A few alarm bells go off in my head when I read this. If you want to prepare for the interview well, I think the best way to prepare would be to address these two issues, both of which would probably kill your chances of getting the job if you were being interviewed by me.
First of all you mention that you are worried about badmouthing him.
Do not say anything bad about him or ANYONE else at the company. If you start talking about other people's shortcomings, then you will lose the role immediately, i promise you. An interview is the one time in life that it is socially acceptable to brag about yourself.
Remember, the interview is about how YOU would be good for the new role, it is not about how your collegue would be bad or worse at the new job. Talk about how great you would be, don't talk about anyone other than yourself. A company will not want to hire a manager that focuses on all the wrong things with the employees and the company. It's really important to stay positive. If you start talking bad about your collegue, then you will lose the job.
Of course, you also don't want to make it sound like there is nothing for you to work on because it's so perfect there. If you make it sound like a utopia than you will lose the job too, because there is always stuff to improve on. So prepare ideas for constructive ways to improve the company. Be specific. This will be the best use of your time to prepare. As an example you might say:
"We do _______ pretty good right now, but I think we can do it better by implementing my strategy of X, Y, and Z. Would it be okay if I went into some more detail about it? I would love to share my ideas with you about this, because I think it can really benefit the company by doing A and B."
Know the numbers and/or data. Study them. You need to be ready to spit them out before the person interviewing you has finished the question (except you should patiently wait, but be good enough that you could do it if you needed to). This is a management role, which means you will have metrics that you are graded by. Depending on your industry this could be conversion numbers, average sale orders, billable hours, average call times, or whatever. Know the numbers you need to know and find ways to explain that you not only know the numbers, but also know the importance of them.
"The conversion rate of our website is a solid 4% right now. But I know we can improve on this by simply doing A, B, and C. If we get these tasks (A, b, and C) completed in less than 4 months, then I know that the remaining 8 months of the fiscal year we will see an increase of conversion by 0.5% which, based last years rough projections would equate to roughly $1.5M in additional sales"
Lastly, prepare yourself. It sounds like the idea of going up against your co-worker is really bothering you. Don't take this a bad way, but this would normally be indicative of a lack of self-confidence. It's ok to admit it, we can all improve. So you can work on mentally preparing yourself for the job. If you go into the interview mentally prepared, knowing that you are the best man for the job, then it will show in how you answer any of the questions. If you go in, feeling like someone else might be better, that will also show. So you need to mentally prepare and convince yourself that you can do it. Think about what type of awesome benefits this job will bring you. Practice the interview in a mirror or with a friend/spouse/etc. Be confident and go in knowing that you know how to do a great job.
Don't think about an interview as answering the questions correctly. I have interviewed hundreds of people and let me tell you a secret. Most questions don't have right or wrong answers. Most interview questions are designed simply to see how you react. When you are asked to talk bad about yourself (one of the most common interview questions, 'what is your weakness'), it doesn't really matter what you say (unless its really bad like, 'Im usually late twice a week', or 'I am constantly getting flagged for harassment in the workplace'), but usually it has to do with HOW you answer it. Are you confident that you can improve, are you honest, are you sincere. Did you give a canned answer or did you think about it.
Last secret to interviewing well, set goals for yourself. Where do you want to be in a year WHEN you get this job? Where are you going to be in 3 years? What is the first thing you want to improve when you get the job? What ways can you contribute better to the company? How can the company benefit by having you in this role? Prepare yourself mentally for those type of questions. Have specific goals in your head. These will help you answer 50% of the questions you get asked. You can't anticipate the exact questions you will be asked, so you simply need to make sure you mentally know that you have what it takes and you are the best one for that role. Your confidence will glow through you. If you know your goals, then any question you get asked, can always come back to your goals. A lot of people work every day of their life, not knowing where they are going and what they want to become. You need to figure that out and once you do, you will do great.
Again, the interview is about YOU, not your co-worker. If you see your co-worker in the hall between interviews, tell him
"Hey _! Good luck in your interview today. I just got out, (interviewer name) and I had some good discussions about the future and I had a good time. I'm glad its over and now all I can do is wait."
Be positive like that and vague. Tell him it went well without going into specifics. This will leave you on good terms, which is what you want no matter who gets the job. Plus, if you act like it went really well, he will feel like he needs to work harder in order to do better than you did. This will psychologically break him down and might cause him to mess up more or get frustrated in the interview.
As a recap, you asked what should you do to prepare:
- Don't say anything bad about anyone, especially the co-worker
- Be prepared with ways to improve if given the role
- Know your numbers/metrics and what they mean to the company
- Mentally prepare yourself. Know your goals for this job, this builds self-confidence
- Talk positive to him about the interview without specifics if you cross paths with him
Last, it is possible that you will get asked "Why do you think you would be better at this job than _co_workers_name__, I am sure you know they applied, right?"
I would ask this question if I was interviewing, because again, I don't care what you say, I care what you are thinking and how you say it. I would be looking for positive comments and praise. I would actually prepare for this questions specifically since there is probably a 50% chance you will get asked it (I have been asked that before, multiple times in fact). My suggested answer (reword it to sound more like "you"):
Yes, I know ________ has applied, and I think that it is great you are providing the opportunities like this for people from within the company to apply. I wish him the best of luck. I don't know much about his experience, so its hard for me to comment directly on it, but I know that I have the stuff that the company really needs for this job such as A, B, and C. I have past experience and my career goals have really aligned me well for this job, so I know that it will work out great. I also know that you will do a good job at deciding. I have always respected the way you look out for the company since I have been here."
Say that, and you will have the job in the bag. Good luck!
Also, if its possible to reschedule so you are last to interview, that is usually better for interviewing as it leaves a more memorable and lasting impression in the interviewer's mind. If the interview is already set, you might be better off just dealing with it, but in the future always try to be last