Managing the Dark Side of Competitive Rivalry

When Competition Leads to Alarming Behavior

2014 Volume 17 Issue 2

Many important business concepts scale from industry and firm levels down to the individual level and back again. One such concept relates to competition and an associated duality. One side of the concept of competition relates to the fundamental idea of providing customers better products at a lower cost. For example, the competition between Intel and AMD in personal computer microchips contributed to technology and cost improvements.[1] This is the more common perception of competition. However, competition can also become so intense that it can be counterproductive and lead to alarming behavior.

Competition Cartoon sizedRecent research suggests competitive retaliation is more likely for larger firms.[2] Whether the dark side of competitive rivalry holds more for large firms is an open question, but it normally makes the news. For example, in 1993 Virgin Atlantic won a libel suit against British Airways after it launched a “dirty tricks” campaign that included calling Virgin customers to tell them their flight was cancelled.[3] Additionally, in 2003, Boeing managers were indicted for conspiracy after obtaining proprietary documents from Lockheed Martin that facilitated Boeing winning $2 billion in government space launch contracts.[4] In considering this behavior, research has defined rivalry as a subjective competitive relationship with another actor that is influenced by psychological involvement.[5]

The result is that rivalry is not entirely rational, or the source of rivalry is often personal and open to interpretation. This is reflected in cultural perspectives on rivalry in stories that extend to early recorded history, such as the story of Cain and Abel. In another setting, Native American mythology modeled human behavior using animals. In an associated fable, a comparison is made to a battle that rages between a buffalo and wolf within the spirit of every person. If the buffalo wins, a person will have an ordered life and settled spirit. However, if the wolf wins, a person’s life will be full of conflict and their spirit will always be hungry. When asked what determines whether the buffalo or wolf wins, an elder responds with the lesson that it depends on the one that you feed. That fables with similar lessons appear in different cultures suggests that issues associated with rivalry represent a common human characteristic with implications for organizations and the individuals within them. With this foundation, this article explores implications of rivalry between and within organizations to include personal implications before discussing remedies to destructive rivalry.

Inter-organizational rivalry

Rivalry is an inherent part of human nature and it is something managers need to think about more deeply to avoid being caught up in its dark side. Managers of firms that are not mindful of rivalry risk being surprised by competitor moves. In a discussion on failures with A.G. Lafley, then CEO of Proctor & Gamble (P&G), he described how product testing of a new bleach product in Portland Maine was undone after Clorox provided every household in the target market with a gallon of bleach to eliminate demand.[6] Often a competitive action invites a response that escalates rivalry leading to competition based on price (commoditization) that lowers profits for all firms in an industry.[7] [8] In this example, P&G accepted the losses for its failed bleach campaign and it avoided direct competition with Clorox by integrating the new bleach into its Tide product.[9] While negative impacts of industry rivalry are accepted, a less recognized risk of rivalry is that it also has organizational and personal costs that can limit progress available to managers.

Intra-organizational rivalry

When the thrill of competition becomes the goal, managers risk the future of their organizational units and potentially careers, as the Boeing manager indictments demonstrate. At the same time, different units contend for limited resources in organizations. Compared to a cohesive unit, an internally divided unit will suffer in the contest for organizational resources and status.[10] As a result, experience teaches us to coordinate activities as a means to an end. Consider the example of choosing a play in a football huddle. Instead of the quarterback calling the play where effort is coordinated, disorganization and delay would result respectively if people each ran their own play or they debated the play to run. This identifies self-interest as an opposing force to coordination. This problem is managed exceptionally well at Google where employees spend 20 percent of their time on a project of their choice to create an internal market for talent where people essentially vote for promising projects with their time.[11] Meanwhile, in family businesses, conflict over personal interests often results in rivalry that can lead to problems.[12] For example, the rivalry between German brothers Adolf and Rudolf Gassler, who went on to found Adidas and Puma respectively, after initially making shoes together involved both personal and business feuds.[13] Again, this suggests that business is not just business, but that it often is also personal.

At a personal level, striving to win at the expense of others is consistently a losing proposition.[14] [15] A dramatic example involves an attack in 2013 where acid was thrown into the face of the director of the Bolshoi ballet at the direction of a rival dancer.[16] In business, the rivalry between former collaborators Thomas Edison (General Electric) and Nikola Telsa (Westinghouse) over using DC or AC electric current is dramatic with Edison electrocuting animals to demonstrate the perceived dangers of AC.[17] An implication is that an important aspect of competition comes from what competitors decide not to do, or recognizing that attaining something generally requires paying a price.

Often the cost comes in the perception of others. For organizations, this translates into reputation and legitimacy that affects relationships with employees, customers, regulators, and other interested parties. Ignoring reputation risks boycotts or limited firm options for business partnerships. For example, Pfizer’s poor reputation as an acquirer prevented its purchase of Covidien.[18] For individuals, career progress depends on favorable perceptions by colleagues. Specifically, it means at some level that your superiors and peers accept you are someone they would want to work under. This relates to the importance of perception and the need to consider how competition and rivalry are perceived, as a change in perspective can determine whether a situation is viewed positively or negative.

