IBM – Thomas Watson Jr.'s Success Story

'Fear of failure was the most powerful force in my life.'

Growing Up

Unlike most of the other entrepreneurs in this series, Thomas Watson Jr. did not start the business he was to run – he inherited it from his father.

Watson Jr. was born in 1914. When he was 10 years old, his father became the CEO of Computing Tabulating Recording and renamed the company to International Business Machines, or IBM. With his father's wealth, Watson Jr. was given more opportunities than most children his age. He had private schooling and was able to travel the world.

But even with all the luxuries afforded to him, Watson Jr. had an unfortunate upbringing. His father was an unsympathetic man who high demands from his son filled Watson Jr. with self-doubt. He was a troublemaker in school and was given the nickname "Terrible Tom" for his clashes with school authority. After 6 years and 3 different schools, Watson Jr. finally graduated from high school. At Brown University his behavior almost cost him his ability to graduate.

When he finished at Brown, Watson Jr. joined IBM as a salesman. Reflecting on this period in his life, Watson Jr. would later write "My three years as a salesman were a time of sickening self-doubt." With his father running the company, Watson Jr. could never be sure if his recognition was because of his true accomplishments or because of his father's name.

Then in the Second World War Watson Jr. was a pilot and aide for Major General Follett Bradley who instilled in him a sense of pride, confidence, and determination. After the war he was a new man who was ready to take on all challenges

Starting The Business

After the war, consumer demands for technology products began to change in America. IBM's core business lay in tabulators while more powerful computers were increasingly in demand. Watson Sr.'s method of running his business was to stick to what you know. He refused to see that his bread and butter products were becoming outdated.

In 1952, Watson Jr. took over as president and immediately hired experts like John von Neumann to create IBM computers. Their first computers were the 700 and the 650 series which allowed them to gain a stronger in the marketplace.

Watson Jr. also differed from his father in that he encouraged a free-thinking, independent office environment while Watson Sr.. employed a more authoritative approach. The cultural change allowed IBM to better react to the rapidly changing market environment and become the industry leader in innovation.

Having established IBM as the top player in its field, Watson Jr. was about to take the biggest risk the company would ever take.

Building An Empire

Watson Jr.'s big gamble was to invest $ 5 billion into researching and developing a new product line of computers that would not only deplete the company of its financial resources but also make its existing product line obolete. His dream was to open up computers for the masses with the System / 360.

In 1966, after many delays and near failure, the System / 360 was launched and became an instant hit. The gamble had paid off and Watson Jr. was revolutionizing the industry. Between 1964 and 1970 the number of computers sold soared from 11,000 to 35,000 and IBM's revenues passed the $ 7.5 billion mark.

In 1971, Watson Jr. experienced a heart attack which almost took his life. The stresses of running IBM had finally been brought up to him. Watson Jr. decided to retire and became the ambassador to the USSR. A 1993 Fortune article called Watson Jr. "the greatest capitalist who ever lived."

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