The name of "Thinkpad"

Big Blue's big adventure

Peter Golden -- 1/1/1999
Electronic Business

Part I:

In 1991, Denny Wainwright was a senior
planner at IBM Corp. in Boca Raton, FL.
Wainwright was part of the small group
working on a portable tablet computer: a
pen-based system that permitted users to
write on a screen, save the information and
transfer it to other computers by a cable.

The group was having trouble finding a
name for the product. IBM had a strong
preference for its computers to be
designated by numbers, as if only machines
that sounded like they had been invented
by George Jetson would be taken seriously
by customers. The company had deviated
from this tradition when it started selling its
desktop PC, calling it the IBM PC, but the
policy was still almost sacrosanct. Even so,
the members of Wainwright's group felt that
a number was too impersonal for their tablet
computer.

Although many working on the project were
young and more casual than the
prototypical IBMer, Wainwright was a
throwback to an earlier era at Big Blue. He
was a gentle, formal man, invariably
dressed in a suit and tie. At a meeting,
Wainwright held up the small notepad he
always carried. IBM used to issue the pads
so employees could jot down to-do lists, or,
better yet, earth-shaking ideas. The pad,
which was designed to fit into a dress-shirt
pocket, was bound in leather and
embossed in gold with the IBM motto,
"Think." Displaying the little leather legacy
of IBM's past, Wainwright said, "Let's call it
the Think pad."

The suggestion was more than a catchy bit
of marketing. It connected the tablet
computer to the philosophical foundations
of the company. By 1991, "Think" had
become mainly a marketing mantra at IBM,
but, for founder Thomas Watson Sr., it
epitomized his devout rationalism. In 1915,

Watson told employees: "All the problems
of the world could be solved easily if men
were only willing to think." Within a few
years this optimism would be challenged by
the brutality of World War I. But, Watson
and his son, Thomas Watson Jr., molded
IBM in accordance with the rationalist's
cheerful faith, which manifested itself as a
slow-moving, orderly approach to product
development, an obsessive concern for the
needs of the customers (which were tended
by an impeccably groomed sales force) and
a benevolent paternalism toward
employees. Ironically, the ThinkPad, which
would become symbolic of the "new IBM"
and the approaching 21st century, was in
many ways rooted in the company's past, a
result of a process first expounded by
Watson Sr. This story is about that irony,
and the lessons to be learned if we are
patient enough to watch the future emerge
from the past.

IBM helped push the personal computer
into the mainstream when it began selling
its PC in 1981. Eventually, though, it lost
control of the PC marketplace, and didn't
bring a portable to market until 1985. By
then, portables were already becoming
smaller and lighter. Tandy had scored in
the market with its TRS-80 Model 100, a
compact, lightweight computer with an
integrated word processor and modem. In
1986, Toshiba unveiled a state-of-the-art
portable line that became an immediate hit.
IBM followed with the 5140 Convertible PC,
but it proved to be nothing but an expensive
doorstop made of dated technology.

In 1991, Dataquest, the San Jose-based
market research firm, reported that during
the previous year the top five laptop
vendors had shipped 547,000 notebook
computers worldwide. Toshiba led the way
with 230,000, and Compaq Computer
wasn't far behind at 200,000. IBM wasn't
even on the list, and Jim Cannavino was
annoyed about that.

Cannavino was president of IBM's Entry
Systems Division, a predecessor of the IBM
PC Co., and until then his career had run
parallel with the company's glory days. He
had started out in 1963, a teenager with a
high-school diploma and a talent for


repairing mainframes. He proved equally
adept with software and was promoted to
lab director, where he began his steady rise
through the hierarchy.

For Cannavino, the PC-era was frustrating,
particularly his stint as the point man in
IBM's battle with Bill Gates over the jointly
developed OS/2 operating system, which
eventually lost to Microsoft's Windows. But
Cannavino saw an opportunity for IBM to
get into the mobile game when he spotted a
prototype of a tablet computer. It had been
produced by GO, a start-up that was hoping
its software would become the standard
operating system for pen products. "One of
the first things I had to do was replace 70%
of my executives," recalls Cannavino, who
retired from IBM in 1995 and is currently
CEO and chairman of CyberSafe Corp. of
Issaquah, WA, a network security provider.
"The decision-making process and
development time at IBM were too slow for
the market, and the executives I replaced
were the ones who didn't believe change
was required." Cannavino asked Kathy
Vieth, a vice president with wide-ranging
marketing experience, to oversee the
portable- and pen-computing development
team in Boca Raton.

