The Demise of the "IBM Way"

The companys peculiar culture fueled its success, and eventually its fall from industry dominance.

- Deborah Cohen

IBM is one of the oldest technology companies in the world, with a raft of innovations to its credit, including mainframe computing, computer-programming languages, and AI-powered tools. But ask an ordinary person under the age of 40 what exactly IBM does (or did), and the responses will be vague at best. "Something to do with computers, right?" was the best the Gen Zers I queried could come up with. If a Millennial knows anything about IBM, it's Watson, the company's prototype AI system that prevailed on Jeopardy in 2011.

In the chronicles of garage entrepreneurship, however, IBM retains a legendary place as a flatfooted behemoth. In 1980, bruised by nearly 13 years of antitrust litigation, its executives made the colossal error of permitting the 25-year-old Bill Gates, a co-founder of a company with several dozen employees, to retain the rights to the operating system that IBM had subcontracted with him to develop for its then-secret personal-computer project. That mistake was the making of Microsoft. By January 1993, Gates's company was valued at $27 billion, briefly taking the lead over IBM, which that year posted some of the largest losses in American corporate history.

But The Greatest Capitalist Who Ever Lived, a briskly told biography of Thomas J. Watson Jr., IBM's mid-20th-century CEO, makes clear that the history of the company offers much more than an object lesson about complacent Goliaths. As the book's co-authors, Watson's grandson Ralph Watson McElvenny and Marc Wortman, emphasize, IBM was remarkably prescient in making the leap from mechanical to electronic technologies, helping usher in the digital age. Among large corporations, it was unusually entrepreneurial, focused on new frontiers.