Tuesday, February 28th, 2012

What Kodak’s Failure Might Teach Detroit About Success by Rod Stevens

Last month Kodak declared bankruptcy, and this month it quit selling cameras, something it has been doing since 1900. Did Kodak fail because it did not move from film to digital faster, or because it did not stick to what it knew best, laminating film? A close look tells us something about how other places with deep knowledge and fascination with a given
science or technology might find new success in global business.

What Business Are You In?

The Economist titled its article on Kodak’s bankruptcy “Gone In A Flash”, but watching Kodak go down was like watching a ship slowly sink under the waves in clear shallow water. At one time Kodak controlled 90 percent of the film business and 85 percent of camera sales. In the late 1980s it had a workforce of more than 145,000 people. Today it employs about a tenth that much. It’s not gone, but it is a shadow of its former self.

Conventional wisdom would say that Kodak failed because it defined itself as a film rather a photography business. This says that if Kodak had done so, it could have made the shift to digital earlier.

This is the strategy approach taught in almost every major business school, often using a Harvard Business School case study titled “Marketing Myopia” written 52 years ago by Theodore Levitt, when railroads lost traffic to both cars and trucks. Levitt argued that the railroads thought in terms of products rather than needs, that instead of defining themselves as “railroad companies” they should have called themselves “transportation companies”. Had they done so, they might have invested earlier in containers, multi-modal terminals, barge lines and even package services like UPS and FedEx.

It’s a pretty persuasive argument, but there is another, basic question that deals with the identity of companies: if you think of yourself solely in terms of markets, of your customers and the service you provide them, are you bound to limit yourself in what you can do, in who you serve? What if, in evolving to meet your customer’s needs, you leave behind the things you do best, and no longer engage the interests that brought you into business in the first place?

Almost everyone – people, companies, and communities – have “core competencies” or things they do better than others. These are the abilities that define them. Many successful companies are founded on one person’s fascination with a process or technology that they found application for. They gather people around them who share this fascination, and over time this fascination becomes part of the company culture. Weyerhaeuser, for example, isn’t just a wood products company. The people there love growing trees. Weyerhaeuser has gotten out of a lot of its old lines of business, but the company’s core assets remain vast tracts of forest land.

Kodak’s Core Competency and the Challenge of Digital

Back in 1880, when George Eastman founded the company, traveling with a camera meant loading up a pack horse with a huge camera the size of a refrigerator, glass plates the size of printer paper, bottles and bottle of chemicals, and even a tent to prepare everything in. George Eastman found a way of eliminating the fuss, by pre-coating the chemicals, and over time the company pioneered the laying down of chemicals in very thin “films” on substrate. The company’s expertise was physical chemistry, the physics of how atoms bond together and jointly react to light, heat, radiation and other changes around them.

Kodak’s challenge was that shifting from chemical to digital photography involved a different discipline – circuitry and software. Digital cameras are essentially a box with glass on the front and back and a whole lot of wiring, chips and motors in between. Kodak may have understood more about how to coat that glass on the outside than it did about what went on inside. Look at the companies that have done well in digital photography – Canon, Nikon, and Panasonic – which all come out of a long Japanese tradition of precision manufacturing and electronics. Until digital came along, Kodak had mostly sold cheap plastic cameras that had little or no electronics inside. Kodak’s strategy for cameras had been very close to Gillette’s with razors: give away the holder to sell the consumables.

Kodak had stumbled once before in trying to diversify its film business. In 1988, believing that it could apply its core knowledge of chemicals to medicine, it bought Sterling Drug, one of America’s largest pharmaceuticals companies. By the mid 1990s, however, Kodak had divested itself of most of the company. It may have known physical chemistry, but it did not know biology.

How Might Kodak Have Survived?

What if instead of branching into digital and software, Kodak had instead stuck to making film, but found new markets for its knowledge of chemicals and coatings? What if, instead of trying to call itself a “photography” or “image” company (something Xerox did half-successfully), it had redefined and expanded the markets for “film”?

