LECTURE 1: INTRODUCTION

AND EXPECTATIONS
ENGN 3230: Engineering Innovation
24 July 2013
TODAYS AGENDA
Introduction
The ENGN3230 team
Content & assessment
Code of conduct
Getting
started
What do we mean by innovation?
Generating ideas
Next steps
ACKNOWLEDGEMENT OF COUNTRY
We acknowledge and celebrate the First Australians on whose
traditional lands we meet, and pay our respects to the elders of
the Ngunnawal people past and present.
We recognise and respect the special place, culture and contribution of
Aboriginal and Torres Strait Islander peoples as the First Australians.
INNOVATION
Bureaucratic definition [1]: The implementation of a new or improved product, service, process,
marketing method or organisational method in business practices [1]
OK, lets not dwell on dictionary definitions. However, to set the tone for the course, lets be
clear about the difference between invention and innovation:
Sources: [1] Paraphrased from the OECD Oslo Manual, 3rd edition (2005) "The Measurement of Scientific and Technological Activities"
Invention
The creation of new
scientific or
technical ideas
Innovation
Turning those ideas
into money (or
social utility)
vs.
CONTEXTS FOR INNOVATION
Start-up
Small team
Multi-tasking, multi-skilled
personnel
Tactical focus
High risk tolerance
Large company or institution
Cast of hundreds/thousands
Extreme specialisation in personnel
Portfolio of existing projects and
new ventures
Corporate - and individual risk
tolerance often low
Most likely you will start your career in a larger company,
so we will examine perspectives around e.g.
Managing an R&D portfolio
Navigating stage-gate processes
However large companies grow from smaller ones, and
the entrepreneurial mindset is important to master, so
well be covering that aspect too
INTRODUCTIONS: THE ENGN3230 TEACHING TEAM
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Keith Finlayson - Convener
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BSc (Hons) ANU
Doctorate Heidelberg
CSIRO developed instrumentation to image/analyse surface
chemistry on an atomic scale
Australian Antarctic Division deployed remote sensing
technology to monitor climate change at 80km altitude
United Nations Environment Programme Polar View ESA
service providing earth observation data for environmental
management
CSIRO spin-off: ETP Pty Ltd (sold to SGE Pty Ltd)
MBA UNSW & Northwestern (exchange program)
Project Rush Hour (failed startup!)
McKinsey & Company
Strategy & innovation consulting practice
THE ENGN3230 TEAM & GUESTS
Liam Waldron
Most of you know Liam already!
Experience in managing big aerospace tech
projects & a range of startups
Hell be leading some of the tutorials
Some of the talent we will be drawing on this semester
Blazenka Klaric
Our very capable Student Admin person
Admin contact for this course
Xiang Gao
Masters in Finance ANU
Will lead tutorials in finance early in
semester
Gabriel Shaw
BSc(Hons) Marine Biology
Studying for his Masters of Environmental
Law
Keiths assistant
Hamish Hawthorn
CEO ATP Innovations Pty Ltd
Our man in Sydney
Will be doing a guest lecture on IP and we
may get him on Skype this afternoon for a
quick chat
Hamza Bandemra
PhD Candidate in RSEng
Will be coordinating your major project
work assessment later on in the semester
Bruce Bachenheimer
Clinical Prof of Entrepreneurship at Pace Uni
and previous Chair of MIT Entrepreneurship
Forum
Our man in New York
Periodic updates from Bruce
Pool of external advisors and mentors
People with commercial experience we
can draw on for your group work
ATP INNOVATION VIDEO
Well just watch a video showing you what Hamish does at ATP Innovation in
Sydney
Placeholder for youtube video:
Global Entrepreneurship: World Economic Forum
Report Overview
Hamish appears 2:20
WHERE TO FIND DETAILS ABOUT THE COURSE
The course objectives, content and assessment are summarised in the course
outline. This is available on the ENGN3230 Wattle site.
Make sure you have access to
the ENGN3230 Wattle site
If you are not enrolled, but
think you should be, go see
your student admin contact!
The Course outline can be
downloaded from the link at
the top of the Wattle site
COURSE ASSESSMENT
Assessment is a combination of course participation, case study, mid-semester
exam and a new venture project.
Assessment
item
Description and
detail of
assignment
Specific
requirements
Due Date Weighting (%)
Course
participation
In consultation
with their lecturer
or tutor, each
student will lead a
discussion in a
class, tutorial or
Wattle forum
Choose a set
topic (tutorial
questions or other
set topic) or
propose an
activity to lecturer;
(Presentations
should be kept to
max 5 mins.)
Sign up for an
activity slot in
your first tutorial
10%
Group case study Students will work
on an R&D
innovation case
study in groups of
3 - 5
2 page report and
participation in
on-line simulation
23 August,
4:00pm
15%
Mid-semester
exam
Numerical and
written questions
on the finance,
marketing & IP
(and all other
material covered
to date)
2 hour closed
book exam
Week of 2
September
35%
Total for course participation, group case study and mid-semester exam 60%
New Venture
Group Project
(teams of
maximum 10
students)
Write a succinct
business plan on
how to take your
new venture to
market
Maximum 10
page business
plan suitable for
presentation to
potential investors
11 October 2013 5-20% (group to
nominate
weighting)
Design and build
a prototype
product or service
to accompany
your business
plan
Prototype or
mock-up
hardware,
software or
website
To be available
for demonstration
in week of 21 Oct
5-30% (group to
nominate
weighting
Record a pitch
video to profile
your new venture
to potential
investors or
partners
Maximum 3
minute-long video
4pm 22
nd
October 5-15% (group to
nominate
weighting)
Total for New Venture Project 40%

