In its heyday, Eastman Kodak Co. employed more than 60,000 people in the Rochester area. Three decades later, one-third of Rochester’s former Big Three employers has lost 96 percent of its local workforce.
“I think the obvious dramatic change in the technology of imaging is clearly the most significant factor in Kodak’s shrinkage,” said Kent Gardner, chief economist of the Center for Governmental Research Inc. “The ability of a firm that’s profitable to change course dramatically is kind of limited.”
Ranking 12th on the 2014 RBJ 75, Kodak employs 2,300 people in Rochester and has a workforce of 3,600 nationwide. At the same time, companies on the RBJ 75 that once were part of Kodak employ nearly twice as many local people as a group.
“The number of cases of a firm being confronted with such a dramatic change in its basic market and being able to retain its size … the number of instances of that are small,” Gardner added. “It’s not surprising that Kodak has shrunk.”
The catalyst for Kodak’s demise was the transition to non-film-based image capture and storage, said Lawrence Matteson, executive professor of business administration at the University of Rochester’s Simon Business School. Matteson was senior vice president and manager of electronic imaging at Kodak.
“While it (didn’t) become a significant factor in the consumer market until the 21st century, by the 21st century almost all of Kodak’s commercial businesses, which were a large part of the company, had been converted or were in the process of being converted to electronic storage, away from capturing storage, away from film,” Matteson explained.
The transition from large film consumers to electronic capture and storage made businesses more productive but left Kodak without much demand, he added.
“There were no elements of Kodak’s fundamental film business that were not affected by this disruptive technological innovation of electronic imaging across a whole variety of businesses,” Matteson said. “The catalyst is the disruptive technological innovation of electronic imaging, not just in the consumer business but in all of their businesses.”
Gardner said Kodak’s employment legacy can be thought of in three different ways: firms that Kodak spun off, individuals who left the company and started their own businesses, and former Kodak employees who stayed in the community and lent their experience to other firms.
“They provided the big-company experience and gravitas to small and medium-sized firms in the community,” Gardner said. “Very few firms in Rochester don’t have an ex-Kodak executive someplace in their ranks. I think that’s very important for the Rochester economy.”
While the third facet of Kodak’s legacy is impossible to measure, divisions and business segments that were spun off can be quantified. In fact, several rank among the region’s largest employers.
Companies on the RBJ 75 that have their roots in Kodak—Carestream Health Inc., Exelis Geospatial Systems, Ortho Clinical Diagnostics and Kodak Alaris—together employ some 4,230 people locally. While Kodak continues to shrink, those firms continue to flourish since being divested by their parent, area economists and experts say.
“There are a number of businesses that Kodak started and later discarded or disposed of that still employ thousands
of people in Rochester today,” said George Conboy, chairman of Brighton Securities Corp. “A lot of those people are people at the same desk, so to speak, doing the same job but no longer doing it for Eastman Kodak as the parent company.”
Kodak Alaris, which spun off from Kodak last year, employs some 700 people locally. Despite a decline in the consumer film segment, Dennis Olbrich, president of Kodak Alaris’ personalized imaging business, said he sees many opportunities for growth in the company’s business.
“We are currently constructing our first five-year plan as a new business, evaluating all growth opportunities and the amount of investment required to pursue them,” Olbrich said. “It is a very exciting time for the new company.”
Olbrich expects Kodak Alaris to remain an important employer in Rochester.
“Our strategies are focused on customers now more than ever,” he added. “So it’s all about the innovation and new offerings we provide our customers, not the fact that we were spun off from Eastman Kodak Co.”
Other former Kodak segments also employ a significant number of people in Rochester and expect to continue growing. Exelis Geospatial Systems has 1,150 employees, while Ortho Clinical Diagnostics employs 1,130 people here. Carestream Health, which was acquired from Kodak by Onex Corp. in 2007, has 1,250 staffers in Rochester.
“We have a strong business and a bright future, and our goal is to provide the best customer experience for those organizations that choose to do business with us,” said Robert Salmon, Carestream corporate communications director. “Our employees are passionate about delivering high-quality solutions to our customers, and as we continue to grow and innovate, that can create a positive climate for job growth based on our business needs.”
Local experts agree that despite Kodak’s labor shrinkage, the region has done well for itself, in part a result of Kodak’s onetime employees.
“The loss of employment has been mitigated by two things. One is the offshoot companies that are doing more or less well,” Matteson said. “The thing that’s not recognized is the number of small startup companies that spun off from that intellectual base.”
One thing that was true of Kodak, he added, was that the company hired talented people, many of whom stayed in the region after layoffs and divestitures, populating companies with their experience.
Conboy described Kodak’s lasting impact on employment and the local economy as incalculable.
“Stretch your arms out to the left and right and think of one hand being Buffalo and one hand being Syracuse,” Conboy said. “Buffalo and Syracuse always had heavy industry, heavy manufacturing—steel, mining, industries like that.”
Kodak for a century was research-based and, for its time, comparatively high-tech, he added. The fact that Rochester became known as an area of light industrial, research-driven, high-tech work is due to Kodak.
Despite its small size today, Kodak continues to trudge on.
This year the company named a new CEO and several other new members of its senior leadership team.
“I think the last chapter hasn’t been written,” Gardner said of the onetime photo giant’s future. “Kodak has a chance to remake itself and begin to grow again from the place it finds itself today. With a new team, a new board, we kind of hope that will occur.”
7/25/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email [email protected]