Lessons from Running GM’s OnStar
Before teaching at Harvard Business School, Chet Huber ran the General Motors telematics subsidiary OnStar. Huber discusses how the lessons he learned in the field mesh with the lessons he teaches to students.
Among the most popular elective courses at Harvard Business School is Building and Sustaining a Successful Enterprise (BSSE). Developed by Professor Clayton M. Christensen, the course teaches future leaders how to use well-researched academic theories to understand what happens when managing and growing a business, for better or for worse.
"I tell my students that they'll get a better framework in this 14-week course than I got in 14 years at the school of hard knocks."
Chester A. "Chet" Huber (HBS MBA '79) says the lessons of BSSE would have served him well as he launched and led OnStar as president and CEO for 14 years. A major subsidiary of General Motors, OnStar provides in-vehicle security, navigation, remote diagnostic, and emergency services to more than 6 million subscribers. Now a senior lecturer at HBS, Huber teaches the BSSE course, along with colleagues Stephen P. Kaurman and Derek C.M. van Bever, also senior lecturers with prior leadership experience in the private sector.
Huber recently sat down with Harvard Business School Working Knowledge to discuss how an automotive executive ended up teaching at Harvard, and how the lessons he learned at OnStar mesh with the lessons taught in BSSE.
"I tell my students that they'll get a better framework in this 14-week course than I got in 14 years at the school of hard knocks," Huber says. "General Motors spent a billion dollars on my tuition. That was the negative cash flow we invested in OnStar before it turned profitable."
The HBS Class of 1979 produced a raft of high-profile executives, including Meg Whitman, president and CEO of Hewlett-Packard; Dan Bricklin, co-creator of the VisiCalc spreadsheet program; John Thain, chairman and CEO of CIT Group; Elaine L. Chao, the 24th US Secretary of Labor; and, fortuitously, Clay Christensen, the Kim B. Clark Professor of Business Administration at HBS, and the world's foremost authority on disruptive innovation.
"Clay was always that guy in class who would say these off-the-wall things, and we'd say to ourselves, 'That was either really brilliant or really stupid,' but we couldn't figure out which one," Huber recalls. "And of course they were all brilliant. But unfortunately for most of us normal humans, we never wrote them down. We could have stolen his ideas back then, but we didn't know they'd become famous."
After graduation, Huber didn't expect their career paths to cross again. But several years later, Christensen would realize that the OnStar story was a great example of navigating innovation within a large company.
A hands-on introduction to disruptive innovation
After attending HBS on GM's dime, Huber returned to the company after graduation. He was running the commercial activities at the company's locomotive division when, in 1995, GM's vice chairman Harry Pearce asked him to head up a new initiative called Project Beacon.
The general idea was to marry wireless communications with automobiles; it was up to Huber to figure out what that meant. Primarily the GM leadership was looking to justify GM's earlier multibillion-dollar acquisitions of Hughes Aircraft (which included commercial satellites) and Electronic Data Systems (which specialized in information technology). "At some point there was financial pressure from Wall Street," Huber says. "Why did we own these things?"
According to Huber, he was chosen for the initiative because, as a locomotive guy, he had no preconceived notions about EDS, Hughes, or the automotive division. "I was a neutral third party, the human equivalent of Switzerland," he says.
Moreover, GM had recently sent Huber to the Industrial College of the Armed Forces, where he became the first private sector civilian to graduate from a program aimed at military leaders. There he had been schooled in the concept of VUCA: volatility, uncertainty, complexity, and ambiguity. Project Beacon had VUCA written all over it.
Huber's team spent a few weeks brainstorming ideas of what Project Beacon should be and do—a daunting task for a guy who knew little about the car business, let alone wireless technology. "The last time somebody had done something new with locomotives was 50 years before I was born, so I had never had this challenge of, oh, there are so many new things to do we don't know which to do next," Huber remembers. "But the technology business is seductively open-ended. It's like, what do you want to do next? We could do anything next!"
