Universities are required to produce graduates with good technical knowledge and ‘employability skills’ such as communication, team work, problem-solving, initiative and enterprise, planning, organizing and self-management. The capstone software development course described in this paper addresses this need. The course design contains three significant innovations: running the course for two cohorts of students in combination; requiring students to be team members in 3rd year and team leaders in their 4th (final) year; and providing assessment and incentives for individuals to pursue quality work in a group-work environment. The course design enables the creation of a simulated industrial context, the benefits of which go well beyond the usual, well-documented benefits of group project work. In order to deliver a successful outcome, students must combine academic theory and practical knowledge whilst overcoming the day-to-day challenges that face project teams. Course design enables the blending of university-based project work and work-integrated learning in an innovative context to better prepare students for participating in, and leading, multi-disciplinary teams on graduation. Outcomes have been compellingly positive for all stakeholders - students, faculty and industry partners.