Watson, Thomas J.

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Watson, Thomas J.

(1874-1956)
International Business
Machines Corporation, (IBM)

Overview

American business executive Thomas J. Watson assumed management of the International Business Machines Corporation (IBM) in 1924 and built it into one of the world's largest and most respected corporations. As a manufacturer of business machines and computers, IBM under Watson's innovative and inspired supervision led a revolution in the business world that heralded the information age. By the end of 1955, Watson's last full year as IBM's chief executive officer, he had guided his company from debt to having total assets of $630 million and from fewer than 4,000 employees to 41,000. IBM was poised to dominate the emerging computer market, and by the 1960s and 1970s it controlled 80 percent of the U.S. market. Due to Watson's effective leadership, IBM had become a model for corporate planning, research, and customer and employee loyalty.

Personal Life

Thomas John Watson was born February 17, 1874, in Campbell, New York. He was descended from a Scottish-Irish family who had moved to upstate New York in the 1840s. Watson's father, Thomas, was a lumber dealer. Young Tom Watson was educated at Addison (New York) Academy. His father urged him to study law when he graduated and offered to pay his college expenses, but Watson was anxious to pay his own way and to begin his business career. Watson took a year-long course at the Elmira (New York) School of Commerce and, at the age of 17, found a job as a bookkeeper in Clarence Risley's market in Painted Post, New York. Soon bored, he took a job as a peddler selling organs and sewing machines.

From such a modest start, Watson would eventually emerge as one of America's greatest and most influential business executives. He married Jeanette Mary Kittridge of Dayton, Ohio in 1913, and they had two sons and two daughters. Two of their sons, Thomas J. Watson, Jr. and Arthur K. Watson, followed their father to work at IBM. Thomas J. Watson, Jr. became president of the company in 1952 and was chairman from 1961 to 1971.

A Presbyterian and a Democrat, Watson was a strong supporter of Franklin Roosevelt and Harry Truman. Dignified and conservative in his dress and manner, Watson neither smoked nor drank, nor did he take vacations, working 16-hour days and spending most of his evenings at the functions of his many employees' clubs. Watson's personality and manner defined the IBM corporate identity that extended to its severely conservative dress code and the ever-present stimulating signs that graced IBM offices such as "Aim High and Think in Big Figures," "Serve and Sell," and IBM's trademark, a Watson creation: "Think." Although Watson has been called "Salesman Number 1," his manner was the opposite of the typical salesman. While talking to Watson, who was bashful and soft spoken, most people forgot their sales resistance and succumbed to his quiet charm and integrity.

Watson's principal interest outside of business was as a patron of the arts. He began acquiring paintings when he was only 24, and was an outspoken advocate of the mutual benefit in joining the world of art with business. At the 1939 New York World's Fair he exhibited paintings by artists from 75 countries and a collection by American artists that IBM had acquired. For many years he served as a trustee at Columbia University and as the president of the International Chamber of Commerce. An adviser to several U.S. presidents, Watson, who never graduated from college, was the recipient of 32 honorary degrees. For offering IBM's considerable research and production capacity for the war effort during World War II, Watson was given the U.S. Medal of Merit. He also received numerous decorations from several foreign countries, including the Merit Cross of the German Eagle, which Watson returned to Hitler in 1940, stating that the policies of the Nazis were contrary to the causes for which he worked.

Career Details

In 1895 Watson joined the fast-growing National Cash Register (NCR) Company as a salesman. At first the company manager was uninterested in hiring him, but Watson persisted, making numerous trips to the company's Buffalo office. After several months he was finally offered a position. The United States was in the midst of a depression, and Watson sometimes went many weeks without a single sale. He sustained himself by quoting the tried-and-true slogans and homilies that he later would use at IBM. Despite his early lack of success, he received encouragement from his superiors, and, within two years, Watson had become the top salesman in the Buffalo office. He moved steadily up the company ladder to become general sales manager and was given a position in NCR's Dayton home office in 1903. Watson's aggressive assault on NCR's competition, the creation of a company to undercut competitor's prices on second-hand cash registers, was illegal, although it is unclear whether Watson was aware of this. Watson, along with NCR's president and 28 others, was indicted and convicted for the scheme. An appeals court later ordered a new trial, but it was never held. In 1913, in a dispute over an antitrust legal issue, Watson was fired from NCR, though he was presented with a $50,000 parting gift.

Watson was selected to head the Computing-Tabulating-Recording Company of Elmira, New York, a small holding company that controlled four small firms that produced punch-card tabulators, time clocks, and other business machines. As company president, Watson acted to secure loans to finance expansion. The move helped the company's gross sales increase from $2 million in 1914 to more than $33 million by 1949. Personnel increased from 235 to 12,000 during the same period. Watson was committed to research and development, and much of the borrowed funds went into engineering laboratories that produced new machines such as the key punch, card sorters, tabulators, and eventually the computer. In 1924 the firm merged with International Business Machines Corporation and took its name. The business he had taken over had by then more than doubled in terms of plant size, number of employees, and volumes of sales. As the head of IBM, Watson helped those figures double yet again about every five years during his reign.

