How They Started Page 25

  “The directors told me, ‘You’ll have to hire outside brains before you can build up this company,’” said Thomas. “I told them, ‘That’s not my policy. I like to develop men from the ranks and promote them.’”

  In many ways, Thomas was becoming more and more like John H. Patterson, his old boss at NCR, aping some of his ideas as well as his management style. NCR had a Hundred Point Club whereby salesmen who hit targets would be treated to a weekend at a country club. Similarly, Thomas created the Hundred Percent Club, which served the same purpose. He strove for unity and cohesion, which wasn’t easy while managing what were effectively separate companies. “We want all of our subsidiary companies to feel that they are all one thing, one big family,” he said.

  The thinking company

  Against the odds, by the end of the decade, CTR was growing and beginning to really show its potential. Herman’s influence was declining, and later Thomas would establish a robust engineering department that would work on and improve the tabulating machine. Although he was not an engineer himself, he managed to get the best out of his men. Sometimes, he would secretly set them the same task and then choose the best product, believing that rivalry brought better work. He tried many different techniques to bring out the best from his team, and repeated whatever seemed to work the most effectively. He also liked to have the slogan THINK displayed at various places across the company, another vestige of his NCR days.

  On a blackboard, he wrote out the words “manufacturing,” “general manager,” “sales manager,” “sales man,” “factory manager,” “factory man,” and so on … He then crossed out all the words apart from “man,” suggesting that all were equal in the company.

  In 1917, the company moved into Canada, and Thomas decided to call that company International Business Machines (IBM). He later used that name as the company moved into South America. In 1924 the CTR name was dropped completely and IBM floated on the New York Stock Exchange. Also that year George Fairchild died, and the last remaining barrier to Thomas’s dominance was removed. IBM was now truly Thomas Watson and would remain that way for the better part of 30 years.

  Where are they now?

  During the Great Depression of the 1930s, IBM managed to grow and even launch new products such as the Electric Writing Machine (a typewriter), while other businesses struggled. In the 1940s, the business made its first foray into computing, and a decade later introduced its first computer. By the 1960s, IBM recognized the potential that computers would bring to business, and, accordingly, the business was transformed from a medium-sized manufacturer of tabulating equipment to the technology industry leader more familiar to us today.

  Today, over 100 years since the founding of the business, IBM has grown to become the world’s largest computer manufacturer, operating in over 200 countries with more than 425,000 employees. In 2011, it was ranked by Forbes as the 18th-largest firm in the US and the 7th most profitable, with annual revenues breaking the $100 billion barrier at the end of 2011. The company has also branched out into diverse markets in recent years, and can now boast of being the largest IT services provider in the world, as well as the largest IT financier.

  The Walt Disney Company

  Creative to the core

  Founders: Walt Disney and Roy Disney

  Age of founders: 21 and 29

  Background: Cartoonist and naval officer

  Founded in: 1923

  Headquarters: Burbank, California

  Business type: Entertainment

  Disney is the largest entertainment company in the world. While we might naturally associate the company’s origins with Mickey Mouse, the real story involves a rabbit, and several years of hard work, creditor disagreements and mutiny. With a failed business behind him at just 21, Walt Disney and his brother Roy started their company from their uncle’s garage in California in 1923. Armed with a truckload of talent and little else, the Disney brothers’ story is littered with highs and lows reminiscent of a rollercoaster found at Disneyland. The business, which today brings in more than $40 billion a year and employs 150,000 people, is a remarkable story of survival and creativity.

  Hard knocks

  As you might expect, Walt Disney had always been fascinated with illustration. He took an active interest in drawing from a young age; he was even commissioned to draw his neighbor’s horse. Aged 10, he continued his love of drawing, attending Saturday school at the Kansas City Art Institute. But Walt soon realized he was not good enough to pursue traditional illustration and turned his attention instead to caricatures and cartoons.

  When the family moved to Chicago, the teenage Walt became cartoonist for his school’s newspaper and took night classes at the Art Institute of Chicago. After leaving school, Walt intended to become a cartoonist. But with the advent of World War I, he joined the Red Cross as soon as he was old enough and served in France for a year in 1918. Throughout this time, he continued to hone his drawing skills, submitting numerous pieces to national magazines. Upon his return home in 1919, he started a concerted effort to find a job in illustration.

  Walt received numerous rejections, but eventually got a job at a commercial art studio that produced marketing materials and corporate stationery. Here he met Ub Iwerks, the man who would later become his first business partner and eventually a loyal member of the Disney empire. Both men were quickly let go from the studio once a busy period ended and, at a loose end, they decided to set up their own company in January 1920.

  Iwerks-Disney Commercial Artists was a short-lived venture but gave Walt valuable business experience. The pair won a few small contracts producing content similar to that of the studio they had been fired from. However, it was all over within six weeks, when Walt accepted a position at the Kansas City Film Ad Company for $40 a week and persuaded his bosses to take on Iwerks, too.

  The company made silent cartoon advertisements, mostly in black and white, and working at the ad company gave Walt a real taste for bringing his artwork to life. He decided to become an animator. He found he was able to improve the company’s basic and somewhat lackluster animation significantly, and started to work on his own cartoons in his spare time. His boss at the ad agency let him borrow a camera with which to experiment at home.