First half of semester will give
you 60% of your assessment,
culminating in a mid-semester
exam
Remaining part of semester
will focus on a new venture
group project which will count
for 40% of your assessment
CLASS PARTICIPATION
Expect you to help your peers by doing
one or more of the following during
semester
Lead a discussion in class (around
10 slots per week, arranged week
prior with me)
Presentation in tutorials (around 5
slots per week in tutorials for next 5
weeks)
Lead/moderate a discussion on a
forum on Wattle
Run a mini-workshop for your
peers (e.g. how to use the 3D
printers; intro to Ruby on Rails; etc)
Something else (come and see me
in my consultation time on
Thursdays)
To get your contribution assessed, you
should fill out the course participation
template available on Wattle, and hand it
in to the faculty you presented in front of
Class participation is important.
INNOVATION CASE STUDY AND SIMULATION
In a couple of weeks time, well discuss a
case study in class (pre-reading required
come prepared)
You will form groups of 3-5 to complete
an on-line simulation based on the case
study, in which you have to invest in R&D
to increase the value of a company
After the simulation, your group will aslo
submit a 2 page writeup on your
innovation strategy, and what you learned
from the simulation
You will be assessed on both the outcome
of the simulation, and your writeup
Key dates:
Nominate your team for the
case study (max 5 per team)
by 4pm 14 August
Complete the simulation and
submit your write-up by 4 pm
23 August
More information in the
coming weeks
PURCHASING CASE STUDIES
You will need to purchase a range of case studies during the course
You will receive a link (anu email address) which will take you to a
website where you can register and purchase the course materials. You
will need to arrange payment by credit/debit card.
You should budget:
6 to 10 case studies at US$4 each
access to an online simulation at US$12.50 (per group)
Instructions will be on Wattle
While there is no requirement to purchase a textbook for the course, you will
need to purchase a range of case studies from HBS
THE NEW VENTURE PROJECT
The New Venture Project assessment is composed of 3 deliverables (described
below) which account for 40% of the course. Students will work in teams of 10
for the overall project. By 4pm 28 August, teams will complete and submit the
2 page template available on Wattle with the following information:
Team name
Membership of the team
General description of the New Venture
Nomination of the assessment weight the team wishes to allocate to each
team deliverable. The team may change the assessment weighting later in
the semester (but not after 30 October), but at a penalty of 3% to their
overall mark.
The lecturer (in consultation with a panel of judges) will assign a mark for each
team deliverable. The project team members will be responsible for assessing
the contributions of their peers, and providing this as feedback to the lecturer.
Based on this, the lecturer will assign individual marks for the new venture
project.
CODE OF PRACTICE
As an alum of the ANU, I expect the highest level of ethical conduct from you as
students - and young professionals.
The principle of appropriate scholarly practice
Any work by a student of the Australian National
University must be work:
that is original
that is produced for the purposes of a particular
assessment task
that gives appropriate acknowledgement of the ideas,
scholarship and intellectual property of others insofar
as these have been used
General understandings and specific techniques of
"appropriate acknowledgement" vary across cultures
and disciplines. Therefore:
it is the responsibility of everyone at the ANU to
uphold and promote fundamental principles of
quality and integrity in scholarly work
it is the responsibility of academic staff to promulgate,
explicitly and unambiguously, techniques of and
expectations about appropriate acknowledgement
within their area
it is the responsibility of students to ensure that they
understand the acknowledgement practices relevant
to every piece of work they submit for assessment
My (explicit) expectations
Do not plagiarise: do not use material from other
sources (illustrations, data, written text even
parts of sentences) and try to pass this work off as
your own
Provide proper citations & and explicitly
acknowledge the contributions of others (including
your peers)
In your written work, be especially careful to use
for any direct quotes (even parts of sentences)
from other work, and cite each & every instance
Use original sources i.e.
It is fine to use Wikipedia (a remarkably
accurate source, all things considered) to get
an overview and leads into a subject
but dont use Wikipedia as a source citation!
In exam conditions, follow the instructions of
invigilators/tutors/me to the letter:
No talking, passing notes
No copying
Pens down means just that instantly!
Source: https://policies.anu.edu.au/ppl/document/ANUP_000392
TODAYS AGENDA
Introduction
The ENGN3230 team
Content & assessment
Code of conduct
Getting
started
What do we mean by innovation?
Generating ideas
Next steps
THE NATURE OF ECONOMIC GROWTH
Economic
growth
Extensive Intensive
Increase the output by a
commensurate increase in
the inputs (e.g labour, raw
materials)
E.g. employ more
production line workers in
more factories to increase
the number of cars
produced
Doesnt drive increases in
per-capita output ...
Increase the output by
making more efficient use
of inputs
E.g. automate
manufacturing with
robotics, reducing need for
manual labour
Per capita output increases
(assuming labour is
reallocated in economy)
Economists dont
really understand how
growth works
but they like to think
about it having (at
least) two
components,
extensive and
intensive
Intensive growth,
driven by innovation, is
the long-term driver of
improvements in the
standard of living
PRODUCTION FUNCTIONS
You will hear the word productivity used a lot in the media in relation to the
state of the economy. Here is a superficial overview of how it is measured
Macro-economists have a
frightening tendency to
model very complex
systems with very simple
equations
As an example, lets look at
the Cobb-Douglas
production function
As someone trained in the
hard sciences, Im
personally very sceptical of
the predictive power of
these kinds of models
but at least we can use this
one to get a measure of
productivity and innovation
=