To answer this, consider some of the other “film” inventions of the past 40 years: Post-It Notes from 3M; breathable fabrics and bandages from Goretex; flat panel displays from Samsung; Teflon pots and prosthetics; polarized glasses; and even osmosis filters for creating clean drinking water.

You might argue that if a company doesn’t focus on one or two markets, it cannot know these well enough to meet their needs and follow their evolution. This is true for many companies, but some are so good at something, so driven by a given fascination or competency, that they can pull off new product development across a variety of markets. Sometimes the markets come to them, asking them to adapt their technologies and know-how to new uses. 3M is one of these companies.

Apple is another, albeit with far fewer products. In each case, it has used its core competency in “ease of use” to create a new platform that others build on, in many different markets. Had Apple stuck just to computers, it would today be competing with Dell and HP for low-margin hardware sales. It updated and downsized the Sony Walkman with the iPod, moving into consumer electronics. It filled the iPod with iTunes, taking on the recording industry. It made those downloads portable, with the iPhone, taking on Nokia and Blackberry. It brought audio and visual together with the iPad, taking on Amazon and Netflix. And now, with iCloud, it is taking on Microsoft. There is one consistent quality here: ease-of-use.

The Lessons for Cities

Today whole communities are trying to reinvent themselves in business, turning from their traditional strengths in machinery or glass or steel or wood products to growth industries like biotechnology, social media, financial services and “green technology”. (This last really isn’t an industry. “Green” is just table stakes.) Often it is not clear what special skills or bragging rights these places have to offer in these new fields.

Maybe it is time for these communities to revisit what they do well, the techniques and technologies that have historically defined them, and instead put money and focus into updating their competencies, and finding new markets as well. One of the reverse sides of global trade is that there is now a world of markets out there, and you can be sure that somewhere someone is facing a new problem that is old to us. That’s what being export-driven is all about, thinking beyond traditional geographies and supplier relationships to find new ones. This is what a lot of what economic gardening is about.

Most places, especially in the industrial heartland, have long work traditions that revolve around technology. America’s original military industrial complex was in the Connecticut Valley and the area south to New Haven, which, not surprisingly, gave rise to a robust machine tool industry that was strong until the early 1980s. In places like this, people spoke “machinery” at the dinner table. As the factories of America empty out, we’re losing these skills, but if communities act quickly enough, they can update the skills and find new markets, just as Kodak should have done.

There are a number of examples of places with special skills that do not have biotechnology or software at their core. They may involve software, but the core fascination is something else. Milwaukee, for example, is expert at process control, maybe because it used to make both beer and cars. Grand Rapids is expert at workplace design. Portland, a place that runs, walks and hikes, does all things outdoors. Boston, which teaches, provides educational materials. And Las Vegas, a major tourism center, entertains.

Let’s take the last example for a minute. With its huge base of gambling casinos, shows and showy buildings, Las Vegas knows how to capture people’s attention and take money out of their pockets. The gambling machine companies that supply Las Vegas with its slot machines have learned how to use the adrenaline-inducing effects of video games like Grand Theft Auto to keep people sitting down. Perhaps Las Vegas can teach the video gaming industry something it has learned on the casino floor or with lounge acts. This seems like a far better business opportunity, long term, than selling health care to desert retirees.

Or how about Detroit, the “Motor City”? Detroit has been expert in motors and engines for more than 120 years, since before Henry Ford. A key shipping point in the Great Lakes, Detroit used to build both boats and the engines that powered them. Later, as the auto industry evolved, this expertise in motors and machinery found its way into windshield wipers, electric windows and air conditioners. Today nearby Ann Arbor is one of the engineering and technology capitals of the world. Combining new and old, Ann Arbor could anchor the new (Nano) Motor City.

Did Kodak prove Harvard wrong? Maybe it is more important to hold on to do what you do well and find new customers for this, than to hold slavishly to markets but lose yourself in the process. Kodak didn’t have to die on the back shelves of Wal-Mart. It could have stayed in the film business, making water filters for Africa. For America’s expert cities, maybe it is time not to reinvent themselves, but to reinvent their customers, and how and where they apply their expertise.

