High Tech Historical Primer

Engineering Degree Program

Renaissance Entrepreneur

Corrections or additions?

This article by Phyllis B. Maguire was published in U.S. 1 Newspaper

on July 22, 1998. All rights reserved.

Finally, Princeton Gets Cozy with Business

In the early days of Silicon Valley, young companies

were able to leverage the academic richness of California’s

universities

into entrepreneurial success. In contrast, Princeton University

avoided

potentially entangling relationships with commercial enterprises.

"I think they ran up against the belief that business

relationships

would distort the academic focus Princeton held as its paradigm at

that time," says Ed Zschau, a Harvard Business School professor

and former United States Congressman who is now visiting professor

at Princeton.

That’s changing now. When Zschau addressed a technology forum last

month, staged at Princeton University as a photo op for Governor

Christie

Whitman, he likened the intellectual vibrancy of the Princeton

Corridor

to northern California’s famed technology territory. He admitted later

that his statement was more of a futuristic statement than present

fact. "But I’ve always felt that if you point to center field,

you just might hit a ball over the wall," says Zschau. "New

Jersey — with the Princeton area in particular, and other

universities

within a 50-mile radius — has all the makings of an

enterprise-rich,

high tech environment."

Nurturing that environment, as was evident at the forum, is the

gathering

focus for state government as well as for the business and academic

communities. The state has just upped the ante by more than

quintupling

funds provided for technology transfer: the licensing of university

patents and trademarks to outside companies.

And Princeton University has taken a new business-friendly stance.

It encourages the transfer of technology, and it has set up a master’s

in engineering program — not a "business" degree —

but the next thing to it, because candidates can focus on engineering

management. Now the corridor’s corporations can dangle this degree

in front of their prospective recruits.

At the forum, Governor Christie Whitman announced $8.5 million in

new grants for technology education to New Jersey primary schools.

Last week she announced $5 million in technology transfer money for

the New Jersey Commission on Science and Technology, a huge increase

over the $600,000 allotted for previous years.

Sharing the podium that June morning were scientists and industry

leaders — and Ed Zschau (E-mail: ezschau@hbs.edu). A

charismatic speaker and entrepreneur, Zschau will reprise his course

on high tech entrepreneurship at Princeton both semesters this coming

year and is one of the luminaries contributing to the new Master of

Engineering program. At the forum, it was Zschau, a veteran of Silicon

Valley academia, enterprise, and politics, who delivered the day’s

most enticing message, about how Princeton can grow to be a Silicon

Valley.

Top Of Page
High Tech Historical Primer

Serendipity, Zschau points out, was certainly at play

in Silicon Valley. "The exploitation of the transistor was the

first generation," he says. "Were it not for the fact that

William Shockley, one of the transistor’s inventors, had a mother

living in Palo Alto, there is a distinct possibility Shockley Labs

would have been located in Murray Hill." But happenstance got

a boost from other factors, like industrial environment — or the

lack thereof. "The industrial setting on the East Coast was

characterized

by large companies like RCA, General Electric, and Bell Labs. People

in northern California didn’t have big companies to work for, so the

setting was right for small start-ups."

And Silicon Valley had its visionaries. Zschau singles out Frederick

Terman, dean of engineering at Stanford University in 1944 and its

provost from 1954 to 1965. "Terman believed the real benefit of

being trained as an engineer lay in inventing new products and

creating

new companies," says Zschau. "He personally encouraged Dave

Packard and Bill Hewlett to start their company there — and he

convinced Stanford to allocate land for an industrial park, which

became the site of Hewlett Packard and many other companies."

Terman also encouraged Princeton to promote similar measures.

But, says Zschau, perhaps due to Princeton’s desire for academic

freedom,

the university was slow to participate in the licensing of its patents

and trademarks, an arrangement which, according to Zschau, now reaps

$50 million annually for Stanford, with Berkeley receiving only

slightly

less. "MIT, Harvard, the University of Chicago — there are

many examples," he says. "One could argue that Austin became

a high-tech center as a direct result of the role played by the

University

of Texas and its local business community. Universities that don’t

capitalize on what they create on campus miss out on the opportunity

to learn — and on financial returns."