  Walt began working on a series of cartoons with the aim of selling them to the nearby Newman Theater. He called them the Newman Laugh-O-Gram Films, and presented them to the theater manager, who was impressed enough to ask how much they cost. For all the time he’d spent on the cartoons, Walt hadn’t actually worked out how much he’d need to charge to make a profit. Without thinking, he offered up a price of 30 cents per foot—the price it had cost Walt to produce them—and the theater manager promptly accepted.

  The deal was done, and it was too late to renegotiate the price to try to make a profit, but Walt had his first commission and didn’t intend to waste the opportunity. Walt needed to get help to produce the cartoon strips, but with no money to pay staff, he had to come up with another way of attracting talent.

  A scratchy start

  As a way around his staffing problems, Walt placed an ad looking for boys who wanted to learn to animate. He offered applicants training and a share of any future profits. He put together a small team, including colleagues from his work, and they spent evenings after work creating a series of cartoons that could be made into films and sold to theaters. The Laugh-O-Grams were a great success and became popular in theaters throughout Kansas.

  Walt’s team began working on other projects and created an animation of Little Red Riding Hood that proved a hit at local theaters. This success gave Walt the courage to leave his job at the Kansas City Film Ad Company and concentrate on his fledgling business full-time. He persuaded some of his former colleagues to invest in the business and set up Laugh-O-Gram Films in 1922, having raised $15,000. At 20 years old, he owned his first company, although he later joked that it “was probably illegal” to be president of a company at that age. Now in charg
e of a “proper” company, Walt rented some studio space, brought in his former colleague Ub, and took on another handful of budding young animators who earned very modest wages.

  The team began to work on more animations and worked nearly every hour of the day, producing some excellent results. But Walt desperately needed to find someone to distribute his products. With no advertising budget, Walt struggled to get his company noticed and eventually had to hire salesman Leslie Mace. Leslie took the films to New York and secured a deal with Pictorial Clubs of Tennessee, a company that hired out films to schools and churches. The deal was for a series of fairytale cartoons. Walt accepted a down payment of $100 on the understanding that a further $11,000 would come through once the series had been delivered.

  But six months later, just as Laugh-O-Gram Films was about to deliver the finished series, Pictorial Clubs of Tennessee went out of business. With no income and salaries to pay, Walt saw his employees begin to quit. He was kicked out of his apartment for failing to pay rent and soon became the only member of the company.

  At 20 years old he owned his first company, although he later joked that it “was probably illegal” to be president of a company at that age.

  Walt spent the next year accepting meager commissions, including one from a local dentist who wanted a film encouraging children to brush their teeth. The dentist offered him $500 and asked Walt to come by and finalize the deal, but Walt couldn’t even afford the trip. Times were tough and his only pair of shoes was being held ransom by the cobbler until he could pay his bill. He finally admitted this to the dentist, who promptly paid the cobbler’s bill, and the cartoon deal was completed. The money allowed Walt some breathing space and he soon began working on a new idea—one that would eventually lead to the creation of the Disney Brothers Cartoon Studio.

  Alice’s Wonderland

  Walt began to develop ideas for a new cartoon series based on Lewis Carroll’s Alice’s Adventures in Wonderland. New York distributor Margaret Winkler had expressed interest in the cartoon after Walt wrote to her describing it. However, Laugh-O-Gram’s debts were holding him back, and he didn’t have anywhere near enough cash to finish Alice. He had little choice but to declare the company bankrupt and move on. It was a tough period for Walt, but he later said he thought it was “important to have a good hard failure when you’re young.”

  In 1923, Walt set off for Los Angeles, believing it to be the only place he could really bring his visions to life with any success. At the age of 21 and with just $40 in his pocket, he arrived in Hollywood, renting a room from his uncle, Robert Disney. His brother Roy was also in LA, having been transferred to a hospital there to receive treatment for tuberculosis.

  Walt first approached the big movie studios to offer his services, but was turned down categorically. Encouraged by Winkler’s interest in the Alice cartoons, Walt decided once again to set up his own studio, this time in his uncle’s garage. He wrote back to Winkler informing her that he was “no longer connected with the Laugh-O-Gram Films Inc.” and that he was setting up a studio to produce the cartoons she was interested in. On October 16, 1923, a deal was made for the Alice series: six cartoons for $1,500 each, but with no advance.

  Walt realized from his experience with Laugh-O-Gram Films that his skills did not lie in cash flow management. The solution was to bring in Roy, who discharged himself from the hospital, put up $200 of his own savings, and borrowed an additional $500 from their uncle. With both their sons at work on the same project, the boys’ parents also chipped in, re-mortgaging their home to put up another $2,500.

  Walt and Roy then hired a small staff of animators, bought a second-hand camera, and hired a one-room apartment before setting to work on the cartoons. Disney Brothers Cartoon Studio was up and running. At this point, Walt declared to his father that the name Disney would eventually be famous all over the world.