More by Rod Stevens
The Software of Placemaking
The 31 Flavors of Urban Redevelopment

Rod Stevens of Spinnaker Strategies is a business development specialist and change agent who pioneers new sources of revenue. He has worked with entrepreneurs, investors, Fortune 500 companies, universities and municipalities on projects that change how we live, work, learn and play.

29 Comments
Topics: Strategic Planning

29 Responses to “What Kodak’s Failure Might Teach Detroit About Success by Rod Stevens”

  1. Rod Stevens says:

    Correction: I wrote that cameras were the size of refrigerators. I meant to write “microwave ovens”.

    -Rod

  2. Andy says:

    I understand this post is written at a very abstract level, but I am not clear who the specific audience is (the local Chamber of Commerce? The local tourism & marketing bureau? The mayor/city council?) I’m also not clear about what is meant by “cities” — metropolitan areas or the political division of the core central city? Who are the customers referred to — residents, potential residents, workers, purchasers of the product? Laying out these specifics more concretely would better help me understand the argument Mr. Stevens is making. And then there remains the question of how much sense it makes to compare a corporation to a municipality or a region.

  3. Wad says:

    The New York Times has run series on how Rochester is slowly rebuilding itself in a post-Kodak world.

    Rochester is much like Pittsburgh, large but fading, with the area slowly depopulating. However, like Pittsburgh and unlike other areas, Rochester is moving up in the economic value chain.

    Former Kodak workers have gone on to work at other labs or started up their own businesses, a lot of them that have to do with the chemistry roots of early Kodak. Add to that great higher education institutions that supply both talent and information, Rochester found a way to reinvent itself.

    Rochester, and by extension, Pittsburgh are different than other industrial towns because they retained a kernel of minds that were capable of a transition. Being a scientist or engineer offers a degree of class privilege and expertise that a blue-collar worker couldn’t attain. A 20-year engineer is more likely to gain access to capital and have more career options open than a 20-year assembly line worker in a factory. Namely, in those 20 years, the assembly line worker didn’t gain the expertise needed to go into business for him or herself.

  4. George Mattei says:

    Akron is probably one of the quintessential examples of this strategy. Akron was the “Rubber Capital of the World”. When the manufacturers moved out, the engineers and scientists that developed better tires and new products went on to polymers. Akron is now known as the “Polymer Valley” with many companies working in polymers.

    Akron isn’t a stand-out amongst cities in the Midwest, but it is much more stable than its nearby neighbors Cleveland, Canton and Youngstown. Much of this can be attributed to their polymer industry.

  5. Rod Stevens says:

    I struggled writing this, because as often as not, young people become as fascinated with a “thing”, like a car, as a process, and later go into business or a profession to pursue this. But quite often, as you point out with Akron, it is the scientific discipline or the engineering expertise, “the college major” that gives people a way of thinking and that allows them to apply the same kind of problem solving skills in different markets.

    The chief executive of a large and diversified aeronautics manufacturer in the Pacific Northwest gave a business development speech about how his company has been able to grow by staying focused in three or four broad product lines by incrementally adding new markets to these. He cited the example of their design and manufacture of small projectiles for the military. A conservation group, working in Africa, came to them to develop new tranquilizer darts that would save elephants lives through greater dosing accuracy. They could never have set out to be in the elephant business, but they got their capabilities known, and they remained open to the phone call that seemingly came out of the blue.

  6. Chris Barnett says:

    Corning Glass Works and IBM are major New York State examples of reapplying technical competencies to a new arena, and doing so internally to transform the corporation.

    Whether any level of government could drive these kinds of corporate transformation is highly questionable.

    Whether any planned/organized “community collaboration” (i.e. NGO, institution, or non-profit consortium) could do so is highly questionable.

    Rochester had the world lead in imaging in the 1980’s with Kodak, Xerox, and Polaroid. From 50,000 feet and 30 years, we’d agree today the seeds of continued imaging success were there, with RIT complementing the corporate labs and capital.

    Pittsburgh is different in that steel wealth was diversified by the Pgh elite (Mellons and others) into glass, (PPG), chemicals (Koppers), oil (Gulf). The city was not a single-industry economy even though steel was huge.

