Case in Strategic Management - IBM

There is much that can be learned from IBM that can help us in developing and implementing sound strategies.  We can also gain insights from IBM’s mistakes.

IBM is one of those companies that have helped the world to become a better place through their inventions.  Most of us are somewhat familiar with the history, but let’s review some highlights.

IBM was originally known as the “Computing Tabulating Recording Company” (CTR) and was established in 1911.   CTR was the merger of three different companies:

• Tabulating Machine Company
• International Time Recording Company
• Computing Scale Company

Tabulating Machine Company

In the article “The Pioneers of Computer Programming,”  Andrew Beattie wrote:

The first practical step toward a programmed computer was taken by Herman Hollerith. Hollerith, and the Tabulating Machine Company he founded in 1896, lie at a nexus in computing history. Hollerith’s punch card machines were definitely a step in the direction of a programmed and automated computer, but they also marked the birth of data processing. As if that major contribution weren’t enough, his company also became part of the iconic IBM in the 1920s. As far as programming, however, Hollerith’s punch cards provided a medium by which programming (laborious and slow programming) could take place.Herman Hollerith was a statistician. He graduated from Columbia University at the age of 19 with a degree in “engineer of mines” 1879.  While at Columbia ,Herman impressing one of his professors, W.P. Trowbridge. Herman worked as Trowbridge’s assistant and followed him at Census in 1880.

The process of counting was arduous and error-prone. Herman’s objective was to improve the process. He knew the key was to develop a way to mechanize counting. He ultimately focused on the idea of punch cards, and designed a machine that used the punch cards and tabulated and sorted results.  Arguably his machine reduced a ten-year project to complete, down to three months. Herman’s machines were purchased and used world-wide.   Herman went on to invent an automatic card-feed machine, the first key punch and the “type 1 tabulator.”

International Time Recording Company

Willard Bundy,  a jeweler in New York,  invented the first time close in 1888.  Willard’s brother,  Harlow,  convinced his brother to mass produce the time clocks.  They established the Bundy Manufacturing Company to do just that.

Computing Scale Company

In 1885 Julius Pitrat of Ohio patented the first computing scale.   A computing scale is a weighing machine that shows the weight and the selling price of items.  In 1901 Edward Canby and Organ Ozias purchased the patent and established The Computer Scale Company – the first computing scale vendor.  (Case in Strategic Management - IBM)

Thomas J. Watson

Thomas was the youngest of five children and the only son of Thomas Watson and Jane Watson.    Father Watson owned a lumber business.  Thomas (the son) worked on the family farm and eventually attended Addison Academy.

Later on in Thomas’ career he was able to get a job the National Cash Register (NCR).    NCR was one of the top selling organizations in the country.   NCR was founded by John Patterson who was an highly organized,  rule oriented, micro-manager.

Initially Thomas was poor salesman,  until he received training and mentoring from his branch manager John Range.   Eventually Thomas became the top salesman in the company.

In 1900 Thomas Watson was asked by the founder John Patterson, to run the Rochester New York Agency – which was struggling.   In 1903,  Mr. Patterson asked Thomas to set up a ” dummy company to destroy competitors in the used cash register business.”   The dummy company sold used cash registers at such a low price that the competitors couldn’t compete.

In 1912,  Watson and 29 other employees were indicted and found guilty in an anti-trust suit against NCR.   Thomas never went to jail,   but in 1913 the owner fired him. (Case in Strategic Management - IBM)

Computing Tabulating Recording Company (CTR)

In 1914,  Thomas Watson was offered a job by Charles Flint – the owner of CTR.   He joined CTR as CEO. In his book The Maverick and His Machine, Kevin Maney writes  that Watson had radical management ideas for the time. Watson wasn’t a controlling overlord, like his previous boss. At the time management culture in industry was strict and  hierarchically oriented.

Thomas asked his employees for advice and stressed teamwork  He even required that people think, offer suggestions and talk at meetings.   He made it clear that sales people should dress well enough for the customers to respect them,  but conservatively as not to draw more attention to their clothes than to the product.

IBM

In 1924, Watson changed CTRs name to International Business Machines (IBM).   For two decades Watson transformed it into the leading innovation and technology firm in the world.  IBM writes of itself:

From the beginning, when the company’s name changes to International Business Machines Corporation (IBM). From the beginning, IBM defines itself not by strategies or products—which range from commercial scales to punch card tabulators—but by forward-thinking culture and management practices grounded in core values. By adhering to its vision and values throughout the Depression—providing continued employment, even adding engineers and other staff in order to sustain its production output—IBM is able to play a pivotal role in enabling the U.S. government’s Social Security Act of 1935, “the biggest accounting operation of all time.”

Case in Strategic Management - IBM

Highlights by David Willden