Thomas J. Watson, Jr.

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Thomas John Watson, Jr.
Thomas Watson Jr. in a 1955 Time magazine cover.
Born January 14, 1914
Dayton, Ohio, U.S.
Died December 31, 1993
Greenwich, Connecticut, U.S.
Occupation Business
Spouse Olive Cawley (m. 1941 until his death)
Parents Thomas J. Watson and Jeanette M. Kittredge
Children Thomas John Watson III, Jeanette Watson, Olive F. Watson, Lucinda Watson, Susan Watson, Helen Watson

Thomas John Watson, Jr. (January 14, 1914 – December 31, 1993) was the president of IBM from 1952 to 1971 and the eldest son of Thomas J. Watson, IBM's first president. He was listed as one of TIME Magazine's 100 most influential people of the 20th century.

Contents

[edit] Early life

Thomas Watson, Jr. was born on January 14, 1914 just before his father was summarily dismissed from his job at NCR. Then came two daughters, Jane and Helen, before the youngest child, Arthur Kittredge Watson, was born.

Both sons were immersed in IBM from a very early age; Tom Watson, Jr. was later to say that IBM was always on his mind. He was taken on plant inspections — his first memory of such a visit (to the Dayton, Ohio factory) was at the age of five — business tours to Europe and he made appearances at the Hundred Per Cent Club even before he was old enough to attend school.

At home his father's discipline was erratic and often harsh. Around the time he was thirteen, Tom, Jr. began to suffer from recurring depression. These continued for six years and, in his autobiography, he claimed that (according to the standards of later times) his behavior then would have been seen as a symptom of clinical depression.

Talking to a reporter in 1974, Watson, Jr. described his relationship with his father; "My father and I had terrible fights.....He seemed like a blanket that covered everything. I really wanted to beat him but also make him proud of me". But this relationship was not all negative as Tom himself admitted in the same interview; "I really enjoyed the ten years (working) with him". In his own book (Father Son & Co.), on the very first page, he gives his own comment of the force that drove him; "I was so intimately entwined with my father. I had a compelling desire, maybe out of honor for the old gentleman, maybe out of sheer cussedness, to prove to the world that I could excel in the same way that he did."

Watson Jr. attended the Hun School of Princeton in Princeton, New Jersey.

He claimed in his autobiography that as a child he had a "strange defect in his vision" that made written words appear to fall off the page when he tried to read them. Although not recognized at the time, this description matches a common form of dyslexia. As a result Watson struggled in school, and he acknowledged that Brown University reluctantly admitted him as a favor to his father. He obtained a business degree in 1937.

After graduating Watson became a salesman for IBM, but he had little interest in the job. The critical turning point in Watson's life was his service as a pilot in the Army Air Force during World War II. Both brothers, Tom and "Dick" (Arthur) Watson, served in the forces during the Second World War, Arthur (dropping out of Yale) as a Major in Ordnance and Tom, Jr. as a pilot, a Lieutenant Colonel chauffeuring top brass around the USSR. Tom, Jr. later admitted to journalists that the one career he really would have liked to follow was that of an airline pilot. Piloting came easily to him and for the first time he had confidence in his abilities. Toward the end of his service Watson worked for Maj. Gen. Follett Bradley, who suggested that he should try to follow his father at IBM. Watson regularly flew Bradley, the director of lend-lease programs to the Soviet Union, to Moscow during the war. On these trips he learned Russian, which would later serve him well as the American Ambassador to Russia.

Watson returned to IBM at the beginning of 1946. He was promoted to be a Vice President just six months later and was promoted to the board just four months after that. Continuing to make record progress, he became Executive Vice-President in 1949.

[edit] IBM President

Tom Watson, Jr. became president of IBM in 1952. Up to this time IBM was dedicated to electromechanical punch card systems; Watson, Sr. had repeatedly rejected electronic computers as overpriced and unreliable. Watson Jr. took the company in a new direction, hiring electrical engineers by the hundreds and putting them to work designing mainframe computers. In the early 1960s he oversaw the System/360 project, which produced an entire line of computers that ran the same software and used the same peripherals. Since the 360 line was incompatible with IBM's previous products, it represented an enormous risk for the company. Despite delays in shipment, the products were well-received following their launch in 1964 and what Fortune magazine called "IBM's $5 Billion Gamble," in the end, paid off.

