Many companies are obsessed with a competitor when they should be obsessively focused on their customers. It is a common mistake made by companies large and small. The Guardian Unlimited has a fascinating interview with Jeff Raikes, President of Microsoft Business Division. The interview covers a wide range of topics including Apple, Visicalc, Sharepoint, Office, Live online apps, Bill Gates, software piracy, and others. But, I came away with one big thought that applies to all businesses "don't be obsessed with a competitor, stay focused on the customer". 
Startups often get obsessed with beating the market leader, watching every move they make, targeting their marketing messages at trashing the competitor, trying to hire key employees, and basically building a company culture of "us against them". Big companies do it too. The ego of big company CEOs drives them to beat the competition. I'm sure you can think of examples in every market segment.
Customers have their own business to worry about and they want solutions to their problems, at a reasonable price, that are easy to use, and work well with what they already have. Customers don't care that a particular product is open source, shared source, out-sourced, sole sourced, or anything else. Customers want the best solution to their problem at a reasonable price.
Jeff Raikes says "The reason is, people get very focused in on trying to undermine Microsoft and they don't get very focused in on the customer." In response to a question about Office and online versions of the same functionality Jeff said "the thing that will probably trip people up is they'll get focused on the idea that that's a replacement for the Office suite, when what's most interesting are the new and unique scenarios that you can get by having that capability. But then, it's our responsibility to make sure that our customers have access to those services as part of their use of Office tools. It's about software and services, as opposed to services versus software."
Technology Focus is another problem. How many times have you listened to a company pitch its product or service and watched them get totally wound up about the technology or the "how", and completely ignore the customer benefits? It happens all the time.
Focus on the customer and you can't go wrong. This is a great lesson for businesses large and small, and one that we sometimes need to learn over and over again. In the many startups I have worked at I have always tried to, ask the customer, unprompted by self serving questions, what problem they are trying to solve. Believe it or not, some customers don't have the problem you are trying to solve, or already have a satisfactory (to them) solution for it. If so, move on...don't waste your time. Don't try to convince the customer they really DO have the problem you solve. This is another common mistake of startup sales people. I have done it myself...many times.
Listen to the customer, truly listen to what they are saying. Not just one big customer, listen to hundreds of customers and look for patterns. Build your product and your marketing around the common customer themes. Don't focus on the competitor. Don't take the battle to their turf...you will most likely lose. Remember one of my favorite cliche's... In a fight between a grizzly bear and an alligator, the terrain determines the victor. Listen to the customer and keep the battle on your turf.
