IBM and Thomas Watsons
In his book, “Frontiers of Management”, Peter Drucker (who is hailed as “The Guru of the Management Gurus”; He died recently) wrote, “It’s a misconception that Thomas Watson Sr. built a BIG company named IBM. It was Thomas Watson Jr. who, entering the company in 1946, made it big. Watson Sr. just founded a midsize company but Watson Jr. made it a behemoth.”
Well, whoever has made the contribution, the fact remains that IBM IS big. And how much big? Just to quote the numbers, though dated, in 1984, the IBM payroll had 4, 90,000 names; in 1987, the company’s turnover was $ 54 Billion - higher than the GDP of Greece ($ 40 Billion)!
Every big thing has to start from scratch and it was Watson Sr. who did it. Thomas Watson Sr. was born in 1874 in Campbell, New York. His first job was at age 18 as a bookkeeper in Clarence Risley's Market in Painted Post, N.Y. Later he sold sewing machines and musical instruments before joining the National Cash Register Company as a salesman in Buffalo. NCR was run by John Patterson. This is where Watson Sr. learnt how to sell aggressively. Six years later, his boss and mentor, the powerful John Patterson, assigned him to a secret project to put competitors out of business. Partly because of this covert sales warfare, Watson, Patterson and others would be prosecuted in 1913 under new anti-trust laws enacted to prevent business monopolies. Later on, in 1914, Watson Sr. joined a company called “Computing Tabulating Recording” as a General Manager in New York. 1914 was, also, the year when Thomas Watson Jr. was born.
The company’s turnover back in 1914 was $ 4.2 Million. It soon doubled to $ 8.3 Million in 1917. “Computing Tabulating Recording” wasn’t particularly into any of “Computing” or ”Tabulating” or “Recording” CTR used to sell a motley mixture of products like Balances, weighs, Knives, Coffee Grinders, Clocks and almost any other thing but computers (Of course, it had a long way to come into reality.) Additionally, the company used to sell “Tabulating Machines” based on the “punched cards.” (I think, these were the same punch cards Einstein used to work upon in the patent office). One fine evening in 1924, returning home, Watson Sr. declared,” Our Company will now be called “International Business Machines” Little Watson Jr. laughed at the idea of a company named “International Business Machines” selling Grinders, Knives, etc. And so did everyone else. But Watson Sr. used to think big… really big. He wanted to create the biggest ever “Business Machines” company.
Watson Sr. was smart enough to concentrate on the Tabulating Machines as the next thing in the market. So even when the Great Depression destroyed other industries, families, IBM was going great guns. In fact, in 1934 – in the midst of depression, Watson Sr. boasted a salary of $ 3, 64,432!
And as fate would have it, conditions couldn’t get any better when the Government approved an act named “Wages Hours Act” which forced the companies to keep records of Working hours and wages disbursed. All the recording machines available in the market at that time were incapable of handling such enormous amount of data. So invariably, it was IBM who, in 1944, introduced a machine named “Mark I” to provide the solution for this problem. And it had to be popular. I can’t imagine any better example where Government Policies have indirectly helped an industry grow! Mark I was soon followed by “Selective Sequence Electronic Calculator” – nicknamed Poppy in 1947 which again was a hit.
Watson Sr. had his principles. In the earlier years, he never sold his machines; he used to “lease” them. Also, the Salesmen were highly regarded and were the most important people in the organization. They were so skilled at their tasks that it was said they can sell a refrigerator even to Eskimos! As Watson Jr. rightly puts it,” Everyone at IBM is selling something at every moment”
IBM also, pioneered some of the great initiatives in Management. In 1958, they introduced daily wages instead of hourly wages which was the routine practice till then. Also, the concept of “Earned Leaves” is a gift of IBM. “Respect for Individual”, “Excellence and Superior Performance”, “Customer Service” and many other Management concepts were first thought and implemented in IBM. In fact, there were songs played at the plants to motivate the workers and the employees to work hard. One song goes like (Tune: Jingle Bells) “I. B. M., Happy men, smiling all the way. Oh what fun it is to sell our products night and day.” J Just for fun sake, PFA few other motivational songs!
Watson Jr. delivered his first speech at the age of 12 in the “Sales Meeting” in IBM. He went on to graduate in Mining from the Brown University and then, joined IBM in New York as a Salesman. He took a short break from IBM to serve in US Air Force during World War II. He was a B – 24 Pilot in the war. He resumed his job in 1946 after the World War. In the year 1956, he became President of the company, and in 1961, the Chairman. He handed over the active charge of handling IBM to rank Cary in 1972. Serving IBM for more than 30 years as a President and CEO, he became its Chairman Emeritus in 1989. He was also US ambassador to Russia for 9 years, as well!
In 1952, IBM created a computer, especially for the scientists, named Model 701. It was based on the concept of digital computer by a scientist Howard Aiken. The biggest decision that Watson Jr. took was about the “System 360” computer. The stake was as high as $ 5 Billion. If System 360 would have bombed, there would have been no IBM. But, it didn’t and in fact, was well received by the market. The company never again saw such “Do or Die” situation.
IBM stood tall as an example of how to run a successful company. According to Tom Peters, the secret of their success lies in the expertise in computers. But, according to Drucker, the top management would take the key decisions and would make sure that the people who are going to execute it should know why they are doing what they are doing.
The history of how IBM monopolized the early computer market and especially the Mainframes is well known. IBM had succeeded in creating a niche market in the field of computers. Whatever the Big Blue would say would be taken for granted. But the situation was soon going to change! Today, the numbers for IBM look like: Revenue: $96.3 billion; Net income: 8.4 billion; Total assets: $109.2 billion; Number of employees: 329,001. Somehow, the numbers back in 1984 don’t quite extrapolate to these numbers!