"I thought Jim was onto something with the
pen computer," says Vieth, who today is
retired from IBM and lives in Vail, CO,
where she runs her own consulting
business. "IBM scientists are brilliant, but
you don't necessarily need brilliant for
successful products. You need common
sense and street smarts. That was Jim
Cannavino."

The name game

As the tablet neared completion and IBM
was preparing to announce it to the press, a
battle was still going on over Wainwright's
suggested name. The pen-computing group
wanted to call it ThinkPad. It felt that it was
crucial for such a personal product to be
named something that would not make
consumers feel as if they had to graduate
from MIT in order to use it.

Debi Dell, who was a product manager in
the group, recalls: "IBM's corporate naming

committee hated 'ThinkPad.' First, they
were upset that the computer didn't have a
number. How could an IBM computer not
have a number? Then, since IBM sold so
many products overseas, they were worried
because ThinkPad wouldn't translate easily
into foreign languages."

When Vieth announced the product in the
spring of 1992, she ignored the corporate
objections and simply referred to the tablet
as the ThinkPad.

"The press loved it," says Dell. "And as
soon as 'ThinkPad' caught on with people,
the naysayers changed their tune."

But the tablet found few buyers. As Paul
Carroll, author of Big Blues: The Unmaking
of IBM (Crown Publishers Inc., 1993),
observes, the market had shifted again and
become "more focused on helping people
communicate while on the move, rather
than compute."

It so happened that IBM had that type of
notebook computer under development. In
fact, the company was just six months away
from releasing it. But in early 1992, this
computer also didn't have a name.

Two years before the tablet ThinkPad was
announced, Cannavino became convinced
that future mobile machines should be
developed at the IBM design center in
Yamato, Japan. The Japanese were more
experienced with consumer electronics than
the Americans, and Cannavino felt their
culture provided them with an advantage
that could not be duplicated in the United
States.

Cannavino explains: "In Japan, you'll find
that competitors share more technical
information among themselves than
departments do in a [U.S.] company. The
Japanese understand that a healthy
industry is good for everyone. We haven't
quite learned that lesson over here."

At the time Cannavino was relocating the
mobile development operation to Japan,
Tom Hardy was corporate manager of the
IBM Design Program. Hardy had watched


his company's portable line fail in the United
States, and concluded that the aesthetics of
a product as highly personal as a notebook
computer was at least as important as the
technology it contained. For some at IBM
this was heresy. Yet IBM also had a history
of working with some of the world's most
distinguished industrial designers--Eliot
Noyes, for instance, who played a lead role
in the design of the IBM Selectric typewriter.

Another of these designers was Richard
Sapper. Since 1980, Sapper had been an
industrial design consultant to IBM. A
German by birth, Sapper left his job at
Mercedes, set up a studio in Milan, Italy,
and promptly became famous for the spare,
clean lines of his work--for instance, the
Tizio lamp--and other designs that have
been exhibited at the Museum of Modern
Art.

In 1989, when Tom Hardy began managing
the Design Program, he and Sapper had
numerous discussions about a method for
differentiating IBM products. They referred
to it as the "personality strategy," which
would attempt to add some excitement and
innovation in order to rebuild the brand.

In the spring of 1990, preliminary work
began on a notebook computer that was
aimed solely at the Japanese market and
would be known as the PS/55 Note. A
meeting was held at Sapper's
apartment/studio in Milan, the top two floors
of a lovely, old apartment house. Hardy
recalls riding up in a cage elevator with a
wooden seat and thinking that his
surroundings were far more pleasant than
an IBM office. Hardy and Sapper were
joined by Kazuhiko Yamazaki, the lead
industrial designer of notebooks at Yamato,
and an executive named John Wiseman,
who was serving as Cannavino's eyes and
ears.

Sapper felt that the design should be clean,
plain and elegant. His wooden prototype
was based on the shoukadou bentou, the
traditional, black-lacquered, Japanese lunch
box. It was small and compact. Desk space
is scarce in Japan, and, since security is an
issue with notebooks, a computer the size
of a bentou box could be locked in a filing

cabinet.

After the design phase was completed, the
wisdom of Cannavino's decision to produce
the notebook in the cooperative corporate
environment of Japan began to be realized.
Several firms who competed with IBM or
supplied its competitors, collaborated on the
project.