Princeton has subsequently been playing catch-up with the

encouragement

of James Wei, who became dean of engineering in 1991 after decades

of teaching and administrative positions at MIT. Rutgers has been

even more aggressive, licensing about 225 patents to 150 companies

and 27 startups, compared to Princeton’s 100 patents licensed to over

25 companies. But, Zschau points out, the synergy of universities

and industry through tech transfer is not limited to economics; while

intellectual property gets seeded throughout a surrounding area, so

does personnel.

Last month’s technology education forum at Princeton’s Engineering

Quad showcased this principle. Among the New Jersey-based companies

were several licensees of technology developed at Princeton and

Rutgers

Universities. Universal Display Corporation in Princeton exhibited

its organic light-emitting diode (OLED) (U.S. 1, February 25, 1998),

while other displays included a virtual endoscopy system from Siemens

Research Center on College Road East; and a prosthetic hand created

through a joint venture between the Somerset-based Nian-Crae Inc.,

and Rutgers’ Biomedical Engineering Department.

Also on display were educational software from Trenton’s Productivity

Works Inc.; interactive products from Jersey Cow Software Co. Inc.

in Franklin Park, and the imaging and sensing technology of Sensors

Unlimited Inc. in Princeton, a licensee of the university’s POEM

(Photonics

and Optoelectronic Materials) Center. Highlighted too were the

outreach

and educational efforts of Princeton’s Center for Ultrafast Laser

Applications, the Princeton Materials Institute, and the Princeton

Plasma Physics Lab.

"New Jersey and its schools have to make a concerted effort to

retain its people, so they’ll build businesses here rather than in

Austin or Boston or Palo Alto," Zschau says. "Over time that

could create a very exciting setting."

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Engineering Degree Program

Fostering that type of relationship is a major impetus

behind the formation of the Master of Engineering program. "The

university has historically been, and will continue to be, a school

for PhDs," says Stuart C. Schwartz, professor of electrical

engineering

and the program’s director. "But the master program is in response

to other perceived needs." One of those is the need of engineers

for advanced training in applied technology. "This is for

candidates

who don’t intend to teach or do research," Schwartz continues.

"The program is for engineers who want to manufacture, design,

and prototype."

But the program also provides an effective recruiting tool for local

companies. Although the eight required courses can be completed by

full-time students in one year, the degree will be available —

another innovation — as a two-year, part-time program. Full-time

tuition is $23,820 this year. Presumably, the two-year program will

cost about the same but officials have not yet fastened on a firm

figure.

"Details of the tuition are still being worked out," says

Sandra Mawhinney, associate dean of the Graduate School. "If

students

are self-paid and show financial need, limited fellowship funds are

available on a restricted basis. We don’t want to restrict the program

to company-sponsored or wealthy students."

The part-time option should be an attractive alternative for high-tech

employees and for firms importing talent to the Princeton area. Says

Zschau: "The courses being offered through the master program

increase the likelihood of candidates starting a business close by,

rather than joining a company across the country and having an idea

occur to them there."

The program is also designed, says Joseph Montemarano, director of

industrial liaison for the POEM Center and the Princeton Materials

Institute, to improve "the ability of engineers to analyze their

options. As they develop technology, we want them to at least

understand

what they’re giving up. In some cases, very good technologies don’t

move forward because the people creating them don’t want to give up

control. Fifty percent of a big number is better than 100 percent

of nothing, and that’s a calculation we want engineers to be exposed

to."

The engineering master’s will be available in several permutations.

A candidate can specialize in any of the five engineering departments

— electrical, computer science, chemical, mechanical and

aerospace,

and civil engineering and operations research — taking six

technical

courses in that discipline, with two non-technical courses. Within

departments, more topical curricula can be structured for financial

engineering, telecommunications and information networks, structural

engineering, and photonics.

And the degree will also be available to those who don’t

elect a department specialty. A master’s in engineering management

will feature the same technical component that distinguishes the

program

from standard MBAs, but only four technical courses will be required,

with four non-technical ones rounding out the degree. One on

engineering

leadership will be taught by Norman Augustine, former CEO of Lockheed

Martin Marietta and author of "Augustine’s Laws." Another

non-technical course available to master’s candidates, as well as

to senior engineering undergraduates, will be Ed Zschau’s.