    Rochester seems to have turned out a lot like Detroit: a Big Three continental-scale industry monoculture with a sense of entitlement has crashed and burned. 145,000 employees in a highly-centralized, near-monopoly corporation? How many of them just “fed the beast” and plugged away for retirement?

    Here are the questions I’d raise to draw lessons from history:

    Can (and should) a city or metro create and/or foster development of an economic monoculture? Or should it prevent monoculture in favor of a more-diverse regional “portfolio”?

    Is collapse and failure of a monoculture inevitable? (Everyone’s favorite, Silicon Valley, is 50-60 years old.)

  7. George Mattei says:

    chris:

    On an individual corporate level, I would agree that a city or metro area cannot affect that change. But on a metro-wide level, they can provide the services and infrastructure to accomodate those with the skills and ambition to repurpose their skills.

    Akron could no longer be a company town and rely on Goodyear to take care if everything, because the economy was changing and Goodyear was shrinking. But there were plenty of workers that were laid off by Goodyear that had the skills to develop new products in polymers. Akron helped empower them to create new companies through incubators, sponsoring networks and providing the infrastructure and in some cases funding.

  8. James says:

    I don’t get this post at all. A long history of the blunders of the Kodak company. Ok. I get that. But what was Rochester supposed to do? I mean other than this was bad for Rochester what does the history of Kodak have to do with cities? It isn’t Rochester’s fault that Kodak didn’t do well in the digital era is it? So what is the point of the bulk of this essay?

    “put money and focus into updating their competencies, and finding new markets as well”

    What does this even mean? Updating competencies? How? How does a city find new markets? I find the qualtiy of posts on this blog had been deteriorating for some time now.

  9. Rod Stevens says:

    To Andy and James (from Rod Stevens)

    Cities are more than just companies and corporations. Their economies are not neatly siloed. The economic development decisions are not just left to company boards of directors, city economic and planning departments or chambers of commerce. The redevelopment strategy isn’t focused solely in the redevelopment agency. Nor is the urban leadership limited to those in government and the private sector. It includes the leaders of the “urban anchors”, the eds and meds and philanthropic organizations (like the Gund Foundation or Kresge Foundation or Ford Foundations) that sit on boards and not only dispense grants but vote about corporate strategy. These strategies are interlocked, and at high levels there is very definitely collective discussion about how a place wins and where it should place its bets.

    The stronger places have been able to make these choices. One of the problems with Detroit, and with Hartford as well, is that these were essentially one industry towns in which the corporate leaders had so much control, and such little vision about how to diversify, that they did not think about new markets, new uses for the capabilities of their companies and workers. The other problem in these places is that these company leaders carried too much power. They were listened to too carefully; people did not challenge what decisions they were making. I hear the same complaints about New Haven today, that Yale is so powerful there that the city bureaucrats, philanthropic leaders and others who make decisions defer too much to that single institution in the room.

    Now you may argue that only government can make these decisions, or that only industry can, but consider what kinds of decisions do get made, and how they shape economic strategy: decisions in Detroit to focus on a few standard, mega-sized projects, like stadia and convention centers. Or a desire to put money into subsidizing a sports team, instead of beefing up a community college. Or, conversely, a tax benefit package for a new car assembly plant that not only provides roads to the front gate but worker training facilities as well. Or a desire to create a new downtown main street that will become a YUPPY heaven with art galleries, because these are the kinds of places that artists, software engineers and biotech researchers go. All of these investment decisions are based on bets about how the community can succeed and how it should place its bets in attracting a given kind of industry. All of those “knowledge districts”, all of those biotech innovation funds, such as the type coming out of Maryland- you don’t think they represent some kind of consensus about where those places should put their money?

