Inside GM’s startup incubator strategy

GM has launched a series of new subsidiaries in the past year tackling electrification, connectivity and even insurance — all part of the automaker’s aim to find value (and profits) beyond its traditional business of making, selling and financing vehicles. These startups, including numerous ones that will never make the cut, get their start under Vice President of Innovation Pam Fletcher’s watch.

Fletcher, who joined TechCrunch on June 9 at the virtual TC Sessions: Mobility 2021 event, runs a group of 170 people developing and launching startups with a total addressable market of about $1.3 trillion.

Today, about 19 companies are making their way through the incubator in hopes of joining recent GM startups like OnStar Guardian, OnStar Insurance, GM Defense and BrightDrop, the commercial electric vehicle delivery business that launched in January. Not everything will make it, Fletcher told the audience, noting “we add new things all the time.”

Launching any startup presents challenges. But launching multiple startups within a 113-year-old automaker that employs 155,000 people globally is another, more complex matter. The bar, which determines whether these startups are ever publicly launched, is specific and high. A GM startup has to be a new idea that can attract new customers and grow the total addressable market for the automaker, using existing assets and IP.

The Volt effect

The 2010 Chevrolet Volt is a noteworthy moment on the GM timeline. The vehicle marked the company’s first commercial push into electrification since the 1990s EV1 program. Fletcher, who was the chief engineer of the Chevy Volt propulsion system from 2008 to 2011, noted that the Volt was the beginning of a change within the automaker that eventually led to other commercial products including the all-electric Chevy Bolt, the hands-free driver assistance system Super Cruise and its current work on autonomous vehicle development with its subsidiary Cruise.

I don’t know that the Volt was a root exactly of what we’re seeing today. But I think it was definitely the start of a groundswell of really looking at, how do we inject technology that customers are excited about and care about quickly? How do we engage them deeply in the process? … Which we’ve always done … just, I think there was a climate there where the appetite was so strong with a certain group of customers for the technology that it allowed us to get really a front row seat with them, which was game changing for those of us on the frontlines. And obviously, there have been many programs that have had that in their own ways, but you really see that accelerating now with the advent of everything we’re doing in electrification and autonomous and a portfolio that is just emerging even to the notion of applying some of these great technologies to our new full size, truck and SUV programs. So it’s really broad, based across the company, which is exciting. (Timestamp: 4:56)

Fletcher explained how working to commercialize new technology changed how the company interacted with customers.

With new technologies, one, you get to a new customer base sometimes. So, really understanding what that customer is looking like and putting them at the center of everything. Also, different technologies have different development processes and timelines and pipelines for activity. So, it really allowed us to start to think about how to approach each step of our product development and customer engagement differently. And the Volt was an interesting time too, because that was the advent of new social media was really starting to become much more popular. And so we were very connected with those customers and a great customer base that gave us tremendous feedback very directly, you know, through at the time, what was a new channel. (Timestamp: 3:50)

Why it exists

GM has a long history of research and development, which begs the question of why not just find and build out the next new great idea from the lab? Fletcher explained that how the the R&D department and incubator fit together.

The innovation team has a particular commercial focus, where we are looking for opportunities to create and nurture development of new high-growth potential opportunities to allow GM to enter new markets, attract new customers, diversify revenue streams, and so there’s a very commercial aspect of that too. So the R&D team … we collaborate with them extensively where we need their their expertise, but this really gives us a place to also commercially incubate new opportunities. (Timestamp: 2:30)

How it starts

Fletcher wouldn’t reveal the innovation team’s budget, but she did lay out the process of how these startups go from idea to finally launching.

The approach we’re taking has a logic to it, a flow to it so that the funding makes sense. So for example, we start these things as very early concepts, and it’ll be a very small team … I mean, sometimes a person, a person and a half, to begin to nurture the idea, stretch it, develop it more as we work through some due diligence on the idea. Then if we get through that and it still seems like it’s promising we start to do the incubation and a lot of the empathy work with customers. Then we start adding the skills that it takes to do that work. And so, I would say it’s not unlike startups, in they have to earn their way. And as they earn their way, the funding comes in so far. That’s a process that’s worked well for us. (Timestamp: 7:34)

Fletcher noted their process is likely a similar to what other startups go through. However, these startups not only have to stand on their own, they need to fit within GM.

With each idea, there’s some basic questions to answer in the beginning. The first is, what’s the size of the opportunity? And is this something that makes sense for the potential customers and for General Motors? And then, ultimately, do we have a right to win? And that is very important. We spent a lot of time on that in the early stages.

And then we’d look at what will it take in terms of time and resources, whether that’s people or dollars, to actually commercialize what we’re talking about. Because obviously, we have an appetite to have some things that are near term. We don’t want everything to have a 10-year potential timeline before it’s commercialized. So we put all those factors together — that’s what I would call due diligence. The most important part of the due diligence, though, is do we believe we can come up with that novel solution that not that we say is novel, but the intended user says is novel. And if we get through that key criteria, then we decide to start applying more resources. (Timestamp: 9:02)

Near-term startups and those at the messy stage

Fletcher said the number of startups fluctuates, with ideas being constantly cycled through. OnStar Guardian, which takes the connected car OnStar capability that exists in GM brands and makes it available to anyone with a smartphone, is one of what Fletcher described as a long list of digital products the company is interested in. That doesn’t mean longer-term moonshots aren’t also on the agenda.

On the longer horizon, if you think about future mobility disruptions, aerial mobility is starting to gain some traction, and you’re starting to read more about it; that certainly has a longer time horizon. In that case, we very much believe in a multimodal future. And it takes a long time for those things to develop. So we think, now is the moment to really build out that vision and start to lay the foundation for what, I think is a tremendous opportunity to have true end-to-end mobility capability. (Timestamp: 13:30)

Fletcher said the company has been thinking about aerial mobility for a couple of years and “thoughts are coming together with more to come.”

If you want to be at the forefront of that (aerial mobility) you kind of need to participate at the time when it’s a little bit messy, which is right now. And that’s not unlike on the ground where autonomous technology was being worked aggressively by some great technologists, like our team at Cruise. That was a time when you had to work through how do you certify these vehicles? How do you ensure safety? All those things have to be developed simultaneously. So the time to get involved if you if you want to be part of the thought leadership is early when it’s at what I call the messy stage, which is kind of where it is right now. (Timestamp: 16:57)

Other messy stage ideas that GM is interested in? Fletcher said “smart cities.”

We really believe in the notion of smart cities, but that’s a complicated problem. And there are many stakeholders involved. And so that’s something we believe in and are spending time on developing some products that we think can be foundational to it. But given the breadth of the stakeholders involved, the way that funding occurs, you know, in the private sector or in the public sector and the intersection of those two, I would call that a fairly messy one, but very important one. (Timestamp: 18:00)

There’s some things that we’ve developed that we think have unique capabilities. I don’t know that I’m ready to talk about that yet today. We’ve got a focus at the moment around safety and security that I think can be novel. And you know, that’ll be again, another topic to maybe bring us together for a conversation in the future. (Timestamp: 19:10)

And we can’t forget about the opportunities that may arise out of GM’s plan to only produce electric vehicles by 2040. Fletcher talked about batteries, but not necessarily focused on second-life uses. “We believe that there’s a lot of value from the battery beyond its purpose in the vehicle,” she noted.

What does that mean? Fletcher said they’re focused on startups that bring additional weight of that assets to benefit the customer, potentially to benefit GM and that might require some collaboration between stakeholders that “don’t necessarily always play together.” Fletcher later explained that could mean involving governments, other automakers and utilities.