  Although the studio had a steady income from Winkler, the distributor proved to be a tough client. Continually demanding tweaks and improvements to the cartoons, Winkler soon reduced the company’s profits to virtually nothing. To stem losses, Walt decided he needed a more professional animator to join his team alongside the junior staff. His old friend Ub Iwerks had returned to the Kansas City Film Ad Company after the collapse of Laugh-O-Gram. Walt offered him a salary that was $10 a week less than what he was earning in Kansas, but Ub accepted it and moved out to Hollywood to join him.

  Walt declared to his father that the name Disney would eventually be famous all over the world.

  By 1924, payments from Winkler were becoming increasingly late, and the fee for each cartoon soon went from $1,500 to $900. Winkler had recently married, and her new husband, Charles Mintz, had taken over her business operations, much to the dismay of the Disney brothers. As their profit margins evaporated, the brothers had to face their client. Walt pleaded with Mintz, insisting that the quality of the Alice series could not be maintained if the right amount of cash was not proffered. His frankness appealed to Mintz’s better nature: another 18 Alice cartoons were commissioned for $1,800 each as well as a share of any subsequent profits.

  The arrangement continued for another three years and more than 50 Alice cartoons, although this period was fraught with fee negotiations and more late payments on Mintz’s behalf. By 1927, the New York distributor grew tired of the Alice series and requested something new, possibly involving a rabbit ...

  Oswald the Lucky Rabbit

  Tired of the Alice series himself, Walt found a new lease on life with his creation Oswald the Rabbit. Over the previous three years, Walt had realized that his talents were best placed as the creative force of the company, not in the animation itself. He declared, “Around here, we don’t look backwards for very long. We keep moving forward, opening new doors, and doing new things, because we’re curious.”

  The Oswald series soon became immensely popular, and before long Mintz was paying $2,250 per cartoon. The production schedule was tight, and Walt later recalled, “In the early days of making these pictures, it was a fight to survive. I used to throw gags in because I was desperate. I didn’t even like them but I had to get one out every two weeks.” Despite the pressure on the studio, things were running smoothly.

  “Around here, we don’t look backwards for very long. We keep moving forward, opening new doors, and doing new things, because we’re curious.”

  By February 1928, it really looked as though the company, recently renamed Walt Disney Productions, was starting to make an impact. Walt convinced Roy that his name alone on the cartoon credits would make for a more trusted brand. Roy agreed that a single name would convey more confidence: audiences would associate the enjoyment they gleaned from the cartoons with one entertainer, as opposed to a factory-style corporation churning out commercial entertainment.

  But the company was heavily reliant on its Oswald contract with Mintz, a contract that was up for renewal. Walt set off for New York to negotiate a new deal. He left with high hopes, but what was to follow was one of the darkest periods in the history of the Disney organization.

  Mutiny in the ranks

  Walt had been working his staff hard over the preceding few years, and the fortnightly collections of the Oswald reels meant he had to make tough leadership choices. He joked, “Every once in a while I just fire everybody, then I hire them back in a couple of weeks. That way they don’t get complacent. It keeps them on their toes.”

  However, some of the staff did not appreciate his methods. The animators began talking in secret with Winkler, who was working on behalf of her husband, and she offered them better pay to come and work for Mintz directly.

  When Walt arrived in New York to meet Mintz, he asked for an increased fee of $2,500 per cartoon—what Disney thought was a fair increase as the cartoons were so popular—but Mintz had other plans. He offered a mere $1,800, which Walt immediately rejected. However, it was too late. Mintz had hired almost all of Walt’s animators out from under him. Ub Iwerks was the only animator to r
emain loyal. But the company had not only lost its staff, it lost Oswald, too. The terms of the original contract clearly stated that Walt Disney Productions did not own the rights to the cartoon, Mintz did.

  Goodbye Oswald, hello Mickey

  With no cartoon character, no distributor and virtually no animators to come home to, Walt returned to Hollywood. He sent a telegram to Roy from New York, insisting that it would all be OK and that he would tell him all the details when he returned. But the reality was stark, and even he could not have predicted the eventual turnaround in the company’s fortunes.

  There are several versions of what came next for the company. One version is that Walt began doodling a new character on the train back home from New York. However, the more accepted version of the story is that the studio’s next creation was the result of crisis meetings back home in LA with Ub and Roy.

  Stung by the disloyalty of his staff, Walt kept the ideas quiet for some time, holding secret meetings and idea sessions with his brother and loyal friend. Even the drawings for the new cartoon were hidden under Oswald sketches if others entered the room. This new character provided the inspiration Walt needed to get back on his feet and put the Oswald fiasco behind him.

  The character was a little mouse, dressed in white gloves and buttoned pants. He was named Mortimer Mouse, but Walt’s wife, Lilly, eventually persuaded her husband to rename him Mickey.

  In 1928, Ub began creating two new Mickey Mouse cartoons. But 1928 was a groundbreaking year for motion pictures, and the first film with synchronized sound, The Jazz Singer, was released. Walt was impressed and poured all the studio’s resources into a third cartoon that would have fully synchronized sound. They decided to scrap the first two creations and concentrate their efforts on this film, entitled Steamboat Willie.