That’s why I was so happy to come across this story about Ukoonto when I read the Globe & Mail over lunch. The article is about a young entrepreneur (and soon to be former sound engineer) named Hans Eich, who builds eco-friendly wooden building block toys from his St. Catherine’s based workshop. While I can’t say that I’ve tested the products myself yet, they look great – and from a wikinomics perspective what’s most interesting is how Hans has developed and promoted his company.

As the article notes, outside of an occasional trade show, Hans relies solely on Web 2.0 tools to spread the word about his products. When he started up, he had practically no money, and no big business plan – just an idea to create a toy company. He launched it under the domain of “my toy needs a name”, created a framework online, and asked people for ideas and feedback. From there, to quote Hans:

It was all about interacting with people and trying to set up meaningful relationships. The business evolved out of that.

If you go through the article, you can read about all the interesting lessons he’s learned – from use of things like YouTube and Twitter, to why it’s so much harder to create “fans” on Facebook than create groups, to backlash he received when he tried to push his products to hard in communities he joined, rather than really engaging with the people. To quote Hans again:

You have to listen first before they start listening to you. Traditional media is about telling, but Web 2.0 is all about conversations. It’s very much about letting go of control and engaging with people.

I’ll let you learn the rest from the Globe article, but I found it just an extraordinarly refreshing read – particularly when the three articles on the previous page were “EU to get call for stimulus package”, “Easy credit, public spending fuelled boom”, and “Lost auto jobs pegged at 15,000.” Amidst all the doom and gloom, it’s important to remember that there is an extraordinary opportunity out there for entrepeneurs that can create a good product they are passionate about, and learn to leverage social media and the web 2.0 in a compelling way. As Hans noted, given that most of the tools he’s leveraging are free, his out-of-pocket costs have basically been limited to website design costs. Think about how different it would have been if Hans tried to launch his company twenty years ago…

Click here to watch the video (or register for the complete case study).

This week’s edition of the Wikinomics Report Card will focus on General Motors Corporation (GM). In case you missed my first report card about Major League Baseball, you can find it here. Like last week, I will be evaluating GM on the Wikinomics principles of being open, peering, sharing, and acting globally.

Company Background: GM was founded in 1908 and is the world’s largest automaker and leader in global sales for the last 77 calendar years. It manufactures cars and trucks in 35 different countries under the brands Chevrolet, Buick, Cadillac, Pontiac, and many more. Under the strength of Alfred Sloan’s revolutionary corporate structure and leadership, GM was once one of the world’s most profitable companies peaking in the early 80’s with a U.S. market share of 45%. However, the legacy costs and complex accounting systems associated with the Sloan era have hindered GM’s efforts to create a more lean manufacturing process. Stiff foreign competition from companies like Toyota and poor strategic decisions like focusing on SUVs and light trucks in a rising fuel market has led GM to one of its weakest points in its history. Yesterday, its stock reached a 53-year low after Goldman Sachs changed it status to “sell”. GM is hoping that it can weather this storm long enough to introduce its new line of alternative energy vehicles like the Chevy Volt and reclaim some of its former glory.

Being Open: Traditionally, GM has been a very closed organization. Even internally, its different brands acted with a silo mentality. In the Alfred Sloan era, GM used espionage tactics to quell union uprisings and in the mid 20^th century, GM was blamed for killing American public transportation in the Great American Streetcar Scandal. In the 1990’s GM was accused of killing the electric car so that it could sell its high margin SUVs and trucks. GM had a fully functional electric car with the EV1, but scrapped the program entirely in 2003. Despite an offer of $1.9 million for the 78 EV1s already produced and a waiting list of customers, GM stripped the car of its recyclables and crushed them. However, in recent years, GM has made great strides in opening up. GM’s chairman and CEO Rich Wagoner admitted that the worst decision of his tenure was “axing the EV1 electric-car program and not putting the right resources into hybrids. It didn’t affect profitability, but it did affect image”. GM’s R&D chief Larry Burns said that “if we could turn back the hands of time, we could have had the Chevy Volt 10 years earlier.” Admitting this mistake is a big step in being open and acting with integrity in the new era. GM has started by being very public and transparent about its production plans for the Chevy Volt. Also, GM is one of the few car companies to have higher executives and “Car Czar” Bob Lutz blog on a regular basis. GM continues to act more openly, it should be able to repair its damaged reputation.