According to Kiyonori Sakakibara, a visiting
professor at the London Business School,
who in 1994 published a study of ThinkPad
development: "Ricoh Co. Ltd. performed . .
. the most critical task, assembling the
computer's two circuit boards, so densely
packed that each [had] chips on both sides.
The black-and-white liquid crystal display
was supplied by Sharp Corp. and other
Japanese manufacturers."

In the spring of 1991, the PS/55 Note was
released in Japan and became a best
seller. It weighed barely over five pounds,
and the coating of soft, black, rubberized
paint provided a pleasant tactile sensation
when you picked up the notebook.

The success of the PS/55 Note was in stark
contrast to IBM's PS/2 Laptop, which had
been released two weeks earlier in Europe
and the United States. The PS/2 had been
designed by the IBM team in Boca Raton,
and it flopped.

In the fall of 1992, when IBM released a
European version of the PS/55 Note, it also
sold well. Cannavino had been briefed by
Hardy during the design and manufacturing
of the new notebook, and Cannavino
decided to have Sapper and the Yamato
team create one for the U.S. market. For
two years, Cannavino had been
disappointed by IBM's inability to cut itself a
meaningful slice of the billions being spent
on mobile computers. He saw the problem
as the inevitable result of the company's
history.

"IBM had spent something like $30 million
studying what size to make a notebook,"
recalls Cannavino. "I finally said, 'The
business market has already decided what
size they want it to be--81/2 by 11, like


everything else in an office.'

"Spending that kind of a money on such a
simple question sounds crazy, but IBM was
geared to the lengthy development cycles
of mainframes," Cannavino continues.
"Each mainframe cost millions, so it made
sense to study the design for a long time.
But PCs and portables were basically
consumer products, and the development
cycle was moving down to about six
months.

"Right before Christmas in 1991,"
Cannavino says, "we had a big meeting in
Yamato, and I told the team I wanted the
notebook done for the United States by
summer. None of my executives thought it
could be done. I disagreed and said we
were staying in Japan--through Christmas
and New Year's if necessary--until we
worked it out. Needless to say we were
back in the States before Christmas Eve.
Six months, that was the key. We had to be
done in six months."

As Sapper and the Japanese team went to
work on the new notebook, forced to keep
to Cannavino's drastically shortened
timetable, they had no idea one of the key
technologies that would differentiate the
ThinkPad was languishing, unused, in
IBM's labs.

TrackPoint's progress

No feature had a harder time finding a
home in what would become the ThinkPad
line than the TrackPoint, the red-tipped
pointing stub embedded in the keyboard.
Today, the TrackPoint is so symbolic of the
brand that IBM places a bright red dot over
the "i," in ThinkPad advertisements and
brings up the same dot on the opening
screens of its notebooks. Yet the
TrackPoint is the result of an eight-year
journey that taught one persistent IBM
scientist and his supporters some
frustrating lessons about the alchemy of
turning corporate innovation into gold.

In 1984, Ted Selker read a study that
showed it took three-quarters of a second
for a computer user to shift his hand from
the keyboard to the mouse, and another

three-quarters of a second to shift it back
again. Selker was a researcher at the

Xerox Palo Alto Research Center

(PARC). He thought that if he could
construct a mouse that didn't require users
to move their hands, he would save them
time and trouble. Selker built a model
containing a pointing stick jutting up
between the "G" and "H" on a desktop
keyboard, with two click buttons set into the
bottom edge. Unfortunately, Selker had
other assignments, and he put his model on
the shelf.

Three years later, Selker was working as a
scientist for IBM, and showed the prototype
to his colleague, Joseph Rutledge, a
mathematician. Selker recalls: "He loved it,
and we went to work. The first and saddest
thing we learned was that 100 years of
research says that sticks are not good at
pointing. Then we got even more depressed
when our own study demonstrated that
finger-pressure control was an inefficient
way to move a pointer around a screen."

Over the next four years, Selker and
Rutledge produced a functioning prototype,
discovering that if they slowed down the
cursor and made the movements of the
stick less stiff, then people were able to use
it accurately and comfortably.

