Eric Sink's latest article, The Game is Afoot, has heaps of advice on how to deal with competition in the software business.
The thing I find most interesting about Ping Pong is that you can often win without doing anything fancy or aggressive. A lot of players think the way to win is to slam the ball really hard. The problem with this strategy is that a slam is a high-risk/