It should be noted, even so, that — until the late 1950s — it was the U.S. Air Force SAGE computerized tracking system which accounted for more than half of IBM's computer sales. The company made little profit on these sales but, as Tom, Jr. said in his autobiography "It enabled us to build highly automated factories ahead of anybody else, and to train thousands of new workers in electronics."

Tom, Jr.'s decision was justified; in the longer term it redirected IBM to its later position dominating the computer market. Even in the short term it paid off; for revenues more than tripled in six years, from $214.9 million in 1950 to $734.3 million in 1956. This dramatic rate of growth almost matched the wartime years; a better than 30% compound growth rate that Tom, Jr. more or less maintained for the full twenty years of his leadership of IBM. It was a record that few business leaders can have matched, and was even better than that of his father.

Right through to 1955, despite the presence of his son, Thomas, Sr. still kept a firm grip on the reins. In his autobiography, Tom, Jr. described the position of his father as "He wanted to make me head of IBM, but he didn't like sharing the limelight."

Tom, Jr. took over effective control in a moment that, according to some reports, might have been worthy of a Hollywood business epic; though the formal handover took place a few months later. The occasion was the decision to sign the Consent Decree which was offered by the government after its latest anti-trust investigation. Tom, Jr. saw that the Consent Decree, which sought to strip IBM of half its card-making capacity, was largely irrelevant where the future of the company was already in computers not cards. There was though another condition, that IBM had to sell machines outright as well as on lease, that was to have repercussions in the late 1960s when leasing companies recognized the financing loophole that it created.

In his original book, Tom Watson, Jr. made it clear that almost everyone in IBM opposed his decision to invest in the development of computers. In particular, IBM's technical experts condemned it. Even the supporters of the new technology underestimated the potential. It was Cuthbert Hurd (brought in from the Atomic Energy Commission's Oak Ridge National Laboratory) who, rather than any of the Watsons, made the prediction that "...he could find customers for as many as thirty machines."

Behind this decision was another one, that of spending more on research and development. IBM was only spending 3% on research and development when other high technology companies were spending between 6% and 9%. Tom, Jr. learned the lesson, and thereafter — at least until the 1990s (when, even then, Gerstner only dropped it to 6%) — IBM consistently spent 9%. By comparison, the equivalent figure for Japan was 5.1%, though its high technology companies exceeded even the IBM level, with the 1983 spending for Canon being 14.6% and that for NEC being 13.0%.

This training program was to take him, over the next five years, through many of IBM's operating groups. Tom, Jr. himself believed that of all the influences on him during this period the most important was Al Williams, a CPA, who became president of IBM in 1961; it was Al Williams who said of IBM "It is not bigness we seek, it is greatness. Bigness is imposing. Greatness is enduring..."

Although the initiative, and as such much of the credit for the birth of the information revolution, must go to Tom Jr. considerable courage was also displayed by his then aging father who, despite his long commitment to internal funding, backed his son to the hilt; reportedly with the words "It is harder to keep a business great than it is to build it."

[edit] Research and development

Of the two brothers, Tom Watson, Jr. was seen to make the most obvious impact on IBM as a whole.

Prior to his time IBM had been just about the best selling organization in the world, with a reasonable range of products; for Tom Sr. had always insisted on sound products. Tom, Jr., however, created and funded the research and development structure that is essential to modern high technology industry. It was under his supervision that the laboratories were built up, to a point where, in the late 1980s, they contained a respectable number of Nobel Prize winners; and to the point where the research and development function could stand on an equal footing with marketing, true to his original objective.

When Tom, Jr. started this process in 1949 IBM was reportedly two years behind its main competitor, UNIVAC. In the 1980s, it was arguably up to a decade ahead of anyone else; though its problems since seem to have destroyed much of its strength in this area. This was not so obvious to the outside world, because the new products still followed the conservative release pattern started in the 1920s (and pursued very profitably until recently). Despite the hype about 'pre-releasing' products which did not yet exist, only when the market was sufficiently developed, and a launch was financially justifiable, did IBM commit its marketing resources. In the labs though, thanks to Tom Jr, they were able to plan speculatively for the future decades in advance, independent and untroubled by commercial demands. It was an ideal environment for an industrial researcher, and a highly productive for IBM.