In the 1930s, a new engineering laboratory was built in Endicott, New York, and IBM entered the electrical typewriter business with the purchase of Electromatic Typewriters, Inc. of Rochester, New York. As the holder of more than 1,400 patents as of 1941, IBM held a virtual monopoly in the field of business machines. IBM would maintain its dominance through the inspired leadership of Watson. Having been a salesman, Watson devoted considerable effort in training his sales force, insisting that IBM salesmen should know how to install, operate, and repair all the equipment that they sold. Working out the three basic steps in the selling technique: the approach, the demonstration, and the closing, Watson insisted that his salesmen stress that IBM sold not machines but service. Extremely concerned about IBM's corporate image, Watson was rigid in his hiring and personnel practices. Before World War II, employees at IBM were exclusively male and white Anglo-Saxon Protestants. Jews, Catholics, blacks, and women were unacceptable. All employees were expected to have a copy of Men, Minutes and Money, a collection of Watson's speeches and essays. Employees were expected to be freshly shaved, wearing daily shined shoes, and to follow their chairman's dress style—dark suits, quiet ties, and white shirts—whether in the main New York office or in the Endicott factory. The IBM image virtually defined the corporate concept of the "organization man." Yet the benefits of conforming to IBM's image were many. Forbes declared in a 1948 article that Watson had created "the nearest to ideal working conditions." Watson paid higher rates than his competition did. There were few firings, and benefits included health and life insurance, an rarity at the time. The company also maintained at Endicott a country club for all employees. IBM workers were made to feel that they were members of a special group who were encouraged in their innovations and originality and were expected to carry a THINK notebook to record their inspirations.

The benefits of Watson's emphasis on understanding the market and encouraging innovation are best demonstrated in IBM's entry into the electronics field. After World War II, IBM held off producing electronic computers, continuing to produce only its electromechanical machines in the early 1950s. Sperry Rand's development of UNIVAC in 1948, the first electronic computer, however, prompted IBM to accelerate its own electronic development. Though IBM had brought out its first electronic calculator in 1946, it was not until 1952 that IBM produced its first large-scale electronic data processing system. By 1956, the year of Thomas J. Watson's death, IBM had leaped far ahead of its competitors due to its superior software packages and worldwide marketing operation. IBM won the battle for dominance in the early years of the electronic revolution because of its considerable commitment to research and because its sales force knew what businesses needed for information processing and accounting. IBM therefore designed its machines to fit the needs of its customers, a successful strategy that Watson had spent his lifetime promoting.

By 1955, Watson's last full year as IBM's chief executive, the company's total assets were $630 million with a domestic work force of 41,000, with branch offices in 189 cities, and plants in six cities. The IBM World Trade Corporation had 19,000 employees, 11 plants, and 208 branch offices in 82 countries. Watson had seen his struggling company grow into a world giant that would continue to dominate the business machine market and the rapidly developing computer industry under the direction of his son.

Chronology: Thomas J. Watson

1874: Born.

1891: Began business career as bookkeeper and peddler.

1898: Joined the National Cash Register Company as a salesman.

1914: Became president of the Computer-Tabulating-Recording Company.

1924: International Business Machines Corporation established with Watson as president.

1946: IBM released its first electronic calculator.

1949: Became chairman and chief executive of IBM.

1952: IBM rolled out its first large-scale electronic data processing system.

1953: IBM introduced its first commercial computers.

1952: Thomas J. Watson, Jr. became president of IBM.

1956: Died.

Social and Economic Impact

During his tenure as head of IBM, Watson created one of the world's largest and most influential corporations. Dominating its markets, IBM supplied the business machines upon which American business depended by creating new products to meet customers' needs. Through the development of data processing equipment and a successful computer line, IBM changed the very nature of modern business itself. Through his years at IBM's helm, Watson managed to make IBM the gold standard for product reliability and innovation. He also forged the dominating principles of the corporate culture with its emphasis on company loyalty and team spirit, accomplishing the difficult task of simultaneously encouraging employee uniformity and innovation and individuality.

It may well be that Watson, described in a Saturday Evening Post article as a striking example of "one-man rule in business," was one of the last of the breed of dominating personalities whose identity became inseparable from that of his company.

The machines and devices that IBM pioneered changed modern culture in essential ways. From the calculator to the computer, IBM has been in the forefront of the information and electronic explosion in the second half of the twentieth century, a future that Thomas J. Watson anticipated and helped to create.

Sources of Information

Contact at: International Business Machines Corporation, (IBM)
One Old Orchard Rd.
Armonk, NY 10504
Business Phone: (904)765-1900
URL: http://www.ibm.com