"I thought the pointing stick was an obvious
idea," says Selker. "You could get about
20% more editing time without handling a
mouse. I started showing it around IBM,
and at conferences and trade shows. A lot
of people hated it. I did find some
supporters, like John Cox, an IBM Fellow.
John had a stroke and when some of his
co-workers visited him in the hospital and
asked if he wanted anything, John said,
'Get me one of Ted Selker's keyboards.' "

A significant problem Selker and Rutledge
faced was that since the days of the
Selectric typewriter, IBM has been
renowned for its keyboards, and the
pointing stick violated the integrity of this
revered legacy. In addition, Selker and
Rutledge soon realized that a product
manager was the one person who had the
power to bestow a meaningful blessing on
an invention, but product managers also


tended to be risk-averse--reluctant to
approve features not tested in the
marketplace.

Selker observed this phenomenon firsthand.
He remembers demonstrating the
new device for an executive high up the
ladder who immediately carried the
keyboard to a product manager and said,
"Isn't this great? Can we make it?"

"Absolutely," the product manager replied.
"As long as I'm not responsible for my P
and L's."

Selker's situation wasn't unique. Numerous
inventions of IBM scientists never escaped
the lab. They were patented, and then
deemed either useless or unmarketable,
and left to languish in filing cabinets and
boxes.

IBM's X-Files?

Fortunately for Selker, Jim Cannavino had
been fascinated by the neglected
technology for years. At the time,
Cannavino was general manager of IBM's
Personal Systems Group, and on weekends
he used to browse through dog-eared files
hoping to uncover a useful product.

"IBM scientists are brilliant,
but you don't necessarily need
brilliant for successful
products. You need common
sense and street smarts. That
was Jim Cannavino."

--Kathy Vieth

When he read about the pointing stick,
Cannavino thought he saw something. He
had long been concerned about how you
could sit on a plane with a notebook
computer and have enough room to
manipulate the mouse. Cannavino disliked

the current solution used by the IBM
development team in Yamato--the trackball.
He got himself one of Selker's and
Rutledge's working prototypes, plugged it
into his desktop computer and tested it.
Then he phoned Selker and said, "Ted, this
is great. How come we're not using it?"

"They won't let me," Selker said.

"Guess what, Ted," Cannavino replied. "I'm
'they.' "

Selker was thrilled by the call. "Jim had
about 100,000 people working for him,"
says Selker, but even Cannavino's support
didn't guarantee that the pointing stick
would become a product, so Selker and
Rutledge published their pointing-stick
research in a scientific journal.

"Then we did a press release over
everyone's dead body," says Selker.
"BusinessWeek picked it up, and since the
magazine is outside the company, IBM
executives took notice."

Meanwhile, running parallel to Selker's
campaign, Hardy was championing the
pointing stick for the new notebook, and
because his group oversaw the company's
15 design centers around the world, they
were positioned to push the concept at IBM
Japan.

"I also showed it to Bob Corrigan, who was
head of the PC Co.," says Hardy. "Bob
thought it was terrific, and so did Richard
Sapper. We really needed the space-saving
feature of the pointing stick, but, more
important, using it would build brand image
and give IBM product differentiation in a
highly competitive market."

As a result of all these efforts, the pointing
stick was put into testing in Japan, but there
was one last hurdle for it to clear, the
approval of Toshiyuki Ikeda, the notebook's
product manager.

"I saw the first prototype of the TrackPoint,
and it was not the equal of the trackball,"
recalls Ikeda, currently the director of OEM
System Development for IBM. "I was


reluctant to support a brand-new idea. But
then a tester commented that the trackball
is used by Apple, and it reminded the tester
of our competitor's computers. Then I knew
I had to do something different, so I made
the decision. Ted Selker did a super job
within a couple of months. We ran around
to do-it-yourself shops in Japan searching
for different types of parts."

For Selker and Rutledge, the transformation
of their invention into a product was
enormously satisfying. "What it taught me is
that companies should have incentive
programs for their scientists to become
entrepreneurs [for their innovations]," says
Selker.

Red badge of novelty

One final change made to the TrackPoint
was suggested by Sapper. The tip of
Selker's and Rutledge's pointing stick had
been black, a color that got lost in the black
ThinkPad keyboard. Sapper said, "Let it
sing," and the tip was changed to red,
which brought about a closing act of
corporate silliness rivaled only by Abbott
and Costello trying to decide who's on first.

Hardy explains: "IBM had a cherished
standard which said that the only thing that
could be red on a product was an
emergency power switch, those enormous
switches on the mainframes. To have the
little TrackPoint tip subjected to this same
standard was absurd, but, given the
situation at IBM then, we knew the red dot
wouldn't get through the system. So we
toned it down a shade and called it
magenta."