Rivalry Remedies

Understanding and modifying the perceptions of competitive rivalry needs to consider both the climate internal and external to an organization. Since external perceptions will generally result from conduct of an organization, combating the negative effects of rivalry begins at the lowest levels of an organization to develop how more positive competition can result from accounting for multiple perspectives. For example, successful people take the time to seek out feedback from superiors, peers and subordinates on how they perceive you to make timely adjustments.[19] Moving up in an organization requires exhibiting qualities that set you apart, and building a network of relationships is one of these qualities. This requires going beyond simple co-optation to building relationships and supporting others in what they want. Focusing on common interests provides an important solution to inevitable self-interests that undermine coordination in organizations.[20] Building this skill requires an awareness of what you want, but more importantly what others want, because getting what you want largely depends on understanding what others want. In other words, career success requires balancing the competing demands of achieving results and maintaining relationships.[21] With this perspective, unplanned daily events and problems become vehicles for pursuing goals and managing relationships.[22]

Women racing unfairly sizedTackling rivalry at a personal level can also improve the environment within and outside an organization as norms change. For example, in 2011, Barclays PLC CEO Bob Diamond fired over 40 executives in an attempt to change the culture of the bank.[23] Making changes inside an organization can also begin to limit inter-organizational rivalry. One way this manifests is in the development of industry norms for competition, reflecting the role of embedded relationships in influencing the industry environment of organizations.[24] [25] At the same time, low levels of competition can be problematic and lead to collusion and possible stagnation. For example, the Department of Justice has been investigating technology firms, such as Adobe, Apple, Google and Intel, regarding entering into no solicitation agreements of employees, which kept wages artificially low.[26] [27] This problem could likely be avoided by considering multiple stakeholders, such as the very employees that businesses depend upon. Considering multiple stakeholders also has the opportunity to reduce rivalry and improve the competitive conditions for organizations.[28]

Conclusion

The success of managers and organizations depends on appreciating a paradox inherent to competition. While progress depends on a sense of accomplishment in the face of challenge, appearances need to show it resulted fairly. Still, applying rules too strictly may result in setbacks from competitors applying a looser definition of fairness. For example, during the 2014 winter Olympics, Canadian bobsled pilot Lydon Rush simply stated: “If you ain’t cheating, you ain’t racing.”[29] An observation that echoes Machiavelli’s insight that any man who tries to be good all the time is bound to come to ruin by the great number who are not.[30] The complexity of what this means for business ethics is less clear than those in sports where rules are known and focused on creating an even playing field. In business, challenging rules and competing with integrity can be done when you are aware of what you want, consider those around you in pursuing goals, and apply consistent values to guide your behavior.

In summary, a person doing the right thing for the right reason is generally less newsworthy than scandalous behavior, but nice guys do succeed. For example, Fred Hoiberg, the men’s basketball team coach at Iowa State University, known for his “nice guy” approach, made it to the 2014 “Sweet Sixteen” and he is often mentioned as a future NBA coach.[31] Staying in the game and learning from failure may be all that success requires, as a competitor that will not quit cannot be beaten. This is the concept behind Steve Rogers becoming Captain America, and it can explain efforts to recognize and popularize “real life” superheroes. In the end, time is the great equalizer and progress will come more quickly to organizations and individuals that learn to manage competition and rivalry early on.

 

[1] Kilduff, G., Elfenbein, H., Staw, B. (2010). The psychology of rivalry: A relationally dependent analysis of competition, Academy of Management Journal, 53(5): 943-969.

[2] Mas-Ruiz, F., Ruiz-Moreno, F., Ladron de Guevara Martinez, A. (2014). Asymmetric rivalry within and between strategic groups, Strategic Management Journal, 35: 419-439.

[3] Ibid.

[4] Department of Justice. (2003). Two former Boeing managers charged in plot to steal trade secrets from Lockheed Martin: http://www.justice.gov/criminal/cybercrime/press-releases/2003/branchCharge.htm. Accessed 24 April 2014.

[5] Kilduff, G., Elfenbein, H., Staw, B. (2010). The psychology of rivalry: A relationally dependent analysis of competition, Academy of Management Journal, 53(5): 943-969.

[6] Dillon, K. (2011). I think of my failures as a gift. Interview of AG Lafley, Harvard Business Review, 89(4): 86-89.

[7] Christensen, C. (1997). The innovator’s dilemma: When new technologies cause great firms to fail. Harvard Business School Press: Boston, MA.

[8]Porter, M. (1980). Competitive strategy: Techniques for analyzing industries and competitors. Free Press: New York.

[9] Dillon, K. (2011). I think of my failures as a gift. Interview of AG Lafley, Harvard Business Review, 89(4): 86-89.

[10] Pfeffer, J. (1992). Managing with power: Politics and influence in organizations. Harvard Business School Press: Boston, MA.