    The point of my piece is that communities need to avoid the kind of “me-too” strategy, both in physical redevelopment (see my piece on this site on the “31 Flavors of Redevelopment”) and in industry as well. How many years did the old smoke stack cities chase the old smoke stack industries, trying to make themselves cheaper, easier to work in, lower labor cost? Now many of these places are doing it again, but this time with ‘shoot the moon’ strategies in industries that they have very little chance of winning in, very little strategic or distinctive competence. I’m simply arguing that they should take a good look at what they do best, not follow the pack, and find new places and new markets to sell themselves into. The lesson from Kodak is that this company tried to go digital when it had little expertise in this. It shouldn’t have followed the classic Harvard strategy of defining itself in terms of its customer’s needs. Detroit has already lost at cars. It’s not getting a lot of those factories back from China or India or Mexico. But it’s still skilled, somewhere, at machinery and motors, and it needs to find new markets for that tech expertise.

  10. Andy says:

    Thanks, that helps me understand better where you are heading with this. Maybe it’s your word choice that I struggled with. I really have a hard time with statements like “The stronger places have been able to make these choices” because — at risk of sounding glib — places don’t make choices, people do.

    I understand with your argument that regions like Detroit fail because their elites put too many eggs in one basket & delegates excessive influence to, as Chris Barnett beautifully puts it, a ‘continental-scale industry monoculture with a sense of entitlement.’ The picture you paint of top-down, coherent and centralized decision-making decision-making seems much more like what we see in single-industry company towns, than what we really see in communities with diversified economies.

  11. Rod Stevens says:

    Andy,

    I grew up in Portland, Oregon, and I can tell you that until 1980 it was a wood products town. Crown Z, Boise Cascade, Georgia Pacific ruled the roost. If there was an environmental question that came up, it was “how will this affect the mills”. The big recession of the 1980s cut them way down and when Georgia Cascade went back to Florida and claimed it was environmental restrictions that drove them out, the main newspaper, historically Republican, published a “good riddance” editorial that said they’d basically cut everything down and had no reason to stay.

    That’s what makes Portland so interesting economically. The people that sweated it out and came there during the 1980s came because of the beaches, forests and mountains, and they didn’t want to give that up for “growth” once the economy bounced back. It was one of the first places that Silicon Valley fled to, and those people too, wanted to keep the place nice, because in terms of traffic and housing prices, it was so much better than Santa Clara or Cupertino. The odd thing today is that it’s hard to name a dominant industry there. It’s not a great employment scene, but at least people aren’t waiting for just one industry to recover. ‘

    The one weird thing they’re doing is creating a “sustainability” center downtown, a living building that willhave all the architects salivating, but may do nothing business wise. This is the second time the local redevelopment agency has made a big industry bet. The first time was ten years ago, with a “creative services” building that lost so much rent that finally the agency itself had to move into the space to bail out the deal. I’d rather see these decisions made at the company level, but inevitably they involve some kind of shared urban investment, such as through the Portland Development Commission, and those decisions involve certain bets. I’d like to see a whole lot more soul searching about what skills and traits the commmunity has, what makes it distinctive economically, and then provide some supplemental training money to help those things flourish. It’s better to bet on something you know, or that you can at least evaluate the feasibility of the technology on. Talk about chemical processes, and people in Rochester can probably tell you if one is a dead end or worth exploring.
    Talk about a new software or circuitry approach, and it might be a lot harder to find a large group of people that could agree that private investment or public backing was a good idea.

  12. Rod Stevens says:

    Maybe they’ve got the circuitry expertise these days, because of Xerox, but my point is that communities are stronger in some technical fields than others. Georgia Pacific, by the way, went back to Atlanta, not Florida.

  13. Max Power says:

    Some people at Kodak did notice the competency in chemistry years ago, and spun off Eastman Chemical years ago. It’s among the last sustainable parts of the company.
    Though it was probably just a lucky break as EK sold off assets to keep the failing parts of the company alive.

  14. John Morris says:

    Pretty sure Eastman Chemical is now mostly a commodity producer and not a really high value research type firm.
    It’s been a long time since I looked but i remember at the spinnoff, it was not considered a high value added producer.

  15. John Morris says:

    FYI

    Detroit already has what looks like an amazing, totally organic arts and small business incubator.

    http://www.modeldmedia.com/features/russell129.aspx

    I was at The Whitney Biennial preview. Two artists who live and work in Detroit were in the show.

