Watson, Thomas

Watson Sr., Thomas John

 “Follow the path of the unsafe, independent thinker. Expose your ideas to the danger of controversy.  Speak your mind and fear less the label of “crackpot” than the stigma of conformity.”  (T.J.Watson, Sr)

“THINK” (T.J.Watson, Sr)

Thomas John Watson, Sr., who was to become the president of IBM, was born on February 17, 1874, in Campbell, New York. His father, a local farmer and lumber dealer, offered to pay for his college fees, but the young Watson preferred a one-year course in accounting and business at the local Miller School of Commerce.

After a short stint as bookkeeper, he became a traveling salesman, peddling pianos and organs on the surrounding farms. This earned him the princely sum of $10 per week, but two years later he realized he would have made much more, had he been on commission. When his partner on the road left him – taking all his money as well – he moved to Buffalo where he started selling sewing machines. One day, when celebrating a particular good sale in a local bar, his whole outfit – horse, cart and all merchandise – was stolen, with the result that he lost his job. He then teamed up with a local peddler to sell shares of the Buffalo Building & Loan. This was quite successful, enabling Watson to acquire a butcher’s shop, until his new partner also absconded – taking the loan funds and all commission with him. Watson was fired for the second time.

Watson at NCR

Watson then decided to join NCR as a salesman (1898). Under the tutelage of JohnJ.Range, the manager of NCR’s branch in Buffalo, Watson became one of the most successful salesmen of NCR and was promoted to manager of the NCR agency in Rochester. Over the next four years he managed to turn Rochester into an NCR monopoly which resulted in him being invited to join NCR’s head office in Dayton, Ohio, where John Patterson was its president. Watson managed to create a local monopoly for NCR in Dayton by somewhat unscrupulous means – he established an apparently independent company (covertly funded by NCR) in second-hand cash registers which undercut the competition until he (i.e. NCR) could buy them out. After repeating this operation in Philadelphia, he proceeded to use the same technique across the country, thereby creating a strong dominant position for NCR in the second-hand cash register business.

When NCR subsequently merged the second-hand business with their normal business, they had become the undisputed market leader. NCR’s president, John Patterson, was a brilliant marketing and sales executive who trained many sales managers, including Watson, in his sales strategies with concepts like: each salesman having his own territory – no salesman could sell outside his own territory – all commission earned in a territory accrued to the salesman who “owned” the territory. In addition, each sales representative was measured by having an annual quota that had to be met. All of this was backed up by strong and often innovative advertising. Patterson also insisted that his sales representatives dressed neatly and conservatively. It comes as no surprise that later Watson would implement the same marketing concepts in IBM, making it one of the strongest sales oriented companies in the world. The IBM salesman was (and still is) easily recognized by his grey or dark suit, white shirt and non-descript tie. It was also at NCR that Watson introduced the slogan “THINK” to inspire his sales force – it would later become a famous IBM slogan.

NCR’s monopoly soon drew the attention of the government and in 1911 the Department of Justice filed suit against NCR under the Sherman Antitrust Law. Two years later John Patterson and 21 other executives (including Watson, who then held the position of General Manager Sales) were found guilty and sentenced to various prison sentences and a $5,000 fine. Before the case went to appeal, Dayton was hit by a Katrina-like flood resulting in devastation in Dayton. Patterson made the NCR plant, which was located on a hill, available as a rescue site and used NCR-built flat-bottom boats to ferry people to safety. Watson, who was out of town, organized trains loaded with goods, clothing, food and tents for the survivors. With the trains came the reporters to the flood stricken town. Soon NCR’s heroic efforts made news worldwide. Patterson loved it and became an instant hero. It also resulted in the anti-trust appeal case not being pursued any further. Interestingly enough, similar anti-trust lawsuits would crop up later involving IBM (more than once), Remington Rand, Microsoft, etc.

In 1913 Watson married Jeanette Kittredge from Dayton. The couple had two sons and two daughters, The two sons, Thomas John Watson, Jr. and Arthur K. Watson would later each play their own important role in IBM.

Towards the end of 1913, following a disagreement, Watson was fired by Patterson and looking for a job.

Birth of IBM

In 1911 four companies were incorporated into one, C-T-R or the Computing-Tabulating-Recording Company. The four companies – all high-tech firms in  their time – were:

  • the Computing Scale Company of America, which included the Moneyweight Scale Company (fig.5)  and the Stimpson Computing Scale Company (fig.6)
  • the Tabulating Machine Company established by Herman Hollerith (another Cyber Hero), the company manufactured and sold punched cards and tabulating equipment
  • the International Time Recording Company of New York (fig.7), which manufactured time recording systems; this company included the Dey Time Register Company
  • the Bundy Manufacturing Company (fig.8), which also made time recording machines.

Although Hollerith stayed on as director of C-T-R, it was Thomas J. Watson, Sr. who on May 4, 1914 was hired as General Manager of C-T-R.

