Father, Son & Co. This book tells the generational story of the tech giant, International Business Machines (IBM), from its founder, Thomas Watson, to his son, Watson Jr. These two men led IBM to expand explosively across the globe for over 60 years. IBM initially produced only small electronic devices and scales, but later became the world's largest computer manufacturer. People have called the most glorious period of IBM the "Watson Era."
So who was the one who created this culture? It was none other than Thomas Watson. Mr. Watson managed IBM from 1914 to 1956, for over 42 years. He infused his personal ideas, habits, and beliefs into this company. Even after his death, this deep-rooted culture remained in IBM's DNA. This kind of thing is not often seen in large corporations like IBM.
In fact, Thomas Watson was not the original founder of IBM. The first founder of IBM was named Charles Ranlett Flint. Previously, the company was named the Computing-Tabulating-Recording Company, or CTR for short. Thomas Watson was a person whom the board of directors invited to manage IBM. His shares in the company never exceeded 5%. So why was Mr. Watson so dedicated to this company?
This story has to start with his early career history. Mr. Watson was born into a poor family and had little education. At 17, he started as a traveling salesman. Although he didn't have a high level of education, he had a natural talent for business. He was handsome, smart, and a good speaker. After more than 10 years of experience in business, he achieved some success. At that time, he was the top employee in the sales department of a famous company, where he learned many business skills from his boss, who was the president of the company where he worked.
Later, because he had a conflict of ideas with his boss, he left this company and joined a small company that was on the verge of bankruptcy, which was CTR, later renamed IBM. Because this company had poor management and a lot of debt, CTR was about to declare bankruptcy. But in the end, the board of directors decided to invite Thomas Watson to manage it, hoping he could save it. At that time, Watson had a proposal. Besides a reasonable monthly salary for himself, he wanted a certain percentage of shares in the company. The board at that time didn't deliberate much and agreed to this proposal.
What was unexpected was that after Watson led the company for a while, CTR began to grow in stages, paid off all its debts, and generated surprisingly impressive profits. Ten years later, in 1924, Watson decided to change the name from CTR to International Business Machines Corporation, or IBM for short. Because the company earned a lot of revenue, Watson's salary was also quite substantial. At that time, he was the highest-paid CEO in America. He managed IBM until he was 82 years old, then handed over this position to his son, Watson Jr.
So after he left, what kind of culture did he leave for IBM? First, IBM is a company that focuses heavily on marketing. Because Watson was a great salesman himself, he instilled this gene into his company. In the eyes of outsiders, IBM is a company with strong technology. But Watson Jr. revealed through this book that IBM had no particularly strong technology. They just had superior marketing capabilities, which was a legacy from his father. From the tabulating machine to later when they produced computer hard disks, none of these were technologically advanced products for their time. But they had an amazing sales ability. Their strong sales team sold IBM's products abroad, giving them an advantage over their competitors. It was only later that they started to focus on technology, hiring expert engineers, producing modern equipment, which made them strong in both sales and technology, as they are today.
But before they could build a strong sales team like they have today, Mr. Watson tried every possible method. First, he believed that if you want to sell to businessmen, the salesperson themselves must dress like a businessman and look trustworthy. Therefore, he set a number of rules for all employees under his command: they must dress properly, wear a suit jacket, a tie, and during work hours, consuming alcohol was prohibited. Even at employee gatherings, there should be no alcohol. He even established a training school to train new employees who had just started working. Before going out to sell, they had to be trained here for a year and a half. Six months to learn about the company's products, another six months to learn sales techniques, and the last six months for an internship in the field. The slogan of this training school was just one word: THINK. This means that if you want to succeed, you have to use your brain. IBM's ThinkPad computer was also named after this slogan. To boost employee morale and create energy within them every day, Mr. Watson created many customs within the company, such as an internal newsletter, a corporate culture, and a company song. All new employees who received training, upon entering the classroom for the first time, had to stand up and sing the company song, just like saluting the national flag. At that time, no one did this, and this method was a technique that could make employees understand and remember the company's vision and mission.
Another thing Mr. Watson left for IBM was high salaries and high bonuses. He knew for a fact that for employees to work well, you had to provide them with a salary that wasn't disappointing. IBM's goal was to generate income for its employees and for their families to live comfortably and without worrying about money. The salary of IBM employees was higher than the national average salary of employees in America. The working environment was also good; the entire factory was equipped with air conditioning. They had a library, a gym, a canteen, and so on, which could make employees live in the company more comfortably than at their own homes.