[11] Crowley, M. (2013). Not a happy accident: How Google deliberately designs workplace satisfaction, FastCompany: http://www.fastcompany.com/3007268/where-are-they-now/not-happy-accident-how-google-deliberately-designs-workplace-satisfaction. Accessed 2 July 2014.

[12] Gomez-Mejia, L., Cruz, C., Berrone, P., Castro, J. (2011). The bind that ties: Socioemotional wealth preservation in family firms, Academy of Management Annals, 5: 653-707.

[13] New York Times. (2005). Adidas versus Puma: Origins of a rivalry between brothers: http://www.nytimes.com/2005/11/08/business/worldbusiness/08iht-SHOES.html. Accessed 2 July 2014.

[14] Ellis, L. (2012). Leading with honor: Leadership lessons from the Hanoi Hilton. Freedom Star Media: Cumming, GA.

[15] Hill, L., Lineback, K. (2011). Being the boss: The 3 imperatives for becoming a great leader. Harvard Business Review Press: Boston, MA.

[16] Elder, M. (2013). Bolshoi acid attack reveals tangled web of professional and personal rivalries, The Guardian, 6 March: http://www.theguardian.com/world/2013/mar/06/bolshoi-acid-attack-confessions-rivalries. Accessed 25 April 2014.

[17] Fortune. (2013). The 50 greatest business rivalries of all time: http://fortune.com/2013/03/21/the-50-greatest-business-rivalries-of-all-time/. Accessed 2 July 2014.

[18] Financial Times. (2014). Medtronic/Covidien: 17 June, p. 12

[19] Hill, L., Lineback, K. (2011). Being the boss: The 3 imperatives for becoming a great leader. Harvard Business Review Press: Boston, MA.

[20] Pfeffer, J. (1992). Managing with power: Politics and influence in organizations. Harvard Business School Press: Boston, MA.

[21] Ellis. L. (2012). Leading with honor: Leadership lessons from the Hanoi Hilton. Freedom Star Media: Cumming, GA.

[22] Hill, L., Lineback, K. (2011). Being the boss: The 3 imperatives for becoming a great leader. Harvard Business Review Press: Boston, MA.

[23] Daily Mail. (2011). “‘I’ve ditched 40 executives just for being jerks’: Barclays boss Bob Diamond fights back against demonization of bankers,” 10 December: http://www.dailymail.co.uk/news/article-2072460/Barclays-boss-Bob-Diamond-Ive-ditched-40-executives-just-jerks.html. Accessed 25 April 2014.

[24] Hillman, A., Zardkoohi, A., Bierman, L. (1999). Corporate political strategies and firm performance: Indications of firm-specific benefits from personal service in the U.S. government, Strategic Management Journal, 20: 67-81.

[25] Peteraf, M., Shanley, M. (1997). Getting to know you: A theory of strategic group identity. Strategic Management Journal, 18 (S1): 165-186.

[26] Department of Justice. (2010). Justice Department requires six high tech companies to stop entering into anticompetitive employee solicitation agreements, 24 September: http://www.justice.gov/opa/pr/2010/September/10-at-1076.html. Accessed 26 April 2014.

[27] Catan, T., Kendall, B. 2010. U.S. steps up probe of hiring in tech, Wall Street Journal: 9 April, B1.

[28] Hill, C., Jones, T. (1992). Stakeholder-agency theory, Journal of Management Studies, 29: 131-154.

[29] Zillgitt, J. (2014). Accusations of cheating follow speed on sliding track, USA Today, 13 Feb: http://www.usatoday.com/story/sports/olympics/sochi/2014/02/13/accusations-of-cheating-bobsled-skeleton-luge/5457947/. Accessed 26 April 2014.

[30] Machiavelli, N. (1515). The Prince: http://www.goodreads.com/quotes/564958-any-man-who-tries-to-be-good-all-the-time. Accessed 25 April 2014.

[31] Peterson, R. (2014). When it comes to transfers, Hoiberg gets it. Des Moines Register, 16 April: http://www.desmoinesregister.com/story/sports/college/iowa-state/isu-basketball/2014/04/16/randy-peterson-comes-transfers-hoiberg-gets/7785805/. Accessed 25 April 2014.

About the Author(s)

David R. King, PhD, earned his degree in strategy and entrepreneurship from Indiana University's Kelley School of Business. After retiring from the U.S. Air Force, he joined academia and he is currently an Associate Professor in the College of Business at Iowa State University where he teaches undergraduate business strategy. Dave’s research focuses on complementary resources, merger and acquisition (M&A) integration and performance, technology innovation, and defense procurement. An award winning researcher, his research appears in leading management journals.

Leave a Reply

By submitting a comment here you grant Graziadio Business Review | Graziadio School of Business and Management | Pepperdine University a perpetual license to reproduce your words and name/web site in attribution. Inappropriate or irrelevant comments will be removed at an admin's discretion.