Innovation and Entrepreneurship for Engineers

A Presentation by Thomas W. Mason, Ph.D.

Professor of Economics & Director M.S. in Engineering Management Program
With the assistance of
Dr. Fred Berry, Associate Professor of Electrical Engineering and Dr. Robert Bunch,
Professor of Physics & Associate Director-Technology Assistance and Service Center
Rose-Hulman Institute of Technology

1999 NCIIA Annual Meeting

Washington, D.C.
March 11-13, 1999

INTRODUCTION: THE PROBLEM

By definition, engineers are or should be innovators. Their profession has always been
one focused on the development and application of new technologies. Yet, the education
of engineers has historically contained little preparation for the broader dimensions of
successful innovation, beyond the careful application of scientific knowledge in the
design process. It is established that the best designs are not always the commercially
successful ones. Commercial success requires that customers understand how a new
product meets their perceived needs and that they have a willingness and ability to buy it
at a price that is adequate. Moreover, the modern, cross-functional approaches to product
design require that engineers be able to communicate with representatives of a number of
business disciplines and integrate their contributions into the design process. Yet,
squeezing things like tools of market research and principles of marketing and
distribution and pricing and finance into an already crowded engineering curriculum
seems impossible. In fact, the rapid changes in technology which engineering graduates
will face make it difficult to prepare them adequately in traditional technical and general
education areas.

The path to resolving this dilemma is to integrate at least the basic principles of
entrepreneurship within the education of engineers and try to get them to experience
entrepreneurial thinking. Fortunately, a lot of the characteristics of successful
entrepreneurs are shared by successful engineers. Consider the following list of
entrepreneurial attributes:
Intelligence
Knowledge of the product/business
Courage
Tolerance of Uncertainty
Ability to manage risk
People skills
Communication skills.
Good 21st century engineers should have these same attributes. The challenge is to
develop them in a way that includes entrepreneurial experiences so that the characteristics
and some basic knowledge of entrepreneurship are part of engineers’ education.

VA453 THE ENTREPRENEUR

Over the past decade, Rose-Hulman Institute of Technology has been looking for ways to
integrate entrepreneurship in the education of its engineering, science and mathematics
graduates. This institution is a small, private and highly selective one. Its students have
outstanding academic credentials, and the school has stated that its mission is to provide
them with the best undergraduate engineering, science or mathematics education they
could receive. In the Eighties, Tom Mason developed an economics course titled The
Entrepreneur, which met part of the student’s liberal arts requirements and introduced
them to entrepreneurship.

As a result of the course, participants should be able to do the following:

Describe the role of the entrepreneur in society

Describe the importance of entrepreneurial behavior in organizations of all sizes

and types

Identify traits and behaviors needed for successful entrepreneurship

Use tools of economic analysis to analyze opportunities and efforts

Apply the knowledge of the basic aspects of a business plan

Communicate effectively in written and oral reports

Describe sources of capital, talent and other resources for entrepreneurship

Maintain a sense of fun and perspective about innovation and entrepreneurship

The objectives are achieved by working with the following topics:

The Framework of Entrepreneurship

Resource-based Analysis & Sustainable Competitive Advantages (SCA’s)

Personal Resources Needed

Selection & Analysis of Opportunities

Analysis of the Competitive Environment

 The Global Marketplace

Strategy Formulation

The Business Plan including marketing, sales, organization, operation & financing

Intrapreneurship

The class consists of traditional lecture and discussion and tests for about 60% to 70% of
the class time. Ten percent of the class time is spent on student-team led discussions of
case studies, which are basically critiques of business plans provided by the textbook
author. Another ten percent of the classes are devoted to outside speakers; typically
Rose-Hulman graduates at various levels of success as entrepreneurs. The remaining
class time is devoted to the development and presentation of business plans by student
teams. Tests (45%), short papers (20%), the business plan (20%) and class participation
(15%) determine grades.

The course has been quite successful in a number of respects.

*Topics provide opportunities to teach economics concepts.

*Students fulfill one liberal arts course requirement.

*Enrollment generally hits maximum of 30 students.

*Evaluations indicate high levels of enthusiasm for the course.

*Alumni, including entrepreneurs, have used and built upon the course.

There are also some disadvantages.

*We reach only about 60 students per year.

*The students lack business subject background.

*The 10-week quarter is short for the business plan experience.

*The course is separated from the rest of their curricula.