  16. John Morris says:

    Yes, communities do have core competencies, but I’m not sure they are easy to define.

    There is something very dumb and dangerous about a few leaders defining which aspects of a complex economy to everyone should be focused on.

    Very often, they are just not aware of the talent base and opportunities.

    Did anyone really see Cleveland comming as an emerging food destination? I mean the assets like the West Side market and ethnic food history were there, but few saw it as important.

    Youngstown’s move to build a software based seemed at the time to be building on very few existing assets.

    A failed government funded incubator project is not a sign that that an industry has no legs in the town. For many years the World Trade center failed to attract a lot of wall street firms. nobody in their right mind took it as a sign that Wall Street was dead.

  17. James says:

    Rod,

    Have you considered that your thesis is flawed? I mean if we are again talking about Detroit, the city tried some ventures to diversity. In the 20’s the city thought the aerospace industry would supplant the automobile industry. It made sense but it didn’t happen. In the 90s Detroit tried to become a dot com hub. They lured Compuware to relocate to the city. The state of Michigan encouraged a bioscience corridor to develop between Ann Arbor and Detroit. Flint wasted a lot of time and money trying to bring tourism to the region. Have you ever considered that having the city try and pick winners is a bad idea? That successful cities don’t engage in the behavior you advocate? I mean what exactly did Detroit do to favor automobiles over everything else? The city is full of empty warehouses and factories. It isn’t like auto crowded out other industries. Maybe Detroit isn’t good at manufacturing. Have you considered that?

  18. Rod Stevens says:

    James,

    I share your cynicism about city efforts. The only guy I know on this front that I’d really trust is Chris Gibbons of Littleton, the economic gardening guru, and he doesn’t believe in picking favorites as well.

    Maybe you are taking my use of the word “city” too literally. I’m talking about those loose groups of business, educational and philanthropic leaders (rarely governmental) who do decide where to put the expertise. I rely mostly on the private sector to set strategy, but I do think that chambers of commerce, university specialists, benefactors and others can come together to discuss prospects and set expectations. Chattanooga, by all accounts, came together as a community to clean itself up. That meant taking on the old smoke stack industries. There must have been some collective idea there of what they would do instead.

    The things you cite in Detroit and Michigan are the very industries I described as stereotypical targets- dot com software, tourism, bio science. Who’s ever heard of Detroit having expertise in these. My grad school room-mate came from GMI and Flint and couldn’t wait to get out of there, He said it was basically a one-industry town and it had problems. Sim City even made Flint into one of its disaster recovery challenges. Some of these places are so far gone that they may have to simply exist on good old immigrant entrepreneurism, whatever form that takes.

    But notice that I recommended making Ann Arbor the new center. They have technical expertise. That doesn’t necessarily mean companies there manufacture, although digital craft is becoming the “mini-mill” approach in this area. With proximity to so much manufacturing capacity, isn’t it possible that Ann Arbor could at least become the engineering center for a new generation of motors? That design expertise is not something we have to cede to the Chinese, quite yet.

    The real problem with Detroit is that it hasn’t even tried to get in the economic gardening game. It’s been wasting all that time and money on mega projects, the equivalent of Oakland buying back the Raiders. Has the city taken a business census of what it does have that is at all specialized?

    “Cities” today are really regions. It may be that Detroit is out of the game for a very long time, and that when it does recover, it comes back as some kind of post Robocop, post Road Rider artistic center. Meanwhile there is a lot of know how in Ann Arbor, and a lot of industrial capacity, in the larger region, that is still being used. I’d be thinking about how to put those two together and keep the region strong. I don’t think city governments have anywhere near the capacity to either make the decisions or make them right. What I do believe is that figuring out where the embers are, and getting the community as a whole to blow on them, might keep the fire going, and make it burn in a whole new way.

  19. John Morris says:

    “Who has ever heard” of your city doing X– exactly, why most city leaders from the normal large corporate and foundation world should not be in the drivers seat.

    Too, often they are not really in tune on the ground level with the real assets that are there.

