%), it has gotten there in just five years, while VW has played in the Chinese market for two decades.
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