In June of 1911, a financier and businessman named Charles Ranlett Flint put the finishing touches on a fateful merger. The new business, which consolidated the Hollerith Tabulating Machine Company with two other market-leading purveyors of data-processing technologies, was called the Computing-Tabulating-Recording Company; later, it would become IBM.
Flint had built a successful business bundling companies in industries such as rubber and wool, a talent that would eventually earn him the nickname “Father of Trusts.” With C-T-R, however, he set his sights on a more forward-thinking and ambitious merger in a decidedly abstract sector.
To make it work, he needed someone with vision, and the will and resolve to follow it. That someone was Thomas J. Watson, who believed deeply that the combination of information and technology could create a powerful industry unto itself. As IBM’s CEO for 42 years, Watson would shape the company into a global force in technology, management and culture.
America in the early 1900s was a picture of a fast-emerging future. Model Ts honked in the streets. Telephones connected families and homes. Electricity began lighting up the nation’s cities. The US economy, meanwhile, was largely dominated by a few major players: the so-called robber barons — like Andrew Carnegie and John D. Rockefeller — whose oil and steel monopolies amassed colossal fortunes in a yet-to-be-regulated environment. Through their influence, big business was on the rise.
Against this backdrop, from his office near New York’s Wall Street, Flint had invested in a wide range of industries and facilitated several multi-company mergers. Around the turn of the century, however, he shifted from traditional manufacturing to information technologies. He had particular interests in the time clock, a mechanical device used by factory workers to punch in and out of work; the computing scale, for weighing items and adding up their costs; and the tabulating machine.
In these tools, Flint saw technologies that shared a common emphasis on data, and he envisioned them collectively providing a great deal of value in industry. So in 1907, he convened the principals of three companies — the International Time Recording Company, the Computing Scale Company, and the Tabulating Machine Company — to propose a merger. Talks continued for four years, until June 16, 1911, when C-T-R was officially incorporated as a holding company to control the three separate firms. The headquarters moved to Endicott, New York (considered by many to be IBM’s birthplace), while factories continued to operate in the cities where the businesses had long run production, including Dayton, Ohio; Detroit, Michigan; and Toronto, Canada.
After C-T-R was founded, the tabulating machine quickly became its most promising technology. Invented in the late 1800s by a young engineer and former census clerk named Herman Hollerith, it was originally designed to help the US Census Bureau collect data on the country’s rapidly expanding population.
Building on two previous hole-punch technologies, Hollerith’s design consisted of a pattern of holes in cardboard cards, coding for an individual’s data: city of residence, age, nationality, job and so forth. This simple system was put to the test calculating data for the 1890 census and reportedly saved the US government two years and USD 5 million. Soon after, various census agencies around the world adopted the tabulating machine for their efforts.
It didn’t take long for the tabulating machine to expand its utility. Businesses quickly discovered that the tabulator’s hole-punch system could prove useful in gathering information on products, train traffic and insurance customers. Early adopters included the freight office of the New York Central Railroad and the Eastman Kodak Company, which used a tabulating machine to keep track of customers and salespeople.
Despite the tabulator’s success, C-T-R’s business stalled within a few years. The balance sheet carried significant debt, and some of the managers from the three previous companies remained resentful of the merger and resisted full integration. Flint recognized that in order to move forward, the company needed a uniting force, a charismatic leader.
Earlier in his career, Thomas J. Watson, a born salesman without any formal education, had talked his way into an entry-level role at the National Cash Register and quickly rose to branch manager within a few years. In 1914, Flint hired Watson as general manager of C-T-R, putting him in charge of roughly 1,300 employees. (Watson’s full reign over the company was delayed by a lawsuit, in which he, fellow managers and other NCR executives were held in violation of the Sherman Antitrust Act. After the lawsuit was dropped and Watson’s name cleared, he was promoted to president and set about on a campaign of change.)
Watson envisioned, and then crafted, a unified company with a strong culture. He focused resources on the tabulating machine, sensing the imminent demand for this type of information technology, and de-emphasized the scale and the time clock. Within four years, C-T-R’s revenue had doubled. After expanding operations internationally, Watson renamed C-T-R with the more expansive moniker of International Business Machines in 1924.
Under Watson’s leadership, IBM grew to become the most significant player in every stage of the evolution of information technology and developed various philosophies and worldviews that the company retains to this day, including globalism, equal pay for equal work, and the imperative to always think.
His people-first agenda created a culture that became the envy of industry and a business juggernaut
An ad hoc lecture from IBM’s future CEO spawned a slogan to guide the company
A company’s founding philosophy: The cross-border exchange of ideas and trade is integral to progress — and peace