A turning point in Armstrong's life came in 1835 when, during a fishing trip in Yorkshire, his attention was captured by what he recognised to be an inefficient use of water in a water-wheel. Over the next ten years, he devoted his spare time to developing the effective use of water as a motive power, and his tireless work culminated in his demonstration, to great applause, of a model hydraulic crane at the Literary and Philosophical Society (or Lit & Phil) in Newcastle in December, 1845.
Armstrong convinced the local council to allow him to convert an existing crane on the quayside for the use of hydraulic power and, in 1846, established the Newcastle Cranage Company in partnership with Armorer Donkin and others to manufacture machinery using his hydraulic technology. In 1847, the partners formed W.G. Armstrong & Co and founded the Elswick Engine Works later the same year. Armstrong finally resigned from his solicitor's job shortly afterwards.
An account of Armstrong's demonstration of his hydraulic crane at the Lit & Phil was published in this pamphlet, which recorded that:
“A beautiful model representing a portion of the quay of this town with a crane upon it, adapted to work by the action of the water in the street pipes, was placed upon the floor, and several diagrams… were exhibited on the walls.”