Two businesswomen with boxing gloves fighting.
It's gratifying when private corporate disagreements erupt into the open. It confirms the perception that business, often dressed up as a decorous diplomatic dance, is in fact a vicious hand-to-hand battle. It was in this spirit that I welcomed the recent outbreak of hostilities between Oracle – the software group headed by Larry Ellison – and Autonomy, the U.K. technology company founded by Mike Lynch and now being taken over by Hewlett-Packard.
To recap: Mr. Ellison alleged on a conference call that Autonomy had first been "shopped" to Oracle but the price had been "absurdly high." Mr. Lynch riposted that Mr. Ellison's remarks were "inaccurate" and his understanding of Autonomy's business weak. Oracle retorted that "either Mr. Lynch has a very poor memory or he's lying" about an April meeting with Oracle executives. The two sides finally fought themselves to a standstill, leaving the impression that the company was shopped to Oracle – but earlier and by a banker acting independently (out of the goodness of his heart, as bankers do). Move along now, nothing to see here.
U.S. technology companies are notorious for this rough-and-tumble public rivalry. Sometimes this criticism is direct, such as Mr. Ellison's jibes against rivals including HP, Microsoft and SAP. Sometimes it is more subtle, like Jeff Bezos's sideways criticism of the price and performance deficiencies of Apple's iPad at last week's launch of Amazon's Kindle tablet.
Michael O'Leary, mouthy boss of Ryanair, the budget airline, has virtually built the company's identity on public attacks against rivals – from EasyJet to British Airways to Aer Lingus. In the same sector, Virgin Atlantic's Sir Richard Branson fuelled his airline's challenge to BA in the 1980s and early 1990s with some brutal public sparring.
In long-running disputes, at least one of the antagonists is usually an entrepreneur or owner with the authority and personality to throw punches publicly. There are exceptions, such as the dull and interminable tug-of-war between Boeing and Airbus over which has sold the most aircraft. But faceless companies generally foster rivalry in private. It is as hard to imagine Unilever's chief executive publicly accusing his Nestlé counterpart of being an amnesiac or a liar as it is to imagine Mr. Ellison trading his superyacht for a pair of comfortable slippers and a pipe.
Rivalry is a double-edged management tool, however. A recent study analyzed U.S. college basketball and found that players tried harder against traditional rivals. Co-author Gavin Kilduff of New York University's Stern School of Business told me that publicity for the game could further stoke up the antagonism. But the study also warns that intense corporate rivalry, as distinct from mere competition, "opens up the possibility of economically irrational behaviour," including "an unwillingness to co-operate with rivals even when it is instrumentally beneficial."
This can get personal. Speaking at a private lunch last week, the grizzled chairman of a large listed U.K. group recalled how an executive at a multinational brusquely declined to sell to him early in his career. Promoted decades later to run a big client of this multinational, he took great pleasure telling the same executive how he would never buy from him or his company, even if he gave away its product. Satisfying, no doubt, but hardly good business.
Extreme rivalry can lead to unethical behaviour – like the so-called "dirty tricks" campaign BA ran against Virgin. A follow-up paper by Prof. Kilduff and others looks at Italian soccer derbies: It finds that when arch-rivals meet, players are more likely to commit serious fouls.
So, managers (on and off the sports pitch) must be careful not to encourage the wrong sort of rivalry and they need to pick their moment to take such spats public.
Unlike Mr. Ellison, very much in charge of his company, Mr. Lynch has just agreed on the sale of his – to HP, which was probably the real target of Mr. Ellison's initial jab. Mr. Lynch should have welcomed the fact that his company had discomfited Oracle enough to earn a mention and left it at that. If I were an Autonomy employee at this time of takeover uncertainty, I would not be fired up by Mr. Lynch's counter-attack against Mr. Ellison; I'd be worried the boss had got us into a brawl with one of the biggest boys on the technology block.