As a daily reader of TechInAsia, this recent Evernote CEO interview caught my eyes regarding his views on competition:
While I've always preached that as an entrepreneur you have to know your competition, I do agree with what Phil Libin said, especially when the context is long-term.
Paying too much to competition does constrain business executives to some silo visions. In fact, this is the main criticism against the famous Porter Five Forces model for industry analysis. In some sense, competitor analysis is mostly backward looking, since you can only observe what THEY HAVE and HAVE NOT DONE. It doesn't help you all that much in forging ahead in unchartered territories.
And the “if Google can’t fix this, then I probably can’t either” referred in the article is an especially dangerous one. As a tech innovator, you have to make decisions based on your own analysis, not on simple comparison with market leaders. Otherwise, there will never be any startup disruption, at all.
Still, you can't shy away from the question of competition, especially if you're doing fund-raising with the VCs. Even the most radical idea is supposed to solve a problem that the planet currently cannot solve. That means you are always going against a status quo that probably provides some alternatives, albeit not satisfying enough and therefore leaving a huge pain point for you to attack. But those existing alternatives are still valid competitors, however dinosaur they look like.
Take Uber (again, I know) for example. Few in the VC/Startup eco-system would doubt that they've successfully disrupted an industry. But besides the Uber-like services like Lyft and the 2 to 3 copy cats in every major Asian city they are trying to break it, they have a very powerful competitor in place — the existing taxi industry. And you see how they expend most of their energy and resource fighting the taxi industry in almost every major city or country they broke into. That's valid competition and would be a glaring hole to the VCs if they had ignored it in their fundraising presentations.
Bottom line, do NOT shy away from competition analysis. Meanwhile, like Phil Libin said, don't formulate your (long-term) strategy around your competitors. It's not even a balance that you have to strike. Personally I see the two angles regarding the competition actually not contradicting. Both are trying to achieve the same goal: keep your enemies close and don't let them hold your steps.