Top Of Page
Renaissance Entrepreneur

His career, laughs Zschau, who is now 58, has been a checkered one,

and he amply credits different people and a fascinating roster of

opportunities. Zschau (whose name rhymes with "how" but starts

with the "sh" sound) was raised in Omaha, Nebraska where,

"we had basements as homes do in New Jersey, and our basement,

like a lot of other ones, had a workshop," he recalls. "My

father was trained as an electrical engineer, so even before I entered

first grade, we were building radios and electric motors. I became

a ham radio operator and got very interested in science." His

hero growing up was Albert Einstein, "so it was quite natural

for me to come back to where Einstein had lived and worked."

After entering Princeton in 1957, says Zschau, "something happened

— reality struck. There were students in my physics classes who

were much more brilliant than I was, so I realized I could become

a second-rate physicist or branch out into something else." He

decided to pursue a bachelor’s in philosophy of science, combining

physics with a more liberal arts’ approach and coming under the

tutelage

of Carl Hempel, "a world-renowned philosopher and my thesis

advisor

who had a big impact on my life." Almost 40 years later, Zschau

continues to applaud the breadth and flexibility of his undergraduate

alma mater.

"Princeton was a very fortunate choice for me," he says.

"I

had also been accepted at the California Institute of Technology in

Pasadena where I wouldn’t have had the opportunity to get out of

science.

Instead of being held hostage to something I wasn’t really good at,

I was able here with Professor Hempel to put together something that

really worked for me."

Graduating in 1961, his next stop was supposed to be the Navy’s

Officer

Candidate School, but Zschau was landlocked with a broken leg suffered

while playing rugby his senior year. Instead, he headed west for a

Stanford MBA and a PhD in business administration. He spent five years

teaching, one at Harvard Business School and four at Stanford Business

School where he eventually co-chaired its business-policy department,

before deciding it was time to leave the classroom behind.

"It’s like learning to ride a bike," he says, comparing

running

a business to studying how-to in business school. "Someone can

tell you how to do it, but you have to get on and learn. Until you’ve

faced business challenges, particularly the interpersonal ones posed

by vendors and customers, negotiating transactions and hiring

employees,

it’s hard to learn how to make those decisions. I try to help students

appreciate the nuances, but it’s vicarious."

He stopped teaching in 1968 to found System Industries Inc., a

computer

products company in Silicon Valley before the area’s designation had

even been coined. "It was the year Intel was founded, itself a

spinoff from Fairchild Semiconductor which is now viewed as the

patriarch

of the Silicon Valley family," Zschau explains. "Apple

Computers

was still several years away, and Silicon Valley hadn’t yet become

the phenomenon it was going to be."

Making "a bunch of mistakes" in his new venture, an essential

rite of passage for first-time entrepreneurs, Zschau realized emerging

firms were being hobbled by a tax code that placed a prohibitive 50

percent capital-gains tax on investment earnings. Working as a member

of the American Electronics Association, he helped draft the

Investment

Incentive Act of 1978 which reduced capital-gains to 28 percent,

paving

the way for billions of venture capital investment dollars for

high-tech

firms. It also paved the way for Mr. Zschau, now interested in public

policy, to go to Washington.

Elected to the House of Representatives in 1982 from California’s

12th District, the heart of Silicon Valley, Zschau was re-elected

two years later but lost a Senate bid in 1986 to incumbent Alan

Cranston.

Undeterred, he became general partner in the Silicon Valley office

of the Los Angeles-based Brentwood Associates, a venture capital

group.

He then became CEO of Censtor Corporation, a Brentwood capitalization

that developed advanced magnetic recording components, before big

business called. He left Censtor in 1993, and became general manager

of IBM’s storage-systems division in San Jose.

"I learned a lot from that experience," Zschau says, "but

it is true I find starting companies more exciting than running them,

and building companies rather than re-sizing them." He returned

to Harvard Business School in 1996 and met Princeton professor

Schwartz

in 1997, who wanted Zschau to offer his high tech entrepreneurship

course if 15 engineering seniors could be interested. Instead, 99

applied, and last year’s fall class needed a lottery to whittle it

down to 45.