The first result of this was the STRETCH program to develop a "supercomputer" a hundred times more powerful than the 704; but still based on the vacuum tube. It failed, at a reported cost of $20 million. Although embarrassing in terms of the rumors that drifted to the outside world, it would not however be the last IBM computer series to be terminated and the cost was small in IBM's terms; and the experience gained was invaluable. One of IBM's strengths was that, until the 1980s, it really did learn from experience. Most other companies are only too anxious to bury deep their embarrassing mistakes; and never use the invaluable information they have gained. IBM however made very good use of these particularly hard earned lessons.

The three actual computer ranges that eventually emerged from 1958 onwards comprised the 7070 and 7090 (for large government business), the 1620 (for the scientific community) and the 1401 (for commercial use). Despite the fact that many observers believed that Tom Jr was frittering away the resources his father had built up, these new ranges were remarkably successful, doubling IBM's sales once more over the six years from 1958 ($1.17 billion) to 1964 ($2.31 billion), maintaining IBM's dramatic growth rate virtually undiminished at approaching 30% compound. The effect was that IBM had become independent of outside funding.

[edit] Organizational structures

Perhaps Tom Watson, Jr.'s truly greatest (but largely unrecorded) contribution to IBM was in terms of organizational structure, as had his been his father's; for one new range of products, no matter how successful, carries a company for a few years only. This achievement was, however, less widely reported, and even less widely appreciated.

In 1956, in a move that later became a bi-annual event, he reorganized IBM on divisional lines, to give a decentralized organization, with five major divisions (in the U.S.). The new structure comprised:

  1. Data Processing Division ‑ the most important grouping selling to (and servicing) commercial customers.
  2. Federal Systems Division ‑ selling to (and servicing) the special requirements of the US government (including, later, major involvement as sub‑contractors to the NASA space program).
  3. Systems Manufacturing Division.
  4. Components Manufacturing Division.
  5. Research Division.

In the wings, almost as also‑rans, were Electric Typewriter, IBM World Trade, Service Bureau Corporation and Supplies Division; as well as the Time Division (which was sold off two years later in 1958).

Tom Jr's own comment on the situation was "We had a superb sales organization but lacked expert management organization in almost everything else". He set out to rectify the lack and redirected IBM into an organized bureaucracy capable of absorbing the shocks of change; and indeed eventually designed to even create its own shock wave of change.

He also introduced the concept of line and staff. In his own words: "By the mid-'50s just about every big corporation had adopted the so-called staff-and-line structure. It was modeled on military organizations going back to the Prussian army in Napoleonic times."

Somewhat ahead of his time, for MBO was very much the flavor of the 1960s to come, the other great strength of his reorganization was that, again in Tom Watson's own words "...it provided IBM executives with the clearest possible goals. Each operating man was judged strictly on his unit's results, and each staff man on his effort toward making IBM the world leader in his specialty."

Perhaps the final element of formal organizational change was the isolation of headquarters staff in Armonk, New York. This was said by him to be in order to be near his family. He lived close by in Connecticut, where taxes were lower; but kept his staff across the border in New York State so, it has been suggested, that IBM would not be seen as similarly evading taxes. Cynics have indeed said it was his fear of nuclear warfare (he was the owner of a fall‑out shelter).

[edit] IBM Personnel Policies

While at the apex, global control of IBM was exercised by a very small group of people, the Central Management Committee (CMC) located in Armonk, New York, at the other were the 400,000 or so workers at the "sharp end," whose implementation of the policies was never less than impecc­able.

IBM was able to, and often did, employ as "workers" people who would qualify as directors in many other organizations; and could afford to pay them as such. The quality was evidenced by the number of graduates in the workforce.

To reach even the stage of the first interview they had to show a sound employment track record. They would, of course, have had to demonstrate the degree of charm that is an essential prerequisite to passing through a number of such interviews, whatever the company doing the recruiting. Despite Buck Rodgers' claim that "only first‑line managers do the actual hiring in IBM", in practice a whole range of staff and management (usually including relatively senior management if it was sales‑force recruitment) interviewed potential recruits; IBM took the process very seriously.

There was, however, one relatively unique requirement that, with very few exceptions, they had to meet and that was passing an aptitude test. In theory this merely ensured a minimal numerate ability, in order that they may be able to understand the complexi­ties of computing. In practice it was really a rigorous intel­ligence test that ensured that all key personnel entering IBM had a high intellectual capabil­ity. IBM was just as prone as any other company to recruit its staff on the basis of the rationalized intuit­ive hunches of its managers but, despite this, the aptitude test ensured that in the end the odds were heavily weighted in IBM's favor; in terms of achieving a high caliber of personnel, even when afflicted by the worst vagaries of the recruitment process. The benefit of this one simple screening should not be underestimated as a contributor to the undoubt­ed high quality of the key personnel within IBM (see[1]).

[edit] Quotes

"If you stand up and be counted, from time to time you may get yourself knocked down. But remember this: A man flattened by an opponent can get up again. A man flattened by conformity stays down for good. "

"Whenever an individual or a business decides that success has been attained, progress stops."

"Nothing so conclusively proves a man's ability to lead others as what he does from day to day to lead himself."

"Really big people are, above everything else, courteous, considerate and generous — not just to some people in some circumstances — but to everyone all the time."

"Every time we've moved ahead in IBM, it was because someone was willing to take a chance, put his head on the block, and try something new."

"When my father died in 1956 — six weeks after making me head of IBM — I was the most frightened man in America. For ten years he had groomed me to succeed him, and I had been a young man in a hurry, eager to take over, cocky and impatient. Now, suddenly, I had the job — but what I didn't have was dad there to back me up".

[edit] Encomium

Because of this success, Lyndon B. Johnson in 1964 awarded Thomas J. Watson Jr. the Presidential Medal of Freedom, the highest award a U.S. President can bestow on a civilian.

In his capacity as CEO of IBM Watson grew the revenues of the company from less than one billion dollars to over seven billion and was recognized as a leader in business management and revenue growth of a company. In 1986 Fortune magazine hailed Watson on its cover as "The Most Successful Capitalist In History."

[edit] Retirement

Watson left IBM in 1971 on his doctor's advice after having a heart attack. After recovering, he was appointed by Jimmy Carter to be Ambassador to the Soviet Union, serving from October 29, 1979 to January 15, 1981. Prior to this service he was the Chairman of the General Advisory Committee (GAC) which was set up by President Kennedy to give advice to the President about America's nuclear defense policy.

He was an avid sailor and pilot. Watson sailed his boat Palawan further up the Northern coast of Greenland then any non-military ship had done previously for which he won the New York Yacht Club's highest award. In retirement he traveled the route of Captain Cook in exploring virtually all of the Pacific. He flew every type of aircraft from helicopters and jets to stunt planes and he was the first private citizen to receive permission from then Soviet Premier Mikhail Gorbachev in 1986 to fly to all the time zones of the Soviet Union (a route he had previously done as a pilot ferrying General Bradley) in a jet he piloted himself.

Watson had homes in Greenwich, Connecticut; North Haven, Maine; Stowe, Vermont; Vail, Colorado; New York City; and Antigua.

[edit] Columbia University's Watson House

After leaving IBM Watson became a large donor and benefactor to Columbia University, donating tens of millions of dollars to the university from 1975 onward. These donations have included a library, the Thomas J. Watson Library of Business and Economics, as well as smaller building grants for countless projects.

The most notable of Watson's donations however has become the construction of a townhouse in the Columbia East Campus residence hall named "Watson House." Watson House has become a popular landmark on campus and is noted as one of the most coveted places for rising undergraduate seniors to live. In honor of Watson, the 2006-2007 residents of Watson House opened up a small snack shop called "The Watson Joint" emblematic of Watson's legendary business principles.

In addition, the House, endowed by Thomas J. Watson, has the charge of organizing an annual trip to the Watson Estate in Maine.

[edit] Philanthropy

Watson was also the principal benefactor of the Watson Institute for International Studies at Brown University (the university's principal graduate center for foreign policy), the Watson Pavilion at Greenwich Hospital in Connecticut, Owls Head Transportation Museum in Rockland, Maine, and the Thomas J. Watson Fellowship (which sends students to explore the world for a year while carrying out an independent study on a topic of personal interest) as well as numerous charitable gifts throughout the country.

[edit] References

Preceded by
Thomas J. Watson		 CEO of IBM
1956-1971		 Succeeded by
T. Vincent Learson

{{DEFAULTSORT:Watson, Thomas J., Jr.

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