Grade: D+

Peering: Although peer production of automobiles is very difficult with today’s technology, GM has been able to leverage peering very well in its marketing efforts. From our paper on the 8 Net Gen Norms:

Net Geners are also helping develop advertising campaigns. GM invited consumers to a newly built Web site that offered video clips and simple editing tools they could use to create ads for the Chevy Tahoe SUV. The site gained online fame after environmentalists hijacked the site’s tools to build and post ads on the site condemning the Tahoe as an eco-unfriendly gas-guzzler. GM didn’t take ads down, which caused even more online buzz. Some pundits said GM was being foolhardy, but the numbers proved otherwise. The Web site quickly attracted more than 620,000 visitors, two-thirds of whom went on to visit Chevy.com. For three weeks running, the new site funneled more people to the Chevy site than either Google or Yahoo. Most importantly, sales of the Tahoe soared.

This hugely successful campaign generated a lot of buzz for GM at a very minimal cost. With GM’s negative operating margins, cutting down advertising expenses through peering could greatly reduce costs and improve the bottom line.

Grade: B+

Sharing: GM has done a great job involving itself in joint ventures and collaborative efforts over the last few years. GM is the majority stakeholder in the Korean automaker Daewoo, and has collaborated with many of the world’s auto manufacturers. This includes product, powertrain and purchasing collaborations with Suzuki Motor Corp. and Isuzu Motors Ltd. of Japan, advanced technology collaborations with Toyota Corporation and BMW AG of Germany and vehicle manufacturing ventures with several of the world’s automakers including Toyota, Suzuki, Shanghai Automotive Industry Corp. of China, AvtoVAZ of Russia, Renault SA of France, and most recently, UzAvtosanoa of Uzbekistan.

More importantly, GM has decided to outsource its battery development for its future cars like the Chevy Volt whereas Toyota has decided to develop their battery technology internally. Toyota’s closed attitude and lack of collaboration could eventually lead to a technology gap between itself and GM. While Toyota has profited from selling its superior hybrid software and technology, they may lose out to GM in the future if they remain on this path.

Grade: A-

Acting Globally: GM’s ceo Rich Wagoner expects that 75% of its car sales will be outside the U.S. within a decade. GM is the largest overseas automaker in China and is GM’s second largest market after the United States. After growing sales by 27% each year for 5 years, the GM’s China sales grew 19% last year. This success is largely due to the success of their joint venture between them and Shanghai Automotive. GM is building a new research centre in Shanghai focused on hybrid technology. This is GM’s first venture that is completely separate from Shanghai Automotive. The announcement coincided with the Chinese Government’s powerful National Development and Reform Commission disclosing that it would provide subsidies to alternative fuel vehicles under certain conditions. One major condition was that critical parts must be manufactured in China. While Toyota assembles its cars in China, the critical parts are manufactured and shipped from Japan. This should give GM a big head start in selling hybrid vehicles in China. If GM can repeat its success in China in other emerging markets, it may be able to keep up with Toyota’s sales in the future.

Grade: A-

Overall Verdict: GM is in a very deep hole right now. They are losing around $2 billion a month, and even the new initiatives outlined above won’t act as a quick fix. However, they are building quality cars once again, and seem to be making a lot of great moves. Since the stock is at a 53 year low, this (more like a year from now) may not be a bad time to invest in some GM stock. If the Chevy Volt goes into production on schedule in 2010, high gas prices should propel its sales, and more importantly GM’s corporate image. If 10 years from now, 75% of GM’s sales come from outside the U.S., and its legacy cost issues are solved, they could reclaim the crown from Toyota.

Overall Grade: B

What are your thoughts? Could you see yourself driving the Chevy Volt (above) in 2010?

But then it came time to deliver and suddenly the story changed. What had seemed to be the perfect case study on the benefits of collaboration (with nearly 700 planes sold to 50 different airlines) ground to a halt with a continuous stream of bad news. First promised to customers for May 2008, delivery has been pushed back to early 2009 and many expect even later.

So as we look back at this case study in collaboration, what do these delays tell us about this collaborative process, and in particular, where, if anywhere, does the process fall short?

We’re not the only ones asking these questions. Boeing’s greatest competitor, Airbus, is watching the process as well. The European company had planned to outsource more than 50% of its A350 production (Boeing outsourced over 70%) but has taken note of Boeing’s struggles and is ” studying carefully the lessons we should take on the 787 (as) obviously the supply chain is a concern. . . “
Let’s look at the reasons given for the delays:

• Early in 2007 Boeing warned that a worldwide shortage of fasteners that hold the plane’s fuselage, wing and tail sections together was slowing down assembly of the first test aircraft.
• Then in September 2007, the company announced that it, and its production partners, had run into difficulty acquiring other specialized components as well as in the integration of software and flight-systems control software.
• Moreover, the company was forced to rework parts of the plane produced by suppliers/partners after discovering that the initial partner work didn’t fit with what Boeing needed – much of which seems to be a case of misunderstanding requirements. This specific issue led to the reacquisition of parts of the project that had been outsourced, notably a major share of fuselage production initially done by Vought Aircraft Industries.

