ENGG4900

LECTURE NOTES

LECTURE 1: INTRODUCTION

WHAT IS ENGG4900?

ENGG4900 is designed to give you the knowledge needed to effect change and implement designs
solutions in the real world.

Identify barriers to technology uptake and work towards overcoming these through practical
awareness of: engineering economics, regulation, engineering ethics and the nature of engineering
businesses.

Learn how to undertake and interpret cost-benefit analyses, develop the skills required to
understand business decision- making and economic drivers relevant to engineering and investigate
key concepts required for ethical professional practice.

WHY?

- Engineering and innovation is done through projects.

- Projects require resources (cash and other).
- As an engineer, you will either have to present an argument to senior management to win
approval for your project, or you will be part of the team that decides if projects should be
approved.
- It is thus critical that you know how to draft a business case for projects.

PROJECTS

A project is a temporary endeavour to achieve one or more defined objectives. Most engineering
work is done through projects. Projects range in size:

- ‘Small’: selecting and installing new equipment, maintenance projects, equipment replacement,
software development.
- ‘Medium’: redesign and upgrade of a factory, business wide energy optimisation project,
software
- ‘Mega’: big infrastructure projects, new power station, new manufacturing facility

In a study of 431 industrial projects, it was found that the average project delivers 22% less value
(NPV) than was forecast when the project was funded. The risk of failure is greater for larger
projects. In a survey of 381 industrial megaprojects (>$1b), 65% of projects were classified as failures
because of either cost overruns (>25%), poor cost competitiveness (>25%), slips in execution
schedule (>25%), poor schedule competitiveness (>50%) or significantly reduced production in year 2
of operations. EXAMPLE: Clem Jones Tunnel

PROJECT INVESTMENT DECISION PROCESS

Working through the following steps ensure that there is a decrease in uncertainty and risk as well as
an increase in investment, definition and accuracy.

1. Scoping study: What could it be?

a. Interim Investment Decision
2. Pre-Feasibility: What should it be? Options, A, B, C, D
a. Interim Investment Decision
 3. Feasibility Study: What will it be?
a. Financial Investment Decision (FID)
b. Project Commitment
4. Project Delivery: Deliver the project.
a. Start-Up Decision
5. Operations: extract the value.
a. Closure Decision
6. Closure.

ENGG4900 LEARNING OBJECTIVES

1. Develop a business case for a project (start-up), incorporating key aspects that influence
critical decision-gates.
2. Understand and critique your roles and responsibilities as a professional engineering working
in projects.
3. Perform a financial analysis of a project proposal.
4. Identify, assess, and treat strategic business risks.
5. Consider the role of sustainability in business decision making.
6. Practice working effective as a team in a challenge/uncertain environment.

LECTURE 2: START UPS

WHY DO START UPS FAIL?

- Ran out of cash

- Got Outcompeted
- Poor product
- Not the right team
- Ignore customers
- Pricing/cost issues
- No market need
- Poor marketing
- Lack of a good business model
- Product mis-timed

DESIGN THINKING

- Both an ideology and a process

- Concerned with solving complex problems
- In a highly user-centric way
- Mindset is above all

BENEFITS

- Help you to problem solve

better, from the context of the
problem
- Foster innovation and
teamwork
- Secure a competitive
advantage
DESIGN THINKING PROCESS

1. Empathise: Main Techniques (Empathy Map)

- Observe: View users and their behaviours in the context of their lives (in their natural
environment)
- Engage: Interact with and interview users through both scheduled and short ‘intercept’
encounters
- Immerse: Experience what they experience for a mile or two (walk in their shoes)
2. Define: (Persona Profile)
- Customer Journey
- User person
- Reframe challenge based on new insights; get to a problem statement (UPI statement)
o UPI: Who is the user we want to work for, what problem are they facing that we could help
to solve and what positive and measurable impact the solution of this problem would have
in their lives.
 How can we improve older people living in rural communities in Australia by addressing
the mental health issues they face? Solving this problem, will have the positive impact
of reducing isolation, mental breakdowns and improving their overall quality of life.
3. Ideate:
- Suspend judgement
- Be bold
- Follow the learnings
- Explore other areas and fields
- Broad search for solution (as many possibilities as you can come up with)
- Go beyond rational thinking

BEST TOOLS FOR PHASES

Empathize: Typeform, Zoom, Creatlr

Define: Smaply, Userforge, MakeMyPersona
Ideate: SessionLab, Stormboard, IdeaFlip
Prototype: Boords, Mockingbird, POP
Test: UserTesting, HotJar, PingPong
For the complete process: Sprintbase, InVision, Mural, Miro

LECTURE 3: BUSINESS MODEL CANVAS

BUILDING THE BUSINESS MODEL CANVAS

1. Customer Segment
- For whom are we creating value?
- Who are our most important customers?
o Mass market
o Niche market
o Segmented
o Diversified
o Multi-sided platform

2. Value Propositions
- What value do we deliver to the customer?
- Which one of our customer’s problems are we helping to solve?
- What bundles of products and services are we offering to each Customer Segment?
- Which customer needs are we satisfying?
o Newness
o Performance
o Customisation
o ‘Getting the job done’
o Design
o Brand/status
o Price
o Cost reduction
o Accessibility
o Convenience/usability

3. Distribution Channels
- How do you reach your customers?
o Direct: sales force, web sales.
o Indirect: own stores, partner stores, wholesaler.

4. Customer Relationships
- Very important
o Personal
o Dedicated personal assistance.
o Self service
o Automated services
o Communities
5. Revenue Stream
- For what value are our customers really willing to pay?
- For what do they currently pay?
- How are they currently paying?
- How would they prefer to pay?
- How much does each revenue stream contribute to overall revenue?
o Types: asset sale, usage fee, subscription fees, lending/renting/leasing, licensing, brokerage
fees, advertising
 o Fixed Pricing: list price, product feature dependent, customer segment dependent, volume
dependent.
o Dynamic Pricing: Negotiation (bargaining), yield management, real time market.

6. Key Resources
- What key resources do our value propositions require?
- Our distribution channels?
- Customer Relationships?
- Revenue Streams?
o Types of resources: physical, intellectual (copyrights, data and brand patents), human and
financial.

7. Key Activities
- What key activities do our value propositions require?
- Our distribution channels.
- Customer Relationships?
- Revenue Streams?
o Categories: Production, problem solving and platform/network.

8. Key Partners
- Who are our Key Partners?
- Who are our key suppliers?
- Which Key resources are we acquiring from partners?
- Which Key Activities do partners perform?
o Motivations for Partnerships: Optimisation and economy, reduction of risk and uncertainty
and acquisition of particular resources and activities

9. Cost Structure
- What are the most important costs inherent in our business model?
- Which Key Resources are most expensive?
- Which Key Activities are most expensive?
o Is your business more cost driven (leanest cost structure, low price value proposition,
maximum automation, extensive outsourcing)
o Is your business more value driven (focused on value creation, premium value proposition)
o Sample Characteristics: fixed costs (salaries, rents, utilities), variable cost, economies of
scale, economies of scope.

PROTOTYPING

1. Focus on the business model

2. Don’t fall in love with your first model
3. Iterate rapidly and test your models early
- Next Steps:
o Start the next iteration.
o Trial a model where you give away your value proposition for free.
o Consider successful business models in other industries.