Soon afterward, Designer Yamazaki
received a call from an IBM standards
watchdog, who wanted to know why
manufacturing had produced these tiny red
parts.

Yamazaki said, "They're not red. They're
magenta."

"No," replied the watchdog. "They're red."

The two men battled back and forth, then

phoned Hardy to adjudicate the argument.

"They aren't red, they're magenta," Hardy
assured the standards overseer, which led
to a rambling, philosophical debate on the
ontology of redness. Still, the watchdog
held his position--no red allowed, not even if
you called it magenta.

Hardy suggested that they take the
argument to a higher level, confident that
the watchdog would shrink from continuing
such a trivial discussion with senior
management. That was how it played out.
The tip kept its magenta classification, and
in the coming years, with the introduction of
each new ThinkPad, the color of the rubber
tip was increased a shade until it finally
became a bright red symbol of the brand.

Part II:

In October 1992, the new IBM notebook
line was unveiled to glowing reviews. The
reviewer in PC Magazine described the top-
of-the-line ThinkPad 700C as "The best
notebook I've ever used," and PCLapTop
stated what would slowly dawn on the
industry: "IBM has finally come to play in
the portable market."

Despite a suggested retail price of $4,350,
buyers were delighted with the IBM
ThinkPad 700C, especially its 10.4-inch,
active-matrix color screen, the largest thin-
film transistor (TFT) color screen then
available in a laptop.

"Somebody bet me $5 the engineers
couldn't get that size screen into a
ThinkPad," says Jim Cannavino."I have that
$5 bill framed and hanging on my wall."
(See "A legend in his own time".)

The praise for the screen also confirmed
Cannavino's belief that he had made the
right choice to develop the computer in
Japan, where competing manufacturers
work together more collaboratively than
they do in the United States. The screen in
the ThinkPad, for example, had been made


possible by a joint venture between
Armonk, NY-based IBM Corp. and Toshiba
Corp. of Tokyo.

"The ThinkPad rocked the market," says
Bob O'Malley, who that fall was the
managing director of IBM Personal
Systems, Asia-Pacific."The early notebooks
were like the fleet cars purchased by a
utility company . . .functional, ordinary. But
the ThinkPad was like a Porsche
convertible. It made people say, 'Wow!' and
that 'wow' was unprecedented. I remember
that none of the geographic areas could get
enough ThinkPads. It seemed as though
everybody had to have one."

O'Malley continues to be particularly well-
suited to gauge the impact of the ThinkPad
on the notebook market because he
became chief executive officer of $5-billion
Pinacor Inc., Tempe, AZ, the third-largest
distributor of technology products in the
United States.

"The ThinkPad revolutionized the way
notebooks were packaged," he says.
"It had so much cachet that the tech people
suddenly weren't making the buying
decisions on notebooks. Now the CEOs
were saying, 'I want one of those, nothing
else.' The ThinkPad got IBM where they
needed to go to expand all of their
businesses--right inside the executive
suite."

This excitement translated into sales.
According to Dataquest Inc., the San Jose-
based market research firm, in 1991 IBM
wasn't even among the top-five laptop
vendors, but the ThinkPad changed that.
Within 24 months of releasing the
ThinkPad, IBM pulled even in notebook
sales through the reseller channel with
market leaders Toshiba of Irvine, CA, and
Compaq Computer Corp. of Houston.

The early success of the ThinkPad was the
haphazard result of a dedicated group of
IBMers learning from the company's
previous failures in the mobile market, and
overcoming corporate recalcitrance (see
Part I of this story, in Electronic Business,
Jan. 1999, p.68). But the long-term success
of the ThinkPad line was attributable much

more to a branding initiative that was
unprecedented in the notebook market.

In 1992, Bruce Claflin was named general
manager of IBM Mobile Computing. Claflin
had a marketing background, and this was
critically important to ThinkPad products. If
technology had always been presumed to
be paramount, IBM was about to be
confronted with startling news. As Designer
Richard Sapper told the international design
journal, I.D. Magazine: "IBM did some
market research [the year following its
introduction] and found that 30% of the
ThinkPads were bought because of their
design. It was a shock to many people."

"I'm that idiot"

Claflin, who is currently president and chief
operating officer of 3Com Corp., Santa
Clara,had anticipated the findings of that
research.According to Debi Dell, who was a
member of the Mobile Computing Group,
"Bruce Claflin is the father of the ThinkPad
brand. He was responsible for identifying
ThinkPad as a class of products. And Jim
Cannavino deserves credit for bringing him
onboard."

