Note: A comment about context. Hard to envy the visible turmoil surrounding U.S. universities these days. But below, things endure, evolve, and grow. We focus on those things, the drivers of much of the innovation that universities have produce and will continue to produce.
Let’s start by stating the obvious: Companies and universities want to produce the best products they can.
It is impossible to list all the products emerging from large companies, but universities produce just two core products: human capital and intellectual property. The intellectual output can be publications, books, patents, spinout companies, etc. The human capital is students —undergraduates, graduate students, those in professional programs, and those in executive education courses.
So, whether an institution is creating products, human capital, or intellectual property, its goal is often to create continual innovation and generate breakthroughs. Companies and universities both do this, but their approach differs wildly. And in fact, universities have one trump card over companies when it comes to producing innovation — a system that allows for the freedom to explore.
But that same system brings within itself deeply ingrained factors that hinder cross-disciplinary innovation, which is needed to solve the big challenges of our time. A path forward requires keeping the parts of the system that allow for innovation while redesigning the parts that no longer serve us.
Organizational charts — how universities and companies are the same
First, let’s talk about how companies and universities are similar. From afar, the organizational structure of a major university and the structure of industrial conglomerates seem very similar.
At the top level is the president/chancellor on the university side and CEO on the company side. Provost and COOs may be considered somewhat equivalent, as well chief legal counsel, chief marketing officer, chief technical officer, chief information officer, and so on.
Below that, industrial conglomerates may encompass different production units, aerospace, materials, transportation, financial services, and so forth.
In this respect, universities are conglomerates as well, acting as an umbrella organization over engineering, science, law, business, medicine, and humanities. The production units responsible for the outputs are the schools and, within those, the departments. Engineering alone, for example, can encompass mechanical, chemical, mechanical, electrical, computer engineering, material science, and sometimes computer science.
The leadership structure continues to be similar as you go down the chain. Deans lead schools. In turn, the schools have department chairs or heads. In conglomerates, you have several similar levels of middle management.
And each of these positions are fixed. In a large company, the CMO does not become the CTO. Similarly, deans do not exchange jobs and neither do chairs.
So far, the analogy of university/industrial conglomerates holds. But that’s where the analogies end.
How universities are different from companies
Let us point out three things that make universities very different from companies before going into the central point of the most substantive difference.
First, in a university, a key customer — a student — is also a product. Except in a limited number of cases, this has no parallel in industry. Second, the number of different titles in an entire academic career is just three: assistant professor, associate professor, full professor. But the number of titles in companies is, when compared with university, enormous. New titles can be invented.
Third, and most important, is how companies and universities hire and promote people. At universities, in most cases, the decision to hire faculty is given to departments; the decision to promote, and especially the issue of a promotion for life — a “phenomenon” called tenure — is given to departments as well.
Let us agree to avoid the question of whether tenure is a good thing. The tenure system may not change unless the leading universities agree, collectively, to reexamine it. Long, five-to-seven-year renewable contracts could be a possibility. No one wants to disarm first. But this is not crucial to the argument.
Tenure — and especially how it relates to the graduate students and postdoctoral students that are part of research groups run by faculty — is where the real difference between universities and large companies resides.
Three factors come into play.
What companies envy about universities
While large companies create systems that make people part of a bigger machine, universities do the opposite. They set tenured faculty and their research groups free from the organization, thus empowering them to pursue new ideas, to collaborate and innovate.
First, post-tenure, faculty have to real possibility of reinventing themselves. Second, the people working in the research groups (graduate students, postdoctoral fellows, etc.) turn over, on average, every five years. This keeps human capital fresh. Third, if faculty in science, engineering, and medicine want to advance, they must raise the funding fueling their research. These grants, generally from government agencies and foundations, support students, postdocs, research faculty, and equipment. Typically, one quarter of faculty salaries can come from those raised monies.
To get this funding, faculty must remain innovative. No agency or foundation wants to support old ideas. New ideas need to keep coming, and such a system fosters entrepreneurial thinking.
This is often the essence of innovation that big organizations are trying to replicate. It gives the system remarkable flexibility and the ability to adapt and evolve.
Could companies replicate this system? Post-tenure, universities empower faculty and their research groups to pursue new ideas independently, whereas companies aim to integrate people into a larger system. Companies should find ways cultivate emergence or design emergence to spur innovation rather than the common practice of acquiring smaller companies or startups. (For more information on how to design for emergence, see my website for another essay I wrote on this topic.)
But the tenure system has its downfalls. The main problem with tenure is that it is for all practical purposes an irreversible decision. Not all people, post-tenure, keep up the fire that got them tenure in the first place.
The other problem, addressed next, is that department-based hiring and promotion may hinder interdisciplinary thinking. People rarely fit in classical boxes, and by placing them directly into departments, it thwarts their ability to think and collaborate across domains.
Academia’s ambition: addressing important problems
Academia needs (and in many cases, wants) to be central in addressing the biggest problems facing humanity. Massively interconnected challenges do not have simple solutions. Environmental degradation, climate change, ocean pollution, global energy transitions, response to pandemics, and the need to balance privacy with effective public policy measures are all issues that cannot be solved in compartments or be declared to be solved in one swift blow. Massively complex problems do not have black or white solutions nor perfect or finite outcomes.
These are examples of big problems that require thinking and approaches that span a wide range of domains. Complex problems need bespoke teams composed of members from various disciplines — convergence, as some have called this.
Companies might have the upper hand here, especially startups that can assemble teams at will. But much of the science and technology that will fuels these innovations begins in universities. To solve these problems, academia needs to be nimble. As things are today, it is not.
What needs to change in academia
Let’s acknowledge first that this is an incomplete view of universities. Central and pressing issues such as free speech and diversity enter the discussion as positive drivers of creative output. Ideas benefit from a plurality of viewpoints and a free discussion of ideas.
Let’s also assert that to effect change, we have two avenues open to us. We can re-design the structure, financial structures included, or hire different kinds of thinkers to operate within the existing system.
Organizations and universities can be thought of as complex systems, interacting networks of individuals, communities, and institutional structures. At times, these interactions can give rise to something akin to emergence — explosions of creative output, moments of confluence, of an almost autocatalytic production of creative ideas.
Learning and preparing for emergence is a must. Emergence is what happens when elements — “agents” in the terminology of complex systems theory — interact with each other to produce outcomes that could not have been predicted by examining the agents in isolation. Studying one termite does not give us a clue as to how they form mounds, and no amount of knowledge about a neuron can explain consciousness. Something seemingly magical happens when many elements interact together. Our agents are people. A successful organization will create the right conditions for emergence.
It is apparent that this runs profoundly at odds with command-and-control leadership in business. We need to design the liberty (including the liberty of failure) to provide a fertile condition for emergence to flourish. Negotiating the balance between freedom and control is key in moving the system to react in ways that produce better-than-expected outputs.
Changing people or changing systems?
Change needs to happen at two levels. First, by redesigning organizational structures and financial incentives, and second, by attracting and developing the type of people that are comfortable with ambiguity and emergent solutions.
To start, let’s change the system. We could make department boundaries more porous or make it easier for people to change units.
The issue of people hired only by single departments can be fixed. Boston University has been experimenting with convergence hires for several years. And change is possible with existing systems as well. During my term as dean of engineering at Northwestern University, over a quarter of engineering faculty had budgetary joint appointments, often with schools outside engineering.
Hiring is important, but who grants tenure to faculty is equally important. This is the part that needs fixing.
There are ways to work on this issue: add people from a second department in the tenure committee, for example. But the problem lies in disciplines that are not broken in departments. Hiring a joint faculty member between computer science and law? Great opportunities lie in this intersection, but it’s complicated by the fact that law schools do not have departments. Units participating in the tenure decision need to be of comparable sizes. It would be unfair, for example, to have someone sitting between computer science and law, to be judged by a department and an entire school, as tenure in law schools requires all the faculty in the school to vote. Having schools composed of departments would make joint hiring decisions easier.
One may conclude that new units – departments or even schools – must be created. One should be aware as well that silos will emerge and that designing connectivity among units should be part of the plan. But we want to allow for emergence as well. Architects and urban planners often design pathways and sidewalks based on the informal routes or “desire lines” that people naturally take when walking across open spaces like lawns or plazas. A similar approach may work here. One should be prepared to formalize “desire lines” among units.
But eventually, everything hinges on the people inhabiting the system. Here, the answer is clear: we need leaders who are comfortable with ambiguity and emergence. Leaders who can create changes in structure so that changes in culture become permanent. (That is a downside to people-driven change: If the culture change does not become permanent, changes may disappear as old habits re-emerge.)
Ensuring the essence of innovation
What changes should be permanent? First, we need to change the conditions for tenure. I am speaking based on my own experience here, but I presume there are many others out there with similar experiences. There have been enough successful cases where we have succeeded in granting tenure to interdisciplinary hires that we can distill the processes and lessons that lead to the successful outcome — and importantly, cases where processes failed — that instead of these cases being the exception to the rule, they become the rule.
Those of us who have thrived in universities should recognize how fortunate we have been to be a part of a system that allows for constant reinvention. True, there are plenty of issues to solve. The system is sluggish in adapting to change. But the comparison with large companies brings into focus the point that want to preserve and even enhance: the essence of innovation that big organizations are trying to replicate.
