Organizational change and strategies
CTR was a company with three separate elements:
In the 1920s, while still under Fairchild's domination, Watson focused on achieving significant growth. Revenue grew from $4.2 million in 1914, when he took over, to a peak of $16 million in 1920. The price of this, however, was a precarious cash position. In 1921, sales fell to $10.6 million, and Watson faced a cash-flow crisis. Once again, Guaranty Trust was to fund and rescue CTR. Watson cut costs, including reducing research and development and laying off employees. He never again allowed his cash position to fall so low. He subsequently maintained a policy of low dividends, high revenues, and careful cost controls. He adopted very conservative accounting principles.
Hollerith, beginning with the 1890 census, had rented his machines so that his company could provide the maintenance necessary to ensure reliable operation.[46] Watson recognized other benefits including the idea that renting equipment was inherently more stable since the income continued when equipment orders would otherwise have dried up. Less obviously, it forced sales personnel, aware that they might lose the rental, to maintain regular contact with customers, thus ensuring – even as early as the 1930s – that customer relationships were well-managed. This approach became central to IBM's activities.
After that, Watson deliberately lagged in introducing new products, though not on research. Even after competitors launched new products, he waited until the market was ripe for large-scale development. Watson recognized the importance of sound R&D, appointing James W. Bryce in 1922 to manage this (moving him from its Time Recording Division, which he had joined in 1915). However, Watson continued to be personally involved in R&D, not least through his insistence on rigorous standards.
"Watson had never liked the clumsy hyphenated title of the CTR" and chose to replace it with the more expansive title International Business Machines,[47] first as a name for a 1917 Canadian subsidiary, then as a line in advertisements. For example, McClure's magazine, vol. 53, May 1921, ran a full-page ad with the following tag at the bottom:
<poem style="text-align:center; width:auto; display:inline-block;"> International Time Recording Company of New York Subsidiary of Computing-Tabulating-Recording Company, New York Makers of International Business Machines Patterson died in 1922, and Fairchild died on December 31, 1924. On February 5, 1924, Watson applied to list International Business Machines (IBM) on the New York Stock Exchange, and the name C-T-R disappeared.[48] Watson began to mold the company in his image and took it to new levels of success for the next quarter of a century until he was 75.[49] He celebrated his new status with the first Quarter Century Club. Even though CTR had only been going for 13 years, he based qualifications on the subsidiary companies. The holding company itself disappeared in 1933 after most of the subsidiaries had been merged into one company, IBM.[50]
- Computing Scale interested Watson the least, and the largest element of this (Dayton Scale) was eventually sold off in 1933 to Hobart Manufacturing. After the sale, the company, to Watson's chagrin, began making money.[44]
- Time Recording was at first the primary revenue earner and was used by Watson as a vehicle for diversification, though none of these was a great success.
- The tabulating business most interested Watson, perhaps because it was closest to his NCR experience. This was where he directed much of his attention, and by the early 1930s, this had indeed become the largest piece of CTR.[45]
