It is said that "imitation is the sincerest form of flattery", but in the world of business, imitation is inevitable, and hardly flattering. For example, Apple's iPhone and iPad products have been imitated by a number of competitors, such as HTC and Samsung, which have incurred the legal wrath of Steve Jobs and company. Meanwhile, in the video game industry, cookie cutter genres are the norm, with each studio imitating a popular franchise - such as Call of Duty, World of Warcraft or Grand Theft Auto - in an attempt to cash in on current popular trends, rather than shoulder the inherent risks of innovation. Competitors in China have taken imitation to extreme levels, with fake iPods, iPhones and iPads freely available at any major street market. In this world which relies on low-risk and high-rewards, imitation clearly trumps innovation.
However, truly learning from competitors doesn't mean flat out imitating them. While there is no fault in following the successful trend of a market leader, such as Apple, there is a flaw in slavish imitation. In Apple's case, its cheaper Android imitators have given Apple the unintended gift of free advertising. People buy Android phones because they resemble iPhones at a cheaper price, but it ultimately fails to satisfy their desire for the real iPhone, which leads to a high turnover rate which benefits Apple. You don't want to create a product that so closely resembles a competitor's higher priced model that it causes your customers to view yours as an inferior, cheaper model. However, that's only a rule of product design.

First of all, be aware of your competitors. Companies often get blindsided by a company which wasn't perceived as a real competitor until it is too late. An obvious example is cell phone maker Nokia's fall at the hands of Apple, which had long been perceived as a personal computer company with no interest in mobile handsets. Google also blindsided invincible software giant Microsoft by rapidly transforming from a search engine into a cloud-based software company. In turn, social networking site Facebook hit Google in a blind spot by outgrowing its status as a social site and branching out into all the nooks and crannies of the web, a final frontier which Google had laid claims to. The lesson gathered here is that your competitors aren't always who you think they are. Besides your normal industry peers, be aware of which hidden companies are threatening to cross over industry lines to threaten your business.
Find several major competitors to follow. Commit your workforce to follow their every move, and try to gauge their business strategies based on their current products, supply chain, pricing and financial condition, if the company trades publicly. For example, Google has been struggling to follow in Facebook's footsteps with its social network, Google+. You can bet that both companies are thoroughly evaluating the strengths and weaknesses of the other. Facebook has "Like", therefore Google has "+1". Google is changing groups into a more user-friendly "Circles" format, so Facebook strikes back by revamping its Groups pages into a new, simpler format. iPhone and Google Apps? Check. Instant photo sharing from smart phones? Check. This kind of rapid fire tit-for-tat is what your company needs to stay competitive and ahead of your competitors. Make sure your products have everything your competitor promises and more - hopefully at a lower price.

Lastly, follow public opinion regarding your competitors. Read its product reviews, and comments posted by real users. Take note of the good reviews as well as the bad, and see how you can use this free advice to modify your own products. Keeping your finger on the pulse of the everyday consumer, who cares enough to post his or her opinions online, can help avoid disastrous product design mistakes. Setting up social networking pages - on Twitter and Facebook - and inviting public discussion regarding your products can keep you well informed about your strengths and flaws compared to the competition.