On top of this, Mr. Watson promised the employees that no matter the circumstances, he would not lay off employees. Unless the employees resigned themselves. Even during the most difficult period for IBM, which was between 1929 and 1936, they absolutely did not lay off employees. That was a time when a severe economic crisis occurred. Everyone was laying off employees, but IBM announced they were hiring more staff, expanding their operations, and waiting for the spring of recovery to arrive. When the US President, Franklin Roosevelt, introduced the New Deal reforms in 1933, IBM received a huge contract from the government, which allowed them to breathe again.
Later, his son, Watson Jr., reformed the salary system for employees, from being calculated hourly to being calculated annually. He also reduced the salary gap between manual laborers and knowledge workers, and also bought insurance for employees and encouraged them by giving them the benefit of buying company shares. This way, IBM employees would be loyal to the company and perform their work with high efficiency.
The above is the first main point where we talked about the early journey of how Mr. Watson saved IBM from a company on the verge of bankruptcy to a rapidly growing company, and the corporate culture he instilled in his company for over 42 years. Of course, not everything Watson left in the company was good and correct.
After the end of World War II, Watson Jr., the son, returned to help oversee the company's affairs and was trained to become the successor. But because of their inherently different characters and experiences, the father and son frequently had conflicting ideas in leading IBM towards different visions, which is the second main point we need to discuss in this book.
First, the way they both managed was not the same. Mr. Watson was a person with a strong influence in the company. In the office, on the factory walls, and so on, you would always see large pictures and his quotes almost everywhere. For every order from him to the lower ranks, no one dared to object. But as for the influence of Watson Jr. in the company, it was not as strong as his father's. Watson Jr., when he first came in, thought that with his father's strong influence like this, the employees under him would probably not use their brains to think. They would just wait for Watson's orders. They wouldn't dare to express opinions, and even less dare to disagree with him. The higher the position, the more they wouldn't dare to speak. And as Watson got older, he increasingly enjoyed the feeling of being respected and feared like this. For a modern technology company, this is not a good quality. The truly capable people would always ask to quit, while those who remained were only loyal employees who just waited to follow orders.
So with such a severe management problem, how could IBM still stand until now? This is because of the amazing competence and brilliant thinking of Mr. Watson himself. He thought of everything himself, without needing any discussion. People just had to do as he instructed. The mechanism of IBM's management was that Mr. Watson was the sole writer. Under him, there were about 40 people who reported directly to him. Sometimes, they had to line up for over a week to report their work to Mr. Watson. This kind of management is clearly a family-style business management.
Later, because Mr. Watson was busy with social work, he decided to hand over the daily operations to Watson Jr., the son. But for major decisions, it was still Mr. Watson who decided. After Watson Jr. took over the position, the first thing he did was to reform the family-style management system into a standardized management system. At that time, it was when IBM was growing rapidly, with sales increasing by 20% every year. Therefore, managing in an authoritarian and family-style manner like this could not respond to this rapid growth.
For this reason, Watson Jr. reformed the human resources system into a large-scale structure, which is to delegate decision-making power to managers and train young, capable managers to replace his father's old employees. Later, they created a working group of six people to meet and make decisions without having to report to the top, and created a management committee of 20 people to jointly lead IBM together.
Of course, this new reform would surely face opposition from his father. But Watson Jr. did not agree to back down. He still maintained this policy, which made the relationship between the father and son very tense. Talking about management and financial allocation, the two also had some disagreements. Mr. Watson was an old-timer who had gone through the first World War and several economic crises. He believed that a company with good financial health should be a company with little debt and as much cash flow as possible. This way, it could cope with situations in a timely manner in case problems arose.
But this was a time when IBM was growing rapidly. They needed to build factories, buy land, and invest in production lines, and they needed to research and develop new products. Therefore, they needed to borrow money from banks to expand. But Mr. Watson absolutely refused to borrow from banks. This made Watson Jr. very worried.
