“There can be no question that we are at war,” Home Depot CFO and executive vice president Carol Tomé told a recent conference of finance executives. The combat, of course, is with Lowe’s — the fastest-growing company in the home-improvement industry, which Home Depot dominates. And Tomé startled some listeners with a few verbal missiles of her own. “From our perspective, they’ve never had an original idea,” she said of the Lowe’s approach. “They copy everything we do.”
Such old-style, knock-down-drag-out competitive remarks may sound refreshing in an era when “No comment” is the preferred statement from executives asked about a rival. These days it seems the tough talk that once consumed companies, from the sales department to the CEO’s suite, has gone the way of, well, the hostile takeover. Sure, companies still fire shots when they sue one another. But back in the early 1990s, for example, The Walt Disney Co. routinely attacked arch-rival Universal Studios’s veracity over its attendance claims for the Universal Studios theme park in the Orlando vicinity, which was cutting into Disney World’s attendance. Pretty Mickey Mouse stuff. And even those “Uncola” and “We try harder” campaigns have given way to tamer verbiage like “Think different.”
For the most part, this new era of corporate diplomacy is good, suggests Margaret Neale, professor of organizations and dispute resolution at Stanford University. She notes that harsh words about the competition often have a negative impact by forcing a response in kind. “A general maxim in negotiations is never to paint [the other side] into a corner,” she says.
On the other hand, if frankness is strategically designed, it may be an effective way to achieve results. “The question is, how do you want to focus it?” says Neale, recalling how Lee Iacocca bluntly challenged automobile price-rebate policies by Ford and General Motors in the early 1980s with critical words and a threat to match them. “He was conveying a great deal of information about his willingness to go toe-to-toe with his competitors, by drawing a line in the sand,” she says.
“Sometimes, though, it’s just personal,” adds Neale. “The two guys say, ‘You know what? I just don’t like you.’ It’s no longer strategic. And that’s when it gets crazy.”
Diplomacy certainly pays among hoteliers, according to Hilton Hotels Corp. executive vice president and CFO Matthew Hart. “My own belief is that talking down a competitor is actually counterproductive,” he says. Why? “In my industry, we all trade generally in a band,” explains Hart. “That band is a multiple of earnings or a multiple of cash flow, or some other multiple. With our two biggest competitors — Marriott and Starwood — to the extent their share price declines, mine probably will, too, because investors can lose confidence in the [industry] outlook.”
Says Hart, “You might get a short-term evil pleasure in seeing someone else’s problems surface,” but it won’t seem worth it when it comes back to haunt your own stock. (A former Disney treasurer, he remembers the tough rivalry with Universal, and says he doesn’t miss it.)