Overall, The Entrepreneur has been good for both the professor and the students. It has
allowed at least some of the students to learn more about this important issue and to see
that they really must be entrepreneurial. It has given a smaller number the start on
developing their own businesses. For example, two students were able to get bank
financing to start an internet-related business instead of going directly to one of several
lucrative employment possibilities. This company is now in its third year and employs
several other Rose-Hulman graduates now. Other students have gone to work in
traditional engineering entry jobs, but even they say the business perspective is enhancing
their careers. The professor has been able to see how much engineering and science
majors can absorb in a short time and to refine the materials and approach for others
including graduate students in the Master of Science in Engineering Management
Program.

THE INTEGRATED PROJECT FOR THE MSEM DEGREE

The Master of Science in Engineering Management Program began in 1995 at the Crane
Naval Surface Weapons Center primarily as a service to working technical professionals
in Central Indiana. Since then, courses have also been offered in Bloomington,
Indianapolis and Terre Haute, Indiana, and there are currently about 70 part-time and two
full-time students at one of the four sites. Among the objectives of the program were
desires for a purposeful integration of technological and management knowledge and the
fostering of an entrepreneurial perspective that included continuous learning and
application of new knowledge as a vital part of business success. The degree requires five
management core courses that are focused on the particular needs of technologically
based businesses along with five technical core courses. The technical core differs from
student to student, but most of them are including some special courses on such things as
the application of statistics to quality, environmental engineering and management,
software system design and specification and manufacturing issues for engineering
managers. As a capstone to the management and technical cores, each student is required
to do a two-quarter integrated project to pull together the technical and business
knowledge. Key features of these projects are that they provide the following:

-Hands on work in technology and entrepreneurship

-Emphasis on commercial success

-Integration of technical and management knowledge

-Application of independent efforts and teamwork

-Faculty in mentor/consultant/coach roles

-Evaluation by external efforts when feasible.

Most students find that the best way to fulfill this requirement is with a technological
innovation for which they develop a business plan. This framework is a natural for
putting technical and business issues together in a coherent way, and it provides essential
experience for those who have upper-level management ambitions. For example, even
the engineers in the civil service support of the U.S. Navy at Crane now must find ways
to compete with other bases in serving their military customers. Entrepreneurial thinking
combined with technical expertise not only aids the individual’s career, it enables the base
to show its unique capabilities and avoid the closings that are affecting others.

THE KAUFFMAN/LILLY ENTREPRENEURIAL INTERN PROGRAM

Because participants in the MSEM program have both experience in businesses and
courses in various management disciplines, they can really get into entrepreneurial
projects is a realistic way. For undergraduate engineering, science and math majors,
more creative approaches are needed to give them more intense exposure to the
challenges and rewards of making technological advances into commercial successes.
Thanks to the generosity of the Kauffman Foundation (supplemented recently with funds
from Lilly Endowment), Rose-Hulman has been able to give a dozen or so students
immersion in the process of making technology commercially successful for a small firm.
Each spring, students apply to work as entrepreneurial interns in small technologically
based companies, instead of taking the usual summer jobs. The firms who hire the
successful applicants only have to pay about half of their salaries with grant funds
picking up the remainder. In return for the subsidy, the CEO of the firm has some
mentoring responsibilities so that the intern has access to her or his experiences. The
intern is expected to use the technical education and skills they have acquired to
contribute to the firm. At the same time, they have reading and paper-writing
requirements designed to make them aware of the entrepreneurial principles being
applied in the business. The success of this program to date is best indicated by the fact
that most participants have chosen to go to work for small entrepreneurial companies and
have plans to one day start their own (if they have not already done so).

LILLY TECHNOLOGY AND ENTREPRENEURIAL DEVELOPMENT PROGRAM

Rose-Hulman’s desire to find ways to incorporate entrepreneurial experiences in its

students’ education is complementary with Indiana’s needs to retain technically educated
people and foster more knowledge-based businesses. Lilly Endowment has been
concerned about encouraging more Indiana residents to go to college and spend their
careers in the state. Rose-Hulman has always attracted Indiana students, but like
graduates of other technical institutions, most of them leave the state to begin their
careers. The technology and entrepreneurial development program was funded by Lilly
Endowment to show students more opportunities in the state. The program includes
funding of the entrepreneurial internships described above at small, high growth potential
firms within the state. It also provided for the marketing of Rose-Hulman student’s
technical skills to Indiana firms so that students could pursue Indiana business related
projects as part of their engineering education. This is intended to give them real world
exposure to engineering for the purpose of satisfying a customer. If all students have to
think about how new technology meets customer needs and desires that should cultivate
their abilities to pursue technological entrepreneurship. It is also giving them
appreciation for entrepreneurial firms where they get to see the whole process of
commercialization, rather than just one or two design tasks.
CENTER FOR TECHNOLOGICAL RESEARCH WITH INDUSTRY

