Thomas J. Watson & the Early Years of IBM (3:12)

Upon founding the newly merged Computing-Tabulating-Recording Company in 1911, Charles Flint desired to hire someone to manage it in his stead. This duty fell to an eccentric business manager named Thomas J. Watson. A native of the Southern Tier, Watson as a self-made man who rose from being a worker on his father’s farm in Campbell to a key player in a burgeoning monopoly in a mere twelve years. The keys to his success were his incredible persistence and clever tactics, which he would become well-known for. Controversy often followed Watson, such as accusations that he sabotaged competitor’s products and tricked consumers. Whatever his reputation, Watson’s management proved incredibly effective, impressing Charles Flint, and began what was to become a legendary tenure as President of IBM.

       An interesting fact about Watson is that while he would end up leading IBM for 42 years, the position of president as initially unavailable to him. Due to their monopolistic business practices, his former company, National Cash Register Co., found itself brought up on charges by the government for violating the Sherman Antitrust Act. Since Watson was potentially headed to jail, the board refused to allow him to assume leadership of the company, relegating him to the position of a general manager. This state of affairs came to an end with a philanthropic endeavor. Major flooding occurred in Ohio, within the vicinity of the Computing Scale Company’s operations, prompting National Cash Register’s executives to donate money and manpower to the area’s restoration. This good act curried favor with the government, who decided to let them off without jailtime. Thus, Watson was able to assume the presidency of Flint’s new company.

       At the time Watson took over, the company possessed 1,300 employees and a multitude of production facilities, making it a very large business by the standards of the day. During the early years under Watson, the company faced a cycle of highs and lows. Even as they their products sold extremely well, cornering the growing information technology market, debts to match would inevitably follow. To counter this issue, Watson reasoned out a new business model whereby IBM would rent out its products to customers. This strategy proved very effective, as it was an advantage for both parties. Customers were able to trade in for new models when they came out, and IBM’s revenue becoming stable and reliable through these routine payments. More important in Watson’s mind, however, was that the strategy forged close relationships with customers, who would be in regular contact and rely on the company for maintenance. In this way, within a few short decades, IBM gained its reputation as the premier company of its field.