Dell recalls a meeting she attended with the
Mobile Computing Group, and the first
question she asked was: "Who is the idiot
who decided to use ThinkPad across all the
notebook lines?"

Smiling, Claflin replied, "I'm that idiot."

Once Claflin ensured that IBM notebooks
would be known by a single name, he had
the various models divided by numbers,
much as Mercedes-Benz differentiates its
cars. The ThinkPad 700 models were at the
high end; the 300 line was for value; and
500 was used for subnotebooks. Other
designations would be added as the line
evolved.

At the time, Claflin's approach ran counter
to the prevailing wisdom among notebook
manufacturers, who were not much
concerned with establishing a single brand
identity for all their models. As journalist
Mark Brownstein points out in "The Portable
Computing Story," (PC Portables, March


1998) since the earliest days most vendors
had relied on the jazziest "gotta-have"
features to sell their notebooks--docking
stations, DVD drives and infrared ports, for
example.

On the contrary, Claflin had little patience
for haphazardly flaunting a feature here or
an innovation there, because, besides
keeping a close watch on the identity of the
ThinkPad, Claflin paid strict attention to
customer requirements, an IBM tradition
rooted in the early mainframe days. Dr.
John Armstrong, who spent 30 years at
IBM, during which he served as director of
research, recalls: "IBM would bring in its big
corporate customers, and they would be
given a confidential look at our developing
technology. We asked their opinion, and
their answers were taken seriously."

IBM, Armstrong adds, was well-suited to
produce for the portable market because, in
a sense, notebooks are far more similar to
mainframes than to desktop PCs.

"A notebook is not as much a collection of
commodities as a desktop [PC]," says
Armstrong. "Nor is it designed to be opened
up and fiddled with. The components and
ergonomics are mainly controlled by the
manufacturer, much as with mainframes.
Furthermore, one of the biggest challenges
in designing a notebook is managing heat,
and, from its mainframe experience, IBM
knows almost everything there is to know
about thermal control. Finally, nearly all
successful product development is
incremental. That's the dirty little secret of
technological progress, and IBM was keenly
aware of it."

That was Bruce Claflin's goal: protecting
and gradually strengthening the brand.
Design choices were based on customer
requirements, but Claflin searched for input
beyond his biggest clients. At Comdex in
1992, Claflin spoke with Dr. J. Gerry Purdy,
at the time a vice president and chief
analyst at Dataquest. Claflin asked Purdy if,
with the ThinkPad 700C, IBM had at last
arrived in the notebook market. Purdy said,
"You're an unknown to the analysts. Apple,
Compaq and Toshiba have been selling
good notebooks for years. You need to

build credibility."

Purdy suggested that IBM meet periodically
with industry analysts and the computer
press, and Claflin backed the idea, which
led to the creation of the Mobile Computing
Industry Advisory Council, a varied group of
experts who still meet with IBM to hear its
plans and offer advice. If any experts forget
to check their egos at the door, they aren't
invited again.

"I was--and continue to be--impressed by
IBM's willingness to share information with
us," says Purdy, who now heads his own
consulting firm, Mobile Insights Inc., in
Mountain View. "None of the members are
paid for their time, and at the end of our
discussions we just about take a vote. Not
only does IBM get some meaningful advice,
these meetings become casting sessions
for consultants."

The success of the ThinkPad couldn't have
come at a better moment for company
morale. From 1991 through 1993, IBM
reported losses of $16 billion and 117,000
jobs were cut. Then, on April 1, 1993, Louis
Gerstner Jr. replaced John Akers as CEO.

Gerstner had a reputation for being tough
and smart, but most fortuitous for the future
of the ThinkPad was the fact that his vision
for reviving IBM was in accord with Claflin's
brand strategy in the mobile market.

While Gerstner was heading American
Express, AMEX was running its
"Membership has its privileges" ad
campaign. Shelly Lazarus, chairman and
chief executive of advertising agency Ogilvy
& Mather, who was working on the account,
told Fortune: "I learned a big lesson from
Lou . . . nobody ever got a . . discounted
card. Lou would say, 'This is a violation of
the brand, and we're not doing it.' "
Secondly, as Gerstner himself recalled for
the cable television news network CNBC in
October 1998: "We had to focus this
company maniacally on the customer."