Recently, Rose-Hulman has been able to take another step toward the integration of
entrepreneurship and engineering for all students. The federal Department of Energy
funded the construction of the John T. Myers Center for Technological Research with
Industry. While the Lilly Endowment grant provided the funding to work out the
pedagogy and initiate research projects on things like actual new products, this new
center provides flexible space that students can use for the projects. Being able to devote
space to these projects is extremely important in the real-world experience of applying
technology to solve business problems. Such efforts do not fit neatly into a once-a-week
lab period in space shared with other uses.

ENTREPRENEURIAL PERSPECTIVES IN ENGINEERING DESIGN COURSES

All of the engineering departments have increasingly been incorporating projects with
external sponsors into the curricula of their undergraduate students. However, just
getting hands-on experience with a real product and a real customer does not go far
enough in generating a truly entrepreneurial experience that will serve to inspire and
guide them in their later careers. A look at the current efforts will show how the
engineering courses have evolved to this point. Clearly, a lot of progress has been made
from the days of only textbook exposure or senior projects that only emphasize technical
feasibility. However, the next section will show that more can be done in getting the
students to think like entrepreneurs.

The electrical and computer engineering department at Rose-Hulman Institute of

Technology is an excellent case study. In response to external review and internal self-
study they have developed a four-quarter course sequence that begins in the spring of the
junior year and continues through the senior year. This sequence is meant to be a Total
Design Activity (TDA) that will allow students to experience the whole design cycle.
The current steps of the process are as follows:

-Gathering information on customer needs

-Working with the sponsor to develop a needs statement
-Using the needs statement to develop a Product Design Specification (PDS)
-Developing several conceptual designs
-Recommending one conceptual design for detail design work
-Development of detailed design in conjunction with the sponsor
-Construction and delivery of a prototype to the sponsor.

The types of products that might be taken through this sequence include the following:

Video Frame Grabbers

Robot Vision Systems
Ion Migration Spectrometer
Windows Based Monitoring of PLC’s
 Tester for Infrared Detectors

This is quite a lot for the design teams to accomplish. However, getting them to think
like real technological entrepreneurs will require even more. We hope that we can find a
way to integrate concepts from the course on The Entrepreneur into this 18-month
sequence. One solution might be to have students take the class while pursuing their
design sequence. However, there are some practical obstacles to doing this for several
hundred students per year and the course has broader objectives, such as teaching
economics concepts. Moreover, students have a way of compartmentalizing knowledge
when it is acquired in different course, and the goal is to get them to see the broader
entrepreneurial perspectives as part of being a 21st century engineer.

The ideal situation would be to expand the list of activities shown above for the 4-course
sequence. A more entrepreneurial approach may look like the following:

-Gathering information on customer needs

-Determining the value and trade-offs of the various customer needs

-Assessing the resources available and determining the likelihood of SCA’s

-Working with the sponsor to develop a needs statement that includes prices that
might be paid

-Assessing the competitive environment

-Using the needs statement and competitive assessment to develop a Product
Design Specification (PDS), a product strategy, a marketing strategy, and a target
price.

-Preparing an initial business plan

-Developing several conceptual designs and relating them to the evolving

business plan

-Recommending one conceptual design for detailed design work

-Development of detailed design and business plan in conjunction with the

sponsor

-Construction and delivery of a prototype and business plan to the sponsor.

-Evaluation of the product by the ultimate customer – i.e. will they buy adequate
volumes at the intended price?

This is an ambitious list of topics to grasp. However, our experience with integration of
entrepreneurship in engineering education in other ways has given us confidence. We
know that graduates will need to learn more and work with specialists in business fields.
We know that if they are to try to launch their own entrepreneurial venture they will need
far more than what is provided here. However, we also know that some knowledge about
topics of entrepreneurship and their relationship to successful innovation is much better
than none. Moreover, we know that we can give them the foundation to ask the right
questions and seek out the sources for information when they need it. More importantly,
they will have some experience with the challenge and excitement of technological
entrepreneurship.