To know why, watch this space tomorrow…
Regards,
Abhishek
P.S.:
“I see a world market for 5 computers” – 1943, Thomas Watson Sr.
Well, whoever has made the contribution, the fact remains that IBM IS big. And how much big? Just to quote the numbers, though dated, in 1984, the IBM payroll had 4, 90,000 names; in 1987, the company’s turnover was $ 54 Billion - higher than the GDP of Greece ($ 40 Billion)!
Every big thing has to start from scratch and it was Watson Sr. who did it. Thomas Watson Sr. was born in 1874 in Campbell, New York. His first job was at age 18 as a bookkeeper in Clarence Risley's Market in Painted Post, N.Y. Later he sold sewing machines and musical instruments before joining the National Cash Register Company as a salesman in Buffalo. NCR was run by John Patterson. This is where Watson Sr. learnt how to sell aggressively. Six years later, his boss and mentor, the powerful John Patterson, assigned him to a secret project to put competitors out of business. Partly because of this covert sales warfare, Watson, Patterson and others would be prosecuted in 1913 under new anti-trust laws enacted to prevent business monopolies. Later on, in 1914, Watson Sr. joined a company called “Computing Tabulating Recording” as a General Manager in New York. 1914 was, also, the year when Thomas Watson Jr. was born.
The company’s turnover back in 1914 was $ 4.2 Million. It soon doubled to $ 8.3 Million in 1917. “Computing Tabulating Recording” wasn’t particularly into any of “Computing” or ”Tabulating” or “Recording” CTR used to sell a motley mixture of products like Balances, weighs, Knives, Coffee Grinders, Clocks and almost any other thing but computers (Of course, it had a long way to come into reality.) Additionally, the company used to sell “Tabulating Machines” based on the “punched cards.” (I think, these were the same punch cards Einstein used to work upon in the patent office). One fine evening in 1924, returning home, Watson Sr. declared,” Our Company will now be called “International Business Machines” Little Watson Jr. laughed at the idea of a company named “International Business Machines” selling Grinders, Knives, etc. And so did everyone else. But Watson Sr. used to think big… really big. He wanted to create the biggest ever “Business Machines” company.
Watson Sr. was smart enough to concentrate on the Tabulating Machines as the next thing in the market. So even when the Great Depression destroyed other industries, families, IBM was going great guns. In fact, in 1934 – in the midst of depression, Watson Sr. boasted a salary of $ 3, 64,432!
And as fate would have it, conditions couldn’t get any better when the Government approved an act named “Wages Hours Act” which forced the companies to keep records of Working hours and wages disbursed. All the recording machines available in the market at that time were incapable of handling such enormous amount of data. So invariably, it was IBM who, in 1944, introduced a machine named “Mark I” to provide the solution for this problem. And it had to be popular. I can’t imagine any better example where Government Policies have indirectly helped an industry grow! Mark I was soon followed by “Selective Sequence Electronic Calculator” – nicknamed Poppy in 1947 which again was a hit.
Watson Sr. had his principles. In the earlier years, he never sold his machines; he used to “lease” them. Also, the Salesmen were highly regarded and were the most important people in the organization. They were so skilled at their tasks that it was said they can sell a refrigerator even to Eskimos! As Watson Jr. rightly puts it,” Everyone at IBM is selling something at every moment”
IBM also, pioneered some of the great initiatives in Management. In 1958, they introduced daily wages instead of hourly wages which was the routine practice till then. Also, the concept of “Earned Leaves” is a gift of IBM. “Respect for Individual”, “Excellence and Superior Performance”, “Customer Service” and many other Management concepts were first thought and implemented in IBM. In fact, there were songs played at the plants to motivate the workers and the employees to work hard. One song goes like (Tune: Jingle Bells) “I. B. M., Happy men, smiling all the way. Oh what fun it is to sell our products night and day.” J Just for fun sake, PFA few other motivational songs!
Watson Jr. delivered his first speech at the age of 12 in the “Sales Meeting” in IBM. He went on to graduate in Mining from the Brown University and then, joined IBM in New York as a Salesman. He took a short break from IBM to serve in US Air Force during World War II. He was a B – 24 Pilot in the war. He resumed his job in 1946 after the World War. In the year 1956, he became President of the company, and in 1961, the Chairman. He handed over the active charge of handling IBM to rank Cary in 1972. Serving IBM for more than 30 years as a President and CEO, he became its Chairman Emeritus in 1989. He was also US ambassador to Russia for 9 years, as well!
In 1952, IBM created a computer, especially for the scientists, named Model 701. It was based on the concept of digital computer by a scientist Howard Aiken. The biggest decision that Watson Jr. took was about the “System 360” computer. The stake was as high as $ 5 Billion. If System 360 would have bombed, there would have been no IBM. But, it didn’t and in fact, was well received by the market. The company never again saw such “Do or Die” situation.
IBM stood tall as an example of how to run a successful company. According to Tom Peters, the secret of their success lies in the expertise in computers. But, according to Drucker, the top management would take the key decisions and would make sure that the people who are going to execute it should know why they are doing what they are doing.
The history of how IBM monopolized the early computer market and especially the Mainframes is well known. IBM had succeeded in creating a niche market in the field of computers. Whatever the Big Blue would say would be taken for granted. But the situation was soon going to change! Today, the numbers for IBM look like: Revenue: $96.3 billion; Net income: 8.4 billion; Total assets: $109.2 billion; Number of employees: 329,001. Somehow, the numbers back in 1984 don’t quite extrapolate to these numbers!
To know why, watch this space tomorrow…
Regards,
Abhishek
P.S.:
“I see a world market for 5 computers” – 1943, Thomas Watson Sr.
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