This approach would pay off during the five
years of Gerstner's stewardship: Shortly
before he spoke to CNBC, IBM stock hit its
record high of $143.69 a share, up from a


low of $25.

Mobile Computing remained dedicated to
the marketing strategy established by
Claflin even after he left the group, but
technical innovations also helped to attract
buyers.

For example, there was the work of John
Karidis, now an IBM distinguished engineer,
who in 1995 managed to fit a full-size
keyboard into the 4.5-pound ThinkPad
701C. The keyboard folded up when the
ThinkPad was closed and expanded over
the edges of the case when it was opened.
It was known as the "butterfly," a feature
whose popularity with users spawned
legends at Big Blue. One customer, an
elderly woman, so the story goes, was so
enchanted with her butterfly keyboard as
she passed the hours playing solitaire on
her notebook that, when she died, her
grandchildren buried her ThinkPad with her.

Bells and whistles attracted buyers, but it
was strict adherence to brand identity that
would be responsible for the staying power
of the line. By mid-1995, the research firm
of Audits & Surveys, New York, was
reporting that IBM was the notebook sales
leader in the reseller channel, controlling
29%, with Toshiba and Compaq holding
23% and 21%, respectively. An analyst at
Audits & Surveys explained the change,
telling PC Week: "Toshiba and Compaq
haven't done badly. It's just that IBM
gained."

The report did not include sales through
mass merchandise or retail distribution
channels, where Toshiba and Compaq
occupied the top two spots.

For the moment, IBM contented itself by
leading the corporate market. But as the
ThinkPad became an established brand,
the marketplace itself began to spin,
creating a slugfest among the notebook
giants. The battles could be traced to four
main causes: the new presence of IBM; the
speed of emerging technology; the rapidly
growing demand for notebooks; and the
ability of some smaller companies to cut
themselves a significant piece of the mobile

pie.

In an attempt to grab back the lead among
corporate buyers, Toshiba matched IBM's
technological advancements with their own.
In 1995, for example, Toshiba discontinued
its advanced notebook line and replaced it
with a totally redesigned family. IBM
countered with more new technology, the
ThinkPad 760. As IBM and Toshiba
squared off, Compaq introduced three new
consumer models. Compaq had always
charted a middle course in designing their
notebooks -solid product, decent
technology, reasonable price - and now
they slashed prices on both their high- and
low-end systems and took over as the
leading seller of consumer notebooks.

By the third quarter of 1997, the CNET
News Web site was reporting that
"traditional leader Toshiba [was finding] its
once-unassailable spot at the top of the
notebook world . . . eroding."

In this case, "eroding" was an extremely
charitable choice of words. Actually,
Toshiba had seen its 41.5% of sales in the
retail and dealer notebook channels slip to
24.8% in a market that was expanding at an
annual rate of over of 20%.

Shake-up

Toshiba would recapture the lead in retail
notebooks, but by then the playing field had
shifted again. Notebook components had
become standardized and readily available,
and down in Round Rock, TX, at Dell
Computer Corp., this development was
regarded as the loud knock of opportunity.

"Dell managed to compete with the major
notebook manufacturers by waiting until the
supply of relevant technology was plentiful,"
says Randy Giusto of market research firm
International Data Corp., Framingham, MA.
"They avoided the cutting edge that IBM
and Toshiba occupied. It was too
expensive."

Dell kept its inventory small and built
notebooks to order, enabling them to pare
prices to the bone and push competition to


the limit, causing one IBM product
marketing manager to mention to a ZDNet
reporter that Dell was "going at it like mad
things." According to Pinacor's O'Malley,
the authority of the ThinkPad brand forced
Dell to take a completely different tack.
"Dell couldn't compete with the brand
identity established by the ThinkPad," says
O'Malley, "so they focused their identity on
the experience of purchasing a notebook.
Configuring and pricing it on the Web,
placing the order and waiting for the
delivery. That's a big part of the Dell brand-how
you actually wind up owning their
product. But it was IBM that first showed the
notebook industry that success was tied to
strong branding standards."

In response to Dell, IBM, Toshiba and
Compaq inaugurated build-to-order
programs. In addition, to hold onto precious
market share, the trio repeatedly cut prices
across the board. IBM even made a stab at
retail channels by introducing the ThinkPad
310, an entry-level system priced under
$1,600 with a dual-scan display, which
never really secured a foothold in the
market.