For this reason 1914 has often been cited as the “starting date” for IBM (fig.9), but 1911 (incorporation of C-T-R), 1924 (renaming to IBM), or even 1896 (when Herman Hollerith’s Tabulating Machine Co. was incorporated) are equally justifiable. In 1914 C-T-R had a turnover of $4 million and there were 1346 employees. Watson soon realized that Hollerith’s tabulating and punched card components were the cash generators in the group and had enormous growth potential, so he focused his attention primarily on these elements. Over the years the other elements would be phased out slowly.

In 1915 Watson was elected president and general manager of C-T-R. Two years later C-T-R opened an office in Canada under the name International Business Machines Co., Limited. In 1924 C-T-R was renamed International Business Machines Corporation (IBM). Turnover had grown to $11 million and IBM had 3384 employees.

Watson at IBM

Thomas Watson became one of the most successful executives of his time (fig.10). He grew the fledgling company from its early stages (fig.11) into the multi-billion dollar corporation of today. There are a few obvious reasons for this growth: Watson was involved in a new-technology industry and he managed to combine that with a strong marketing and sales effort. The lessons he had learned at NCR were now put into practice. Secondly, Hollerith continued to produce new models as their clients requested additional functionality of their tabulators. In 1917 he produced the printing tabulator enabling accountants to view the tabulated results on paper – the machine became a run-away success. By continuously responding to their clients’ requests, IBM was able to market a new or enhanced product line on a continuous basis. Examples are the single-deck sorter (1919), the electric duplicating keypunch (1924), the 80-column punch card (1928), the multiplying punch (1931), the alphabetic printing tabulator (1932).

In 1935, IBM marketed the first commercially successful electric typewriter (fig.12) and added this new product to an already impressive product line of tabulators, sorters, time clocks and scales, and so the list continued to grow.

Another reason was IBM’s strategy of renting out its equipment rather than selling the machines, a strategy it had taken over from Hollerith. This not only had the advantage of being able to upgrade the renting agreement to a later and newer model – obviously at a higher price – but it also ensured a steady stream of revenue.

Added to this was IBM’s insistence that their clients only used IBM-manufactured punched cards (fig.13). Although Watson maintained, as had Hollerith before him, that this was essential to ensuring a good quality product, it would in 1952 result in another antitrust case for IBM. Lastly, IBM installed a large proportion of its office equipment, including tabulators, with the United States government departments. With a rapidly growing population, two world wars, and an ever increasing need for the collection and processing of data there was a burgeoning need for equipment that could handle these tasks adequately. Strangely enough, Watson Sr. needed some convincing before he saw the need to start manufacturing computers.

“I think there is a world market for maybe five computers” (T.J.Watson, Sr. in 1943)

[Two in the U.S., one in Europe, one in Asia, one in the rest of the world]

When electronic data processing equipment – i.e. computers – became available after World War II, it was again IBM that was ideally poised to grasp the opportunity, although this time it was Watson Jr. who became the driving force to include computers in their product line. With sales representatives, who often had first-hand knowledge of their customers’ operations (another prerequisite laid down by Watson), it was a logical step forward for any large company or government department to progress from mechanical tabulating equipment to an electronic data processing computer. Watson had laid the foundation for IBM to become synonymous with “computers”.

 “World Peace through World Trade”

In 1937, Watson was elected president of the International Chamber of Commerce. At its congress in Berlin he gave his inaugural conference keynote address under the title “World Peace Through World Trade“. Not only would this slogan become a worldwide IBM advertising slogan, he even managed to get the slogan as the main text on a 1959 United States stamp. The slogan could be seen for many years on the side of the IBM building at 590 Madison Avenue, New York.

Watson after World War II

In 1949, IBM restructured itself and divided into two parts: the United States part of the corporation which came increasingly under control of Thomas J. Watson, Jr. while the IBM World Trade Corporation consolidated all foreign business components. World Trade was headed by Watson’s other son Arthur K. Watson. Following the economic recovery in Europe and elsewhere after the war, World Trade soon began to make a substantial contribution to the company’s revenues.

In 1949, Thomas Watson, Sr. became chairman of IBM while Watson, Jr. (another Cyber Hero) became executive vice-president.

Following the success of Remington Rand’s Univac computer in 1951, Watson, Jr. managed to convince his father to add electronic computers to their product offerings and in 1952, IBM introduced its first production computer, the IBM 701.

In 1956, Watson, Sr. became chairman emeritus and passed executive power on to his eldest son, Thomas John Watson, Jr. IBM had grown to a giant with 72,500 employees and a gross revenue of $892 million. It had about 85% of the market in tabulating equipment in the United States.

Watson, Sr. died of a heart attack on June 19, 1956, at age 82. At his funeral, president Eisenhower eulogized “In the passing of Thomas J. Watson, the nation has lost a truly fine American – an industrialist who was first of all a great citizen and a great humanitarian.”

© Wobbe Vegter