(New) 787 General Manager Pat Shanahan notes, “We thought we could modify that production system and accommodate the travelled work from our suppliers, and we were wrong.”

So what exactly does this mean for the collaborative process? I’ll preface this by saying this is just some early thoughts and that my hope is that by opening up this conversation we can flesh out where exactly the pain points are.

A)     Something. A global supply chain will always create consequences if parts are in short supply. But the mega-distributed supply chain that Boeing instituted saw it lose substantial control over second and third-tier suppliers. Subsequently, materials shortages or others production-related problems experienced by supply partners have a more significant impact on final assembly as they delay not one, but two stages of production.

B)      Nothing. Ultimately the measure of Boeing’s collaborative processes should be measured not only by final delivery but on the processes that led to the development of the new plane. Without a shared risk and financial model, Boeing would never have been able to get the 787 off the ground. Moreover, Boeing’s latest assembly reports highlight the fact that while parts and integration may still present issues, the second time around has proven a much smoother process than the first.

I’m putting my money on the latter. So long as the plane doesn’t fall out of the sky (or in this case, fails to takeoff), delays alone don’t undo the fact that Boeing has built a state-of-the-art composite aircraft while absorbing only a portion of the risk. If anything, the case proves that collaboration acts to increase what’s possible (though this isn’t to say that’s ground-breaking. A decade ago in business school we talked about cooperation and synergies, this just takes it to a technology-enabled other level.) What it reinforces, however, is that the real challenge isn’t so much design or idea-related collaboration but rather production-related coordination, and that as the number of nodes in the network expands, keeping each in synch grows ever more difficult.

Dell has an order tracking page – so, anxious to see the status of my new arrival, I’ve been checking it a couple of times a day just to see what’s up. But strangely nothing seemed to be moving – I kept seeing that my order was “in production”. But finally this morning I got an email telling me my order had shipped:

Of course, I decided to check into Dell’s order page right away and see if there was any more detailed status (I thought I might find a delivery time estimate from the courier company). But here’s what I saw when I logged in:

Hmm, my “just shipped” computer hadn’t been built yet. Strange. I thought the problem must be on my end. So I tried re-logging in, switching browsers, refreshing pages, checking the newspaper date to make sure I hadn’t fallen into a spinning black hole, but nope… Dell was apparently shipping me a computer that hadn’t been built yet.

Now, to be entirely fair, I checked it later today and the updated order tracking page now shows that my computer is on its way. So all is well. But given their terrific built-to-order model I was hoping to be more impressed by the window into Dell’s supply chain.

That said, I’m still on the edge of my seat, I can’t wait to receive my new machine!

But over the past two months the Seattle-based company has faced increasing struggles to finalize delivery of the 787. The latest setback will see planes delivered in November or December of 2008, rather than May 2008 as promised. The company has blamed the delays on slow delivery of components from suppliers and shortages of raw materials.

Evidently this highlights the downside of giving a larger share of control of the 787 project to suppliers. But does it discredit the company’s collaborative solution? Not at all. Having saved billions in development and prototype costs, as well as the evident sales advantage over Airbus, Boeing will still be well served by its shared-risk, shared-reward strategy with its suppliers. Moreover, the lessons learned in this phase of the 787 project (though perhaps costly with late-penalties applied) will be integral for future collaborative ventures , not only for Boeing but throughout the manufacturing industry.  

Turns out we may misjudged the time frame. Derek Elley, chief strategy officer at Ponoko says his new outfit will bring peer production to the realm of physical things today. Here’s how he describes the service:

You upload your designs to the Ponoko website and select the materials. Ponoko then makes and delivers the product or product parts. You can use our making process to prototype and perfect your design.

You can post your designs in the Ponoko showroom for people to view and buy. Ponoko can make the product and deliver it direct to the customer. Or it can deliver the product or product parts to you for assembly, finishing and delivery to the customer. And Ponoko makes sure everyone gets paid.

Imagine the boon to small and medium size businesses should this take off. Low-cost global manufacturing and peer-to-peer commerce from your living room. They’re looking for beta-users if you’re interested.