Agreed.
Entrepreneurs are getting better at this though, I was at a startup weekend a few months ago that I only found out about because they were really marketing to the design community and emphasizing design as a key factor in success. However, I worked for another startup that had no clue whatsoever.
As for engineering, we had a guest speaker in recently to talk about product development and entrepreneurship and he barely mentioned design, though he was much more focused on highly technical, non-consumer products.