Even International Business Machines' legendary company name reflects Tom Watson Sr.'s savvy salesmanship and willingness to change.
In 1924, Watson (1874-1956) took over as CEO of CTR. CTR was a collection of smallish companies that weighed, measured and timed things for other businesses. It included Computing Scale Co., the Tabulating Machine Co. and the International Time Recording Co.
But seeing something bigger, Watson renamed the menagerie of companies International Business Machines, or IBM for short. And those three letters would soon stand for technology's first real powerhouse: Big Blue.
Thanks to savvy sales techniques and an ability to evolve fast, IBM turned into the first place business managers would think of when looking for tabulation help. IBM became so dominant that it was riskier to hire another firm. "Nobody gets fired for hiring IBM," became a refrain with executives.
Take A Risk To Change Like Tom Watson Sr.
But Watson's willingness to adapt didn't stop with the company's name. He saw IBM's greatest potential in tabulators. Those were electric calculators that used punch cards to read information.
The device wasn't a natural bet. These calculators ranked last place among the company's hundreds of products. But Watson started calling what IBM did "data processing."
With IBM only doing $11 million in revenue, no one paid the company much attention. But IBM's stature would rise fast. During the Roaring '20s, IBM's stock kept climbing. And in the first nine months of 1929, with profits up 29%, IBM shares shot over 200.
Then on Oct. 24, the market collapsed into the Great Depression. But Watson knew the adjustments he made to the company would pay off once the economy improved.
"Despite the economy contracting by 8% in 1930, 7% in 1931, and showing no signs of getting better, Watson bet the company on his unwavering optimism," wrote Kevin Maney, author of "The Maverick and His Machine: Thomas Watson, Sr. and the Making of IBM."
Despite nearing bankruptcy twice, Watson kept investing heavily in innovation so IBM would be well positioned. The gamble paid off. By 1934 IBM's revenue was $19 million — and it would continue climbing for another half century.
Meet Failure With Smarter Work Like Watson Sr.
Watson was the fifth of five children born to a farming family near East Campbell, N.Y., 250 miles west of New York City. As the only son, he was tasked with the most physical work. His father also sold lumber, but a flood killed some of the trees, an early home burned down, and there was an economic depression from 1874 to 1879.
"The family valued persistence and optimism and it couldn't have been lost on Watson that despite his father's many setbacks, he never gave up hope that he could improve the family's life," Maney wrote. "The son showed he was very responsible in taking care of his sister and mother and he shared his mom's warmth and the knack for being likable."
His first job was teaching, and he quit after one day. He became the bookkeeper at a grocery store, tried hustling sewing machines, and then selling shares in a building and loan company. He borrowed money to open a butcher shop in Buffalo that failed and went to the local National Cash Register office to transfer the installment payments on its machine.
Watson: Boost Sales By Knowing People And Products
The local NCR manager saw that Watson was ambitious and optimistic, despite having failed at all previous jobs. In 1896, NCR hired Watson at age 22 to sell registers. Registers were slowly replacing cash drawers.
NCR CEO John Patterson became Watson's mentor. Patterson is now considered one of the most important pioneers of corporate sales training. He used role-playing to help salespeople prepare for any question a prospect might have.
Within three years Watson became the superstar of NCR in upper New York. He earned $1,225 in commissions in one week (equivalent to $47,000 now). That was astonishing, since he only earned 15% on machines priced from $100 to $200.
NCR promoted him to a position at the company's headquarters in Dayton, Ohio, in 1903. And Watson took over as national sales manager five years later. In that post, he used his sales skills inside the company. Watson proposed ways to grow sales that no one else had the nerve to pitch to Patterson.
But Watson sold Patterson on his ideas. Watson proved so successful that, five years later, Patterson put him in charge of a secret operation. The goal? NCR's competitors were selling used registers at lower prices. So Watson created a company that would offer even cheaper models to drive those discount rivals out of business.
See Setbacks As Learning Experiences
Watson's salesmanship was so effective at NCR that the government took notice. President Howard Taft's administration in 1913 brought criminal indictments for antitrust violations by 29 NCR leaders. An appeal led to a 1915 wrist slap for the defendants by President Woodrow Wilson, as long as they pled guilty. Only Watson refused.
"It was a calculated risk, driven by his refusal to believe he'd done anything questionable and the government probably wouldn't go to the expense and trouble to try only him," wrote Maney. "In fact, it never did."
But Patterson was a harsh manager. He grew jealous of those who became very successful. In December 1914, he pressured Watson to leave NCR. But he gave Watson severance of $50,000 (equivalent to $1.6 million today), and they remained on friendly terms.
Build A Sustainable Sales Culture Like Watson
Although Watson had gotten married the year before he left NCR and Watson Jr. was still a baby, he was not in a rush to take any of the attractive jobs that were offered (despite being labeled a criminal).
He decided his best prospects would be in New York City. He arranged to meet with Charles Flint, who had been combining measurement companies into CTR.
Watson accepted Flint's offer to become general manager for a salary of $25,000, plus 5% of profits and stock worth $36,000. He found CTR was a disorganized mess and deeply in debt, so he brought the salesmen and executives together.
Instead of telling them what they should do, Watson admitted he didn't know anything about their machines or how to sell them. But he asked the assembled experts what they thought he should do. Such vulnerability was rare from a CEO at that time. But the team excitedly opened up and shared ideas.
"Watson's true genius was understanding the power of culture to sustain an organization over time," Phil Gilbert Sr. told IBD. Gilbert is a former IBM general manager of design and the author of "Irresistible Change: A Blueprint for Earning Buy-In and Breakout Success."
"(Watson) built what he called 'the IBM family' and meant it — he loved the company and its people as deeply as his own family," Gilbert told IBD. "He created a bond strong enough to endure his leadership flaws."
Cultivate Long-Term Innovation Like Watson
When it came to selling, Watson recognized the value of patents. He began acquiring companies that owned innovative technology he could sell.
To that end, he urged his sales reps to think of products not as devices, but as services. It also helped to pick the winner.
Watson was one of the few business leaders who supported President Franklin Roosevelt. And IBM won all of the New Deal's accounting in 1934. Politics helped. But IBM won primarily because it was best positioned to do the work competently. The following year the president signed the Social Security Act, and the demand for IBM's machines from businesses and the government soared, helping it through the Depression.
Watson's ability to shift IBM to lucrative markets was swift. In 1943, IBM's plant in Endicott, N.Y., began making the Automatic Sequence Controlled Calculator (ASCC or Mark I). It was a true computer, but not the first success. Remington Rand's Univac, released in 1951, was the first popular business computer. IBM caught up with its 700 series in 1956 and dominated the industry into the 1980s.
Watson became too sick to continue at IBM's helm, though. And in 1956 he turned the company over to his son.
"What turned IBM into a business rocket was Watson's daring," wrote Maney. "He made big decisions and took big risks, and then stuck by them."
Tom Watson Sr.'s Keys
- CEO of International Business Machines from 1924 to 1956, when it became the pioneer of computing for business.
- Overcame: Taking over a struggling company that made tabulators and was badly organized, which he turned into business tech superstar IBM.
- Lesson: "Follow the path of the unsafe, independent thinker."