    These are the kind of folks who thought the Hill District was a worthless slum.

    What needs a far greater sensitivity to grass roots assets that may be flying under your radar.

    For example, right now-Detroit has some pretty great street cred in the art world. The Cranbrook Academy of Art, north of Detroit is considered one of the best art schools in the country and a lot more of those kids are staying for a while to do things in Detroit.

    Perhaps city leaders could just help hype the great things that are happening and study why they might be working.

    A great example is The Russell Industrial complex. The place from what I heard, has been far more productive at birthing small businesses than almost anything else the more formal powers have done. Even so, one always hears about the place closing because of the city trying to extract back taxes.

  20. James says:

    Rod,

    I don’t really know where to start. If we aren’t talking about cities then are we even talking about cities? I mean the Flint region is doing fine, is growing in wealth and population. The core city is hollowed out but who cares about these arbitrary distinctions? I dunno this is starting to feel like some post-modernist deconstructionist argument. I guess if the city of Detroit has nothing to learn from Kodak but the civic leaders who all moved to prosperous neighboring Oakland County got the memo then I am still not even sure what we are discussing. Your argument is starting to make my head hurt.

  21. John Morris says:

    @Rod

    It’s not like I don’t agree somewhat but a lot of your comments are laden with condescending preconceptions.

    “When it does recover, it comes back as some kind of post Robocop, post Road Rider artistic center.”

    Can I even dig into all the stereotypes in that comment? Are all artists losers? Do none of them have software or other design skills? Does all growth start with a corporation or venture capital?

    Ever heard of Burning Man?

    “Some of these places are so far gone that they may have to simply exist on good old immigrant entrepreneurism, whatever form that takes.”

    What is that supposed to mean, that only desperate cities with no other choices should be immigrant friendly?

    The odds of very old school foundations in a city like Detroit driving change or grasping good opportunities is not high.

    At least in Pittsburgh, a lot of problems have been caused by trying to hyper manage and hyper focus. CMU finally is really driving the cross polination theme across the city.

  22. Rod Stevens says:

    Actually, John, I didn’t mean to be condescending, but I do believe that some cities do reach rock bottom, and when they do, the growth frequently comes from artists and immigrants. At least that has been my experience with a number of neighborhoods, from the Hayes Valley in San Francisco in the 1970s, to sections of Mississippi in Portland the last ten years. I think of these businesses as almost like fireweed after a big forest fire, when the big trees have come down, the landscape has changed, and new plants are beginning to grow. They are a source of new initiative, and the fact that they rely on only a few elements of the old ecosystem is what gives them their health. But to be honest, many times these ventures have little or no connection to what went before, at least in terms of business circles. My writing here is focused on leveraging the latent skills in existing businesses, or transferring the skills of the remaining people to new enterprises. That is what Chris Gibbons has supported in Littleton, after Martin Marietta moved out. In Littleton there were a fairly large number of very highly skilled engineers, who had been working together for an aerospace company. I don’t know Detroit well enough to know what latent and exportable skills it still has within the city limits. I would assume that in many areas of the city, it will be rebuilding its business base virtually from scratch. That will, in the long run, hopefully lead to some new and very exciting industries, but it takes a long time, and it is, in many ways, starting over. The other parts of the metro area and region may have more to build from, and my point is that rather than redefining how they make things for the auto industry, certainly an industry that is challenged, they should broaden their markets and figure out which processes have application in new fields.

    By the way, to other posters, I would ask that you be civil. I’m not getting paid for writing this stuff, and if you disagree, please be courteous about it.

  23. John Morris says:

    Right, but it does seem condescending.

    At this point, bringing in lots of new people, ideas and perspectives is going to be critical. One should be cheerleading this stuff on. I mean these are people who actually want to be there and they often are bringing skills and human capital.

    This is I think a huge issue in Cleveland where, the organic business community in places like the West Side, feels left out of the plans of civic leaders who think in a very old school corporate way. The sence I get from a distance is that leaders have decided that businesses that don’t fit a very obvious “eds/meds” or large scale tourism focus are considered unimportant.