Far more successful was the ThinkPad 380
Series, an all-in-one design with a built-in
hard drive and a CD-ROM stacked on top of
the floppy drive. IBM classified the 380s as
mid-priced, and sales were brisk. To meet
the demand the company would
manufacture one million 380s in 18 months.
But with a suggested retail price of between
$2,199 and $3,899, IBM still could not
overtake the lower-priced machines offered
by Toshiba and Compaq, and so from 1997
until the fall of 1998, Big Blue chose to
remain the pricey darling of the corporate
world.

The dominance of ThinkPads among high-
end buyers was not lost on manufacturers.
For instance, in early 1998 Micron
Electronics, Nampa, ID, introduced its
GoBook. From the 4.4-pound notebook's
sleek black case, standard-sized laptop
keyboard and bright screen, it appeared
that the Micron design team was emulating
the ThinkPad 560, IBM's best-selling
subnotebook, trying to improve on its
features and beat its price by selling it

direct.

IBM's reply to its challengers for king of the
Fortune-1,000 hill came in the spring of
1998 in the form of the ThinkPad 600, a
remarkable thin-and-light model designed
specifically for the corporate market, where,
according to analysts at ZD Market
Intelligence, during the third quarter of 1998
IBM would up its lead over all notebook
makers with a 47% market share.

By the fall of 1998, it also seemed that IBM
was working its way beyond its usual
backyard. Although ThinkPads were not
widely sold at standard retail outlets, in
September PC Magazine published a list of
the top-selling retail notebooks, and
ThinkPads held 6 of the 10 spots. The list
was good news for IBM, because retail
plays a considerable role in maintaining
brand identity.

"Plant your flag"

As senior hardware analyst Stephen Baker
of PC Data Inc., Reston, VA, says, "All the
volume in notebook sales is to corporations.
But you also need a healthy presence in
stores to hold onto that market. Executives
may not purchase their notebooks at
CompUSA, but they shop there, and the
visual publicity is critical. You have to plant
your flag."

IBM unfurled its retail banner most recently
on October 13, 1998, with the ThinkPad i
Series. The i Series featured the black
matte finish, TrackPoint and keyboard
common to all ThinkPads, but it was
designed based on six research studies of
the consumer mobile market, consumers
being defined by IBM as people spending
their own money on technology whether for
a small business or personal use. For
example, one study showed that consumers
wanted active-matrix screens, so that is all
you will find on the three models that make
up the i Series. Another survey revealed
that IBM wasn't taking advantage of the
notebook's brand equity.

"We discovered that 92% of shoppers in
retail outlets, who are among the fastest-
growing segment of the mobile market,


were aware of ThinkPad, but
considered them unaffordable", says Adalio
Sanchez, general manager of IBM Mobile
Computing. "We also discovered that there
were three major price points where they
decided not to buy--$1,500, $2,000 and
$2,500, so each of the three i Series
models are priced accordingly. [Price your
products right] and people whom you didn't
think of as your market suddenly become
potential customers."

Numbers alone--an estimated $5 billion in
sales--establish the ThinkPad as a financial
success. The success of the brand can be
demonstrated in other ways. James
Sciales, public relations manager for the
IBM Personal Systems Group, reports that
not long ago he saw a television
commercial produced by IBM Japan.
Remember that when Denny Wainwright
proposed the name "ThinkPad," the IBM
corporate naming committee objected to it,
claiming it would hurt sales overseas
because the name wouldn't translate into
foreign languages. It didn't have to. The
committee had not understood the power a
brand can have. In the TV spot, the actress,
Ryo, is walking and carrying a notebook
computer. She speaks entirely in Japanese.
Then she pauses and smiles, holding up
her computer to the camera, and says a
final word: "ThinkPad."


Peter Golden has been a contributor to
Newsweek and the Detroit Free Press.
Email him at [email protected].

Electronic Business would like to thank
Debi Dell and Dr. J. Gerry Purdy for their
generous assistance with this article. Debi
Dell, who has worked at IBM for 17 years, is
currently national competency manager in
charge of IBM Mobile and Wireless
Services. Dr. Gerry Purdy is an industry
analyst and president of Mobile Insights Inc.
in Mountain View. Dell and Purdy are the
authors of a recently completed book on the
ThinkPad, “ThinkPad: A Different Shade of
Blue -How IBM Created the Most
Successful Brand in Computer History”

 

Nice Read!

 

Nice read, but ****, that was long for a forum post lol

 

Who will finish this?

 

seems the copy paste did not allow longer lines