LECTURE 1: INTRODUCTION

AND EXPECTATIONS
ENGN 3230: Engineering Innovation
24 July 2013
TODAY’S 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, let’s not dwell on dictionary definitions. However, to set the tone for the course, let’s 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
we’ll 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
• He’ll 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
• Keith’s 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
We’ll 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 week’s time, we’ll 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 don’t 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
TODAY’S 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
• Doesn’t 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 don’t
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, let’s look at
the “Cobb-Douglas
production function”
• As someone trained in the
“hard” sciences, I’m
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
=
α

(1−α)
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):139–165
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 α 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 it’s 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, that’s 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
won’t
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 can’t
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, 639–656.
PUNCTUATED EQUILIBRIUM IN EVOLUTION
There is a similar concept in evolutionary biology …
Source: Petter Bøckman; 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 don’t
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
– Don’t invite senior management (unless you really
can’t 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 group’s
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 don’t 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
• Let’s 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 week’s lecture
• Need 10 volunteers for discussion
leaders (counts as class participation);
come down and see me now

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