IBM and its Legendary Founder: Flawed Genius

According to a story told by management guru Peter Drucker, when the Japanese looked to America for businesses to emulate as they sought to rebuild their economy after World War II, the choice was obvious: IBM, the most successful company in the world. Kevin Maney provides us with this and many other fascinating anecdotes and insights in “The Maverick and His Machine: Thomas Watson, Sr. and the Making of IBM.” Maney’s account of the man who created IBM and shaped its famous culture is extraordinarily well-researched and balanced. He brings Watson to life, blemishes and all.

 

Watson stumbled without much success until he landed a job in 1903 with the National Cash Register Company of Dayton, Ohio. Cash registers were the high tech devices of the 1890s and early 1900s, as more and more retailers used the machines to manage cash and inventory. Watson quickly found his calling as a top salesman for this company.

 

National Cash Register was the Microsoft of its day with a monopoly hold on the market. NCR built their products to last and they did. Smaller independent operators found a lucrative niche in refurbishing used machines and selling them to the smaller businesses that could not afford the new machines. NCR’s president and founder, John Patterson, hated the idea that any other company might make money from “his” machines, so he created a sham organization with Watson at the helm to deal in used machines. Funded and controlled by NCR, with its sole purpose the elimination of NCR’s competitors, it had the resources to pay higher prices for used machines and then sell them at lower prices. The company ruined virtually every one of its competitors.

 

Watson ran the division successfully without thinking about either the legal or moral ramifications of his or the company’s actions, until the federal government caught up with NCR and indicted the company and its top officers. All the officers, including Watson, were convicted. After more than a decade of increasing success at NCR, Watson, who had recently married and started a family, found himself facing the very real prospect of imprisonment.

 

In 1914 Watson left NCR with the cloud of the felony conviction and a possible jail sentence hanging over his head. He found his way to New York where he spoke with Charles Flint, an entrepreneur who had numerous businesses in his portfolio. Flint had recently combined three of his more troublesome companies and in Watson he found the man he needed to run the new combination. And this, as they say, is where the story begins: Watson began life anew in New York as the head of the Computing-Tabulating-Recording Company, the foundation for today’s IBM.

 

The company was a mishmash of organizations that made time clocks, weigh scales and rudimentary tabulating devices. It was in this last business that Watson saw opportunity. The principal customer for the automatic tabulating machines was the federal government’s Census Bureau. But Watson saw the potential for growth in the expansion of large businesses, especially banking, insurance and manufacturing.

 

Watson brought with him the best ideas he had seen John Patterson implement at NCR, including Patterson’s obsession with culture. Watson wasted no time in creating the foundation for the culture that made IBM famous. He urged his men to dress in a style similar to the customers they called upon. He instituted sales quotas and contests. His meetings with his sales staff took on the air of revivals. Maney ends each chapter with lyrics from the many songs written in homage to “Mr. Watson”.

 

In 1924 Watson changed the name of his growing company from the cumbersome Computing-Tabulating-Recording Company to International Business Machines. The name had the sound that Watson sought. Many did not care for the new name, however, including one customer, a vice president of a large bank, who wrote, “The name Computing-Tabulating-Recording Company is to the writer much more euphonious, and would impress me as being a more impressive and substantial name than the one you have changed to.” The bank the critic worked for is no longer in business, while IBM carries on.

 

Following the stock market crash in 1929, Watson was determined that his company would not merely survive, but thrive. He took an enormous gamble by laying the groundwork for future expansion in the depths of the Depression. The company at times teetered precariously, but ultimately was enormously successful throughout the 1930s as it opened new markets in foreign countries.

 

Watson had been profoundly influenced by Charles Kettering, the brilliant engineer responsible for much of General Motor’s most important innovations. Watson met Kettering when they were both young men beginning their careers at NCR in Dayton. It was Kettering who instilled in Watson both an understanding of and an appreciation for the importance of research and development in any organization: “Watson believed that R&D would drive sales”. It was his passion for technological improvements that eventually prompted him to build what would become IBM’s famous laboratory.

 

It was not technology, however, but IBM’s culture that pushed the company’s success: “IBM’s culture was a whole new species … [The company] was not the best in the world at any particular part of its business … What Watson’s IBM did better than any company in the world was to create and manage a strong, cohesive – and successful – corporate culture. In turn, that culture wove together the pieces of the business and drove employees forward in ways that competitors couldn’t beat,” Maney writes. It was this culture that the Japanese found so compelling following World War II.

 

Ultimately, it was the vaunted IBM culture that proved the company’s undoing. Notwithstanding the ubiquitous and iconoclastic “THINK” signs that Watson posted through his company, the culture “sucked critical thinking out of the company and allowed Watson to think he was always right.” His senior managers seem rarely to have offered anything more than a “Yes, Mr. Watson”. As the years went by and the company grew more successful, Watson’s ability to hear anyone who even remotely disagreed with him evaporated.

 

Maney concludes by writing, “Thomas John Watson Sr. lived a great American life. He started out poor, built a grand company, made millions of dollars, and changed the world. He did so despite magnificent flaws … Watson’s strengths, though, were extreme. He was blessed with that rare charisma that inspires followers to actually love their leader … Watson lived for the company. He embodied it. Every ounce of his personal ambition was inseparable from his ambition for IBM.” Watson’s drive, energy, and charisma, along with his flaws, come through clearly in this excellent biography.

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