If President Abraham Lincoln built your company in 1862, simply maintaining the status quo isn’t acceptable. You want to exceed expectations. When you take charge of a college with one of the lowest graduation rates in the country, it’s hard to look past simply achieving marginal improvements toward the future. But Lance Fritz and Michael Crow, leaders of two such organizations, are driven by the goal of achieving transformative innovation at their workplaces, and the knowledge that doing so isn’t easy.
On March 8, Fritz, the chairman, CEO, and president of Union Pacific Railroad, joined Crow, president of Arizona State University, and New America CEO Anne-Marie Slaughter for a Future Tense conversation on the challenge of innovating at large, complex organizations that have been around for a while. (Future Tense is a partnership of New America, Slate, and Arizona State University, and I work for ASU.) As Slaughter mentioned in introducing the conversation, we tend to think of Silicon Valley and specialized tech firms when we talk of disruptive innovation. But the fact is our economy and democracy rely on plenty of vital institutions born in the 19th century, like transcontinental railroads and public research universities, and we need them to adapt to changing times.
Fritz, who joined Union Pacific Railroad more than 20 years ago, inherited a massively complex organization with a behemoth physical infrastructure when he became president and CEO in 2015. “We were a very insular company,” he said. “A lot of our thinking started inside the railroad and looked outward.” That insular company had a very storied history—it was created when Lincoln signed the Pacific Railway Act in 1862. Over the past 150 years, the company had grown to operate over 56,000 freight cars along 32,200 route miles.
But you can’t stop a moving train, and you can’t simply shut down the freight rail industry for several months and reassess how to design a better company model. Fritz had to examine how to affect change while still managing a company of 50,000 employees and millions of moving freight cars.
Instead of relying on how things had always been done, Union Pacific decided to “blow that model up,” Fritz said. Rather than gathering two dozen decision makers in a headquarters building to make changes, he and his team started bringing in hundreds of on-the-ground employees to reinvent the zeitgeist of the rail industry for the 21st century. Instead of simply achieving their tasks at hand, they looked at how they could streamline their logistics and push their decision making so it was coming from the true subject matter experts.
The innovation process is difficult, Fritz conceded. “I don’t think anyone runs to change,” he said. “It’s a rare human that runs to put more energy in and runs to the challenge.”
Michael Crow blew up Arizona State University in a different way. He entered the school in 2002 under an operational model that he knew had “already failed.” Instead of trying to course-correct, he redesigned the university’s purpose. “The model that they had worked with for 42 years was the classic public bureaucracy model, very much buying into the sociology of the day,” Crow said. “The old model was completely inadequate to the assignment.”
He set out to build an institution that operated as a social enterprise, rather than an antiquated bureaucracy. He and his team cut 85 departments and created 40 new ones. They doubled the university’s attendance between 2002 and 2018, admitting students that reflected a student body “of equal potential as those who come out of smaller universities.” ASU shifted its focus from being faculty-centric to student and community-centric.
But changing a university, or the freight rail industry, or a think tank, involves changing the minds and motivations of its employees as much as it does the financial model, all three agreed. How, Slaughter wondered, did each convince their respective employees that innovation was worth upending the status quo?
For the railroad, it was the promise of their initial design when America was being built. “I very simply harnessed our desire to be the best,” Fritz said. “If Abraham Lincoln is the creator of your company, ‘meh’ doesn’t really cut it.”
Reconfiguring a university means reexamining that university’s purpose. The key, Crow said, is culture change driven by design empowerment, with measurements of success that are understandable to the entire organization. “You move away from being faculty-centric to student-centric,” he said. You operate under a philosophical driver that questions “what would a people’s university look like, in the democracy called the United States of America, which was accessible and committed to the success of our economic democracy?”
An institution that has existed for a long time or lived entrenched in the same model faces other implicit barriers to change besides finding a different motivation or philosophy, Slaughter pointed out. How, she wondered, did both overcome some of the most inculcated resistances in their industries?
“By overwhelming them with data” demonstrating the success of their model, Crow said.
Fritz agreed. “We have touchstones that we go back constantly to verify that we’re doing what we said we’re going to do,” he said. “We build America—we connect 7,300 communities. How we do it matters as much as what we do.”
Ultimately, innovation begins with a willingness to embrace discomfort and live with one foot in the future. Perhaps the biggest barrier, Crow said, is “to get people to realize that the only people responsible for our fates is us.”
Watch the full event here.