(1)
Economic output,
usually measured
in monetary terms
derived from
national accounts
e.g. Gross
Domestic Product
(GDP) figure
Measure of the size
of the labour force
e.g. equivalent
number of full time
workers
Sources: Cobb, C. W. and P. H. Douglas (1928) "A theory of production" American Economic Review 18(1):139165
Measure of the
amount of plant and
equipment (trucks,
computers, lathes,
3D printers etc) that
is used in production.
Usually measured in
$ terms (derived from
balance sheets of
companies)
Empirically derived
factor usually taken
as 0.3 in the US,
which is the share of
national income going
to capital
A is known as the Total
Factor Productivity (or when
derived from the somewhat
more complex, but similar
models, the Multi-Factor
Productivity)
Everything else is measured,
whereas A is derived. Think
of it as a proxy for the
employment of technology to
make capital and labour
more productive
PRODUCTIVITY AND TECHNOLOGY
Mulit-factor productivity index for Australia and GDP per capita growth rates for Britain and the US
Sources: The Economist, January 12, 2013 "Innovation pessimism: Has the ideas machine broken down?; Australian Bureau of Statistics (2012)
So, how are we doing,
productivity wise?
Maybe not so good
here in Australia
And over a longer time
perspective in the
historically leading
economies
not so crash hot,
either.
Brother and sister
(nascent) engineers
this is a Call to Arms!
GOVERNMENTS & INNOVATION
We happen to be in a government town, so its appropriate to talk about the role
that government plays in innovation.
Ways that
government tries
to stimulate
innovation
Funding public sector research
institutes e.g. CSIRO, applied
research programs at
Universities
Providing grants to the private
sector e.g. grants to start-ups
and car manufacturers
Investing in education to make
people that can innovate i.e.
you!
Tax incentives
Reducing friction i.e.
streamlining rules and
regulations
In general, thats a pretty
good investment
Widely accepted that public
sector R&D provides poorer
ROI than private sector R&D
Requires someone
generally a public servant
to pick a winner
The inclination of law-makers
is to legislate for more
legislation
Others?
Market bases incentives
generally a good idea (if not
rorted )
CREATIVE DESTRUCTION & DOMINANT DESIGN
Private enterprise is the real implementer of innovation, and theory of creative
destruction says entrepreneurs play an important role.
Disruption e.g.:
Breakthrough
technology
Shift in market
preferences
Resource
scarcity/discovery
Bang!
Explosion in diversity
e.g.:
Many new ventures
established
Dynamic evolution
Some will survive, others
wont
Dominant design
emerges accompanied
by:
Economies of scale
Specialisation
Organisational inertia &
resistance to change
Dis-economies of scale
Bang!
New disruption
Some of the
dinosaurs cant
adapt fast enough
They get eaten by
the mammals
and the cycle
repeats
For the origins of these ideas, look up:
Capitalism, Socialism & Democracy by Joseph Schumpeter (1942)
Utterback, J.M., Abernathy, W.J. (1975)
Sources: Utterback, J.M., Abernathy, W.J. (1975). A Dynamic Model of Process and Product Innovation, Omega, The Int. Jl
of Mgmt Sci., Vol. 3, No. 6, 639656.
PUNCTUATED EQUILIBRIUM IN EVOLUTION
There is a similar concept in evolutionary biology
Source: Petter Bckman; Wikipedia Commons licence
Ref: Punctuated Equilibria Stephen Jay Gould and Niles Eldredge in Paleobiology Vol 3 No 2 (1977)
TRADITIONAL BRAINSTORMING PROCESS
1. Get everyone in a room with a
whiteboard, post-it notes, etc.
2. Provide a general motivation for the
session: (Hey everyone, think of
something that will make us all rich!)
3. Encourage everyone to contribute
Start with a round robin where
everyone shares an idea (but
provide an option to pass)
Suspend criticism, and put
everything up on the board for
everyone to see
Aim to generate lots of ideas, and
try not to get bogged down on any
one issue
4. Group ideas for discussion on pros/cons
of each
5. (Prioritize ideas offline for further work)
Groups are too large, and have the
wrong mix and some people just dont
give a toss.
Without the proper business context,
idea generation can be way off the mark