The possibilities seemed limitless for wireless entertainment and information systems, and the potential pitfalls were unforeseen. Had Huber decided to offer hundreds of fun applications for what would become Onstar, GM would surely have faced impossible competition from the eventual world of smartphones.
Fortunately, the team decided to focus Project Beacon on driver security and safety. Unknowingly, they were employing Christensen's now-famous "jobs-to-be-done" theory, which posits that customers essentially "hire" products to perform a particular job, and that it behooves companies to focus on the job rather than the product. For Project Beacon, which would become OnStar, that job was to provide peace of mind.
While Huber knew next to nothing about wireless technology when he took on Project Beacon, he did know that any successful wireless product-development cycle would have to move much, much faster than the usual automotive life cycle. "My suggestion very early on was that unless we could suspend those rules, then we shouldn't even bother with the business, because we'd end up selling eight-track tapes when everyone else was selling CDs," says Huber, noting that the antiquated nature of his analogy proves his point.
"General Motors spent a billion dollars on my tuition."
GM's leadership team heeded the suggestion, not only allowing OnStar to operate as a separate subsidiary, but also directing the engineering unit/group to disrupt its usual integration processes—all for a nascent uncertain venture.
The team's marketing techniques were disruptive, too. Whereas automotive marketers traditionally relied on television advertising, OnStar focused the bulk of its promotion on radio—featuring recordings of actual calls for help. Whereas individual car makes and models were usually marketed separately, Huber's team wanted OnStar to have its own distinct brand across the fleet. "The car brands in the beginning didn't want there to be an OnStar brand," Huber recalls. "The Cadillac guys initially said, 'OK, you can put this in our cars, but you won't be OnStar. You'll be "Cadillac Golden Touch" in a Cadillac.' And the Chevy guys said, 'Yeah, we like the idea, but you guys are now "Chevy Save Me" in a Chevy.' "
Had the CEO not been willing to play interference in OnStar's early years, it never would have succeeded, Huber maintains. Today, he shares that experience with MBA students to illustrate a key lesson: If you try to do something profoundly disruptive within a large company, the core business will probably smother it unless the CEO purposefully ensures otherwise.
"The BSSE course teaches that the CEO of a big company has a very special role to play in stimulating disruptive growth," he says. "The CEO needs not only to see that something's there, but also to put significant energy into it, even though there's no rational reason to do it from a scale standpoint, or from a this-will-work standpoint. If the CEO doesn't put in that effort then disruptive ventures don't stand a chance from a growth structure perspective."
OnStar also stayed alive because of the team's sustained belief in the importance of the job-to-be-done. "We start this business and we goof up, and every once in a while someone's hair catches on fire," Huber says. "But at the end of the day, what we realized was that if we figured this out, we could save people's lives."
Back to school
A few years into Huber's tenure as head of OnStar, one of his former employees, now a second-year student at HBS, enrolled in a relatively new course called Building and Sustaining a Successful Enterprise, taught by Christensen. The final paper required that students apply the business theories learned in class to the problems of a company. Naturally, the student wrote about OnStar.
Captivated by the paper, Christensen decided that OnStar's growing pains would be a great HBS teaching case for the BSSE course, so he called his former classmate, who talked to his boss, who agreed to cooperate with HBS. "OnStar: Not Your Father's GM" was updated every few years, evolving from a case about growing pains to a case about the problems inherent in sustaining that growth.
"If building a new enterprise is hard, then sustaining it is hard squared," Huber says. "That's an important lesson in BSSE."
For more than a decade, Huber visited Christensen's class twice a year, sitting anonymously in the back of the room while students tore OnStar apart, and then introducing himself to their chagrin. "I was their piņata," he says.
When Huber retired from GM in 2009, Christensen approached him again—this time to ask if he'd like to teach the BSSE course. Huber joined the HBS faculty in 2011, and the OnStar case remains a capstone of the course.
"Clay says he likes the case because there were a million reasons that OnStar shouldn't have been successful, and yet it made it through," Huber says.