  24. Chris Barnett says:

    John, that’s because the eds-meds complexes in large cities have typically been the leading engines for stabilization of the urban core, employment and educational-attainment increases, wealth re-creation and 24-hour live-work districts. Pittsburgh is a leading example. Our host has documented this phenomenon well in the Midwest; the “sports-and-convention” strategy in Indy slightly obscures the parallel growth of education (50-60,000 full and part time students) and a huge regional medical center.

    So civic leaders can probably be excused for creating grand civic strategies that involve big investments in such things. The entrepreneurial sprouts you mention are typically following ventures that grow because educated and highly paid people want local dining and fine arts…and they have the money to spend. Florida’s “BoBo” population. A certain percentage tire of regimented toil to become entrepreneurs in other fields, too.

    Is there a single case yet of granular entrepreneurial colonization (“organic business community”) turning a big city around? Lately it seems that it all starts with the talent magnet/talent generator mechanisms, mostly eds-meds.

  25. John Morris says:

    Yes, but strictly defining “good and bad” businesses and micromanagement at least in Pittsburgh has been highly destructive.

    First of all, one has the huge issue of non taxable non profits hogging masses of land and having little incentive to use it more wisely. This along with stadiums and handouts to a few favored corporations has shifted the tax burden onto the small business and startup community as well as individual homeowners-driving them out of the city.

    At least in Pittsburgh, a lot of the growth is happening in areas, not originally widely seen as growth drivers. For example, we now are becoming a mini hub for video game design and things like worker training software.

    High end robotics were seen as a big deal–but now Pittsurgh startups are designing robotic toys. It’s all about density-and cross pollination because you can’t always tell what the next big deal is.

    I don’t think it’s a surprise that CMU, a much smaller school, which has worked at spreading assets across the city has been a much bigger driver than Pitt.

    Here’s a good video showing the range of Pittsburgh startups and creative companies across a range of industries.

    http://diggingpitt.blogspot.com/2012/02/pittsburghs-creative-scene.html

    I do think a new attitude is growing that is more open and supportive. The whole-good vs bad business thing rubbed a lot of people the wrong way.

  26. John Morris says:

    “Is there a single case yet of granular entrepreneurial colonization (“organic business community”) turning a big city around? Lately it seems that it all starts with the talent magnet/talent generator mechanisms, mostly eds-meds.”

    A) Has there been a city that hasn’t adopted public policy to favor large companies or favored industries? Mostly, it’s a case of people peeing on the small business community while telling them it’s raining.

    B)”It all starts with the talent magnet/talent generator mechanisms, mostly eds-meds.”

    Yes, I agree that it often starts there, but the real story is how little productivity and spin off investment most major colleges bring in relative to the money spent.

    In most cities, what one is getting isn’t a whole lot more than just the multiplier effect of salaries and research dollars added to a few student neighborhoods.

    Why has this productivity been so low?

    BTW, even cities like Boston which lives on it’s colleges, is thinking about making them pay a moderate city tax.

  27. John Morris says:

    Slightly off the topic, but a number of folks from Pittsburgh startups will be presentig at SXSW in Austin.

    http://alphalab.org/blog/index.php/2012/03/05/pittsburgh-startups-at-sxsw/

    I’d like to see more buzz about Yougstown’s startups too which are getting a lot of bang for the buck investment.

  28. Getting back to Kodak, as a former employee, 23 years and retired in 1992, I could see the writing on the wall back then. The Rochester people with the company I came in contact with were protecting their jobs instead of developing good products. Young management moved in and they started expertmenting with a lot of side lines. I was realy sad when I learned that they had sold off their best patent the OLED to LG.

  29. Nathanael says:

    Detroit has special problems. While resting on their laurels, the Big Three stopped having expertise in *anything*; when Japan and Europe were clearly making better cars, it showed that the expertise in pretty much all the parts had gone elsewhere. Nobody buys electric motors from Detroit companies any more, though electric motors are still huge, and long ago Detroit was the expert in them. They abandoned their rail expertise too. So what area of expertise was left?

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