I've heard from some managers that the internal competition inside a company is good. But few of them can keep it under control in the long run to avoid harmful effect.
I know why managers like this competition: it highlights new leaders, reveals potential efficiency improvements by pushing boundaries, create innovation naturally and motivate creation of autonomous work units focused on results.
I've spoken with a manager from a company where they used this kind of competition between teams whenever they didn't have clear vision about evolution of their business and, apparently, it worked.
But there is a caveat:
the competing people, teams or sister companies they start to create, sometimes unintentionally, competing advantages for them. Advantages require barriers: development teams become gate keepers for the knowledge, subsidiaries — create new "hidden" products. So the company always pay twice (at least), collaboration becomes a strategic liability rather than strength.
Taking competition out of processes and culture will require huge efforts.
I've seen an attempt to introduce often team members rotation between teams to avoid gatekeeping. Result:
- teamleads try to find another competitive advantage instead of the lost control on the team performance. Relationships with other managers, knowledge of the teamleads themselves become such advantages. So the competition is still there.
- because of the rotation teams become more a group of experts rather than a team. It creates natural barriers for developing team performance.
Competition under control can be a powerful tool but the further you go with it the more difficult to roll it back.
If you read by far I have to admit that I have a guilty pleasure: I enjoy researching company structures and product offerings created in such circumstances. They often begin with logical intentions but evolve into something more complex. If you know such examples from your work experience, please, write it in a comment or DM me.