A few pushy people tend to dominate

the conversation in large groups
Criticism is quite often a good thing!
Demotivating if after spending 8 hours
locked up in a brainstorming session
there is no clear idea of what happens
next
Potential problems
TIPS FOR IMPROVED BRAINSTORMING
1. Set the context
Place bounds on the set of acceptable ideas
Use questions to guide the discussion
Identify problems to solve before generating solutions
2. Select participants who can and will contribute
Dont invite senior management (unless you really
cant avoid it )
Get people who can talk about the problems/ the
customer/ the industry etc
Think about incentives (Slab of XXXX/bottle of Chanel
for the best idea?)
3. Leverage social norms
Break larger groups into sub-groups no bigger than
around 4-5 people
Put all the pushy people into the same group
Select the group facilitators carefully
4. Cull the list of ideas you will actively follow up before you
finish the session
5. Do not rely on just one brainstorming session - iterate
The role of the facilitator
Keep the group on task/to time
Ensure the quieter members of
the group get heard
Employ active-listening
Keep notes (or delegate note
keeping)
Summarise and synthesise in
conclusion
TASK FOR YOUR FIRST TUTORIAL
Your first tutorial exercise will involve generating a list of risks and potential
innovations that can address those risks.
30 min group exercise + 3 min presentation
Form into groups of 4-5 and
select an industry/
business/technology
Develop a list of
industry risks and
rank them
Generate potential
solutions for a subset
of the key risks
Decide on a set of
criteria to cull down
to identify focus
going forward
Free choice, e.g.:
Iron ore mining
LNG
Car manufacturers
Satellite communications
Railways
Electricity generators
Solar panel installers
Airlines
Use the groups
knowledge to generate
a list of risks e.g. rising
cost of skilled labour
Consider both upside
(opportunities) and
downside risks
(threats)
Rank the risks, e.g.
using an impact vs
probability framework:
Probability
I
m
p
a
c
t
Low High
Low
High

Choose one (or maybe

more) of the key risks,
and start working it
Keep a relatively open
mind on potential
solutions
Culling criteria could be:
Team has relevant
expertise
Limited competition
Likely payback within 2
years
Appoint one team
member to give a 3
minute presentation
to the class
Counts as class
participation
EXAMPLE BRAINSTORMING SESSION: TAXI INDUSTRY
Develop a list of industry risks
and rank them
Generate potential
solutions for a
subset of the key
risks
Decide on a set of
criteria to cull down
to identify focus
going forward
Perspective Examples of Leading Questions
Customer What is the biggest hassle of using our service?
Taxi Owner What technologies underlying our business are changing most rapidly?
1. Concerns about driver
safety/experience
2. Not all cars carry baby seats
3. Drivers dont have sufficient
local knowledge
4. Not sure if car is going to turn
up/be on time
5. Want to ride in luxury cars
Driverless cars?
Social media driver rating
system?
Iphone app with real-time
location of car with job?
Dedicated chauffer
service?
% of customers
S
p
e
n
d
Low High
Low
High

Must have a
prototype/trial solution in
3 months
Must be able be rolled
out in first territory in 6
months
Prefer not to load up the
balance sheet
Opex must be within 30%
of current
Lets set this as the priority to
investigate further with some
quick market research
Iterate in another session next
week !
EXAMPLE OF A START-UP WITH A SIMILAR VALUE PROPOSITION
Placeholder: go to web browser
NEXT STEPS
First tutorial Next week (hopefully!), brainstorming
sessions with Liam
Stay tuned for tutorial time slots and
venues
Next lecture Everyone download and read case for
discussion in next weeks lecture
Need 10 volunteers for discussion
leaders (counts as class participation);
come down and see me now