It was an auspicious day in June of 1917, when stevedores in the port of Rio de Janeiro, Brazil, unloaded Hollerith machines shipped there by the Computing-Tabulating-Recording Co., later to be renamed IBM. These machines, destined to be used by Brazil’s government to track economic statistics, were the first mechanical data processing machines in the country. The sale had been arranged by an enterprising Brazilian, Valentim Fernandes Bouças, who had traveled to New York to convince Thomas J. Watson Sr. to begin selling equipment in Brazil—with Bouças as his representative. Bouças later ran IBM’s first branch office in Brazil and its Brazil subsidiary. Among his many achievements, in 1930, after a revolution overthrew the government, he convinced the new leaders to keep using IBM machines. His offer: IBM would provide the machines free of charge until they proved their value. The pitch worked. Later, Bouças became an economic advisor to the new government.
IBM’s early years in Brazil demonstrate its approach to doing business around the world: Be ambitious. Get there early. Employ local people as managers. Help countries build their economies. And don’t give up when business conditions get rough. Those instincts guided Watson through IBM’s international expansion over his decades as chairman—and they were crystallized into organizational form in 1949, when he established the IBM World Trade ® Corporation, a subsidiary of IBM with its headquarters near the United Nations in New York City. Watson figured that by giving the foreign operation a measure of independence, the organization would be focused and aggressive.
Watson had believed in the global destiny of IBM’s business from the start. When he arrived as general manager in 1914, he launched an aggressive international expansion beyond the company’s existing operations in the US, Canada, Germany and Britain—first to France and then to Brazil, South Africa, Japan and China. By the late 1940s, although IBM was selling machines in 78 countries, each country operation was separate. Watson thought that by setting up an organization to focus on international expansion, more would get done. “The United States has six percent of the world’s population, and the rest of the world has ninety-four percent: someday the World Trade Company is going to be larger than the US company,” he predicted. Watson’s claim seemed rash at the time. Much of the world was still rebuilding in the aftermath of the war. But the event that he predicted came to pass in 1975 when revenues from foreign sales overtook those in the United States.
Watson assigned his second son, Arthur K. Watson, who was just a few years out of college, to an executive position in IBM World Trade Corp. A short time later, he promoted him to run the organization. In spite of the young Watson’s inexperience, he thrived in the position—making investments in manufacturing and sales that paid off as Europe roared back to life economically in the 1950s and 1960s. Foreign sales were less than US$50 million a year in 1949. When Arthur Watson resigned in 1970 to become US Ambassador to France, foreign sales had grown to more than US$2.5 billion, and the company had operations in 108 countries.
“We want to find the way to take national labels off of our business and off of ourselves. We want IBMers to be at home anywhere in the world.”
THINK magazineJuly, 1974
“I do not believe we will be permanently welcome anywhere unless national employees of our companies—be they British, Japanese, or American—can look forward to careers that will take them anywhere and as far and fast as their talents permit. This kind of policy is simple justice—and good sense. It is also the only way to develop a real world constituency for international cooperation.”
THINK magazineJuly, 1974
“Our role in the free world depends on technological leadership. In the international markets, we are living on our wits and it is a competition that not only benefits us, it benefits the rest of the world as well. As my father used to put it, if two men have one dollar each, and they trade dollars, they both still end up with only a dollar. But if they have one idea each, and they exchange their ideas, they both end up with two ideas.”
THINK magazineJuly, 1974
“The globally integrated enterprise can deliver enormous economic beneﬁts to both developed and developing nations. The integration of the work force in developing countries into global systems of production is already raising living standards, improving working conditions, and creating more jobs in those countries. Small and medium-sized businesses everywhere, particularly, are beneﬁtting: as new services—from back-office administration to sales support—create infrastructures once only affordable to large organizations, these businesses can now participate in the global economy.”
“The Globally Integrated Enterprise,” Foreign AffairsMay/June 2006
In the post-war period, IBM emerged as one of the first truly multinational corporations. It set up mini-IBMs in many countries, each typically with its own manufacturing and headquarters functions. It also took the lead in promoting non-Americans to important executive positions.
Former IBM executive Luis Lamassonne, who joined IBM in 1933 in his native Argentina and worked on several continents, recalls that IBM stood out from other international companies in the way it handled its foreign subsidiaries—instilling its corporate values everywhere, including its high standards for ethical behavior. “The human relations aspect was different,” he said. “They wanted to implant in all of our little companies the same policies that Mr. Watson had in the United States.”
While most of IBM World Trade Corp.’s revenues came from developed economies, it was also active in 1960s post-colonial Africa, which led to situations that tested the resourcefulness of its managers. Jacques G. Maisonrouge, a Frenchman who had many international assignments, including chairman of IBM World Trade Corp., recalls a time in the late 1970s when he and his wife traveled to South Africa. It was traditional for visiting IBM executives to stage a formal dinner for local employees. In this case, because of the rules governing segregation of the races, the black employees at IBM’s Johannesburg plant lived in neighboring Soweto, where they were constrained by a nightly curfew. Maisonrouge got permission for the employees to not only break the curfew but to have dinner with him in a whites-only hotel in Johannesburg. About 80 employees and spouses attended. “It was beautiful,” he said. “We did things that were progressive.”
The vestiges of the IBM World Trade Corp. have all but disappeared from modern-day IBM, as the company has evolved to the new model of the globally integrated enterprise. [Read more about this Icon of Progress.] But the spirit of global citizenship remains. Today, IBM is expanding aggressively in Africa, Latin America, Asia and Eastern Europe, and it continues to set up research laboratories globally. The most recent addition is in Brazil. Locally hired IBM scientists focus on natural resource exploration and on the management of large events. And in preparation for Brazil’s hosting of the World Cup in 2014 and the Olympic Games in 2016, IBM is creating Smarter Cities command centers to help Rio de Janeiro and other burgeoning metropolises across the country integrate real-time data and processes from urban systems, such as civil defense, transportation and meteorology, to build a sustainable operations infrastructure in the face of unprecedented growth. Just as in 1917, when those first punched card tabulating machines were put ashore in Rio de Janeiro, IBM is helping Brazil—and businesses and societies around the world—to move to the future.
Selected team members who contributed to this Icon of Progress:
- Thomas J. Watson Sr. IBM Chairman
- Arthur K. Watson IBM World Trade Corp. Chairman
- Valentim Fernandes Bouças First IBM representative in Brazil
- Jacques Maisonrouge IBM World Trade Corp. Chairman