The traditional structure of the railroad industry limits and often discourages innovation. Any new idea must pass a number of hurdles prior to implementation, and many never start the course. To consider an idea, a railroad company must decide that it is technically acceptable (meets engineering standards, for example). Then the idea must meet the commercial standards and policies peculiar to that railroad company. The process must be repeated by a number of railroad companies if "the industry" is to accept the idea. Since each railroad company can serve only as far as its own tracks extend, an innovation is frequently of little value unless most railroads adopt it.
In spite of the structure, several important operational and technological innovations have appeared in recent decades. Some have been far-reaching, and others have significance only as precedents and pioneering efforts. These innovations are primarily related to rail service, though labor productivity and technological developments are also involved. Improvements in technology alone can help make railroads more efficient, but they cannot win the traffic war--at best they provide only a rear-guard holding action. In the other modes, a broad array of carrier services and prices are available. To compete effectively rail carriers must offer a similar diversity. Instead, the present railroad structure discourages diversity and promotes service at the least common denominator level.
The following examples indicate the potential for rail transportation if a wider range of services were made available. They also show the resistance to change found in the traditional railroad structure.
In 1937 the railroads and their unions signed the Diesel Agreement. Diesels were being used as yard switchers and on a few passenger trains, but