There's a saying in Silicon Valley that for every good idea out there there are ten other people out there with the same idea. Five of them will give up but the other four may just as well come out at the same time you do.
At Farallon Computing, a pioneer in Macintosh networking, we faced exactly this problem from day one with our tiny PhoneNet connector. It was like a classic widget in that it did its job well, better than the product from Apple it replaced, and had a patent to differentiate it. Then along came the clones. Soon they had blinking lights that customers liked even though they actually affected performance. Go figure. I used to fall asleep at night to nightmares of competitors giving their product away in front of us at our MacWorld booth. Ah, the old days.
The first lesson is not to assume that someone else who releases a product a week after you do is a "rip-off." When you see it that way, you've already applied a attitude of moral superiority that assumes you deserve to win because you are first. That's actually really dangerous because it leads you to be blind to what the customer sees.
You're better off assuming they're out there and jump on anything that even smacks of competition to prepare your internal team for the differentiation. As soon as you spot them, dig in and figure out how you're different and better. What can you learn from the ways they're different and (ya gotta admit) better. Never, ever, lie to yourself.
Andy Grove was right... only the paranoid survive.
The real challenge is how respond to your competition without letting it drag you off your charted strategic course. The best way to do that is to really understand how the feature differences affect your target customers -- and your future target customers. Sometimes you can do a magic positioning dance that makes the competitor unimportant. Could be it's a parallel market that may as well be a parallel universe.
I hope that's helpful. Feel free to reach out if I can help further.