"What makes it so easy to sell a course like mine is that kids

all over the country are starting businesses," Zschau says.

"Start-ups

are no longer an adult activity, and when students read about people

their age building companies, they come into the course really excited

to learn."

Zschau incorporates not only theory and case scenarios,

but role models as well. "One individual I brought in last year

is the CEO of Trilogy in Austin who dropped out of Stanford and funded

his company by pyramiding credit cards," Zschau says. "He’s

now worth $600 million. I also brought in his former roommate —

who happens to be my son-in-law — who took a much more risk-averse

approach, graduating from school, working for a larger company,

getting

a business degree, and working for a smaller company before doing

his own start-up. The whole notion is to give students an opportunity

to interact with entrepreneurs so that, by the time they finish the

course, they’re determined to do the same thing with an approach that

works for them."

In teaching entrepreneurship to such technologically proficient

students,

Zschau wants them to recognize "what they’re good at and what’s

required for success. One of the decisions they may want to make is

to bring in experienced management, if they can attract it through

the richness of their opportunity. Quite often, venture capitalists

will insist younger people get what is known as `adult supervision,’

a team of more seasoned businesspeople."

What are the pitfalls when engineers turn entrepreneurs? "One

of the common mistakes is getting enamored with your technology before

you’ve faced the reality of the marketplace," says Zschau.

"You

must first determine if your product can be commercialized and ask,

`Can this dog hunt?’ Sometimes really fascinating technologies turn

out not to be a good foundation for a company or even a product

because

they don’t translate into a value proposition for a customer."

And do companies, like those that sprang up in Silicon Valley, need

to be small and lean in order to prosper? "That used to be true,

but it won’t be in the 21st century," Zschau says. "You need

both speed and scale to thrive in the long run. Small companies have

speed, big companies have scale, and the ones who will successfully

compete will find a way to combine them."

His career has convinced him of the essential connections among public

policy, academics, and business. "I would like to see centers

being created at universities at the nexus of engineering and science

departments, with economics and political science, to explore how

to influence the progress of technology," he says. "The

academic

world provides much of the foundation of what then becomes the

enterprise-

and job-creating engine. Having had some exposure to all three —

not necessarily expertise, but exposure — helps me see those

relationships

pretty clearly and how they might be leveraged."

He lives with his wife on Nantucket, dividing his teaching time

between

Princeton and Harvard, taking pains to point out to students that

life is more than business. "I want them to understand that

balance

is very important, and if they’re fortunate enough to have children,

those years when they’re growing up are irreplaceable." His own

balancing act of a career, with many risks taken and interests

pursued,

continues to bring a great deal of satisfaction.

Zschau is glad he made it a priority to spend time with his children

during their growing years, and that his wife was able to devote

herself

to child-rearing. All three of his children are involved in start-ups.

His son is working with a small Internet software firm in Atlanta

and his son’s wife has started an Internet services company. His

younger

daughter works for a small database software company in California,

and her husband has an architectural consulting firm. His older

daughter

has two children and her husband has started a software firm in

Austin,

Texas. "I can’t help but believe that it’s part of the

entrepreneurial

setting in which they grew up."

"I’m doing everything I like to do and nothing that I don’t

like,"

he says. "I can work with talented young people, and not just

in the classroom. I’ve maintained close friendships with many

students,

and I’ve been excited by what they’ve done in the world. And it is

very gratifying being at Princeton — which I’m glad I applied

to when I did, because the students are smarter now and I wouldn’t

get in! Princeton took a naive young kid who just fell off the turnip

truck in Nebraska and enabled me to do some interesting things."

And, Zschau continues, "I can think of nothing more personally

satisfying than to see the Route 1 corridor viewed as the new hotbed

of technological innovation and entrepreneurship. If I could have

some small part in that, it would be wonderful."

Princeton University School of Engineering and Applied

Science , 609-258-2890. E-mail: MENG@princeton.edu. URL:

http://www.princeton.edu.


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