After arguing back and forth several times, Watson Jr. said to his father, "Dad, if you don't want to borrow from the bank, that's fine. But we have to lay off some employees." This sentence made Mr. Watson even angrier. Because from the beginning, he had never laid off employees, and he had also promised that no matter the circumstances, he would not lay off employees. But after reconciling with each other, the two reached an agreement. Mr. Watson agreed to let his son act according to his judgment and decision. After that, Watson Jr. started borrowing from banks, expanding production lines, and selling shares to his own employees, which made IBM's growth momentum even stronger.
When IBM had enough capital, they started to enter the computer manufacturing industry. Initially, IBM's best-selling product was the tabulating machine. This type of machine was used for accounting and inventory management. Before computers were invented, the tabulating machine was a smart machine that could simplify office work by a large margin, especially for government institutions. In this sector, IBM captured up to 90% of the market share.
Until 1946, the first computer in the world was invented by the Electrical Engineering school of the University of Pennsylvania, USA. It was a huge machine that weighed more than 30 tons, required a room of 170 square meters to be placed, and in one second, it was capable of calculating data up to 5,000 times. But at that time, the father and son did not see the importance of this new invention, and they did not think that this strangely shaped computer could replace their tabulating machines. It was only later that Mr. Watson blurted out a sentence, saying, "In the world, computers cannot have more than 5 units." But later, Watson Jr. realized that his tabulating machine had limited data calculation capabilities, and the paper sheets used for data recording could also wear out and tear when used for calculations many times. As for this machine, you can research and find information on the internet. It is called a tabulating machine, which was one of the best-selling products of IBM.
At that time, IBM did not have many engineers and technology experts. If you want to create innovative products, you must have abundant human resources. Therefore, Watson Jr. started to announce the recruitment of technology experts. And he also requested some budget from his father to spend on research and development of new products. Later, a rare opportunity came, which was during the war on the Korean peninsula. The American army needed a number of technology systems to facilitate warfare, such as radar systems, code analysis systems, and weather forecasting systems. Watson Jr., holding only a few design sketches, dared to negotiate with the US military leaders that they would create these systems for the military to use. With these projects in hand, IBM started to study and research to create these programs, and the relationship between the father and son also improved.
But when IBM entered the computer industry, which was in the 1950s, they were still new. What strategies did Watson Jr. have to lead IBM to become a leader in the computer industry? What IBM started to lead in the computer industry was the production of computers in a large-scale structure. Because before this, computers were produced in a laboratory, where they were assembled one by one. Doing this has no standard, and it cannot be produced in large quantities to meet the market demand. But the reason is not that there were no other companies doing it. But if you invest in a large-scale production line like this, you need a lot of capital and technology. If there are no large-scale purchase orders, no one would dare to invest in this matter. In that era, computers were not used for personal use. Only the US military had this demand.
Because the Watson family were good at sales, they finally gained the trust of the US military and received a project to produce a radar system to intercept Soviet missiles, which they called the SAGE system. Based on this project, IBM became a leading company in computer manufacturing in the late 1950s. But the product that was a huge turning point for IBM, which allowed them to surpass their competitors, was the new series of computers, the S/360. Because of this new computer, Watson Jr. made many sacrifices. And this new generation computer was also an achievement that allowed the IBM board to see his true capabilities.
The key points in the book "Father, Son & Co." that I have summarized for all of you this week have come to an end. Let's do a quick review. First, Mr. Watson created a unique corporate culture for IBM. He managed this company for more than 42 years, from being a company on the verge of bankruptcy to becoming one of the most prominent technology companies in the United States. What he left for the people of IBM was an excellent marketing strategy, high salaries, and a number of other customs.
Second, whether it's management, operations, or the use of finances, the father and son always had conflicting ideas. The father was a family-style manager with centralized power in one person. While the son wanted to come in and reform the management system that could provide full rights and decision-making to other leaders.
Third, Watson Jr. was able to lead IBM to become a leading company in the computer manufacturing industry because they received a project to produce the famous missile interception system, SAGE, and researched and produced the new generation computer, S/360. In the 20 years after the Second World War, IBM was a leader in this industry.
Through this story, we know that IBM was also once a company with a family-style character. But later, they made many reforms, which led to their prosperity as we see today. Regarding IBM, there is another work called "Who Says Elephants Can't Dance?", which talks about how IBM went through a huge bankruptcy crisis in 1990 and continued to prosper as it does today. Hopefully, we will have the opportunity to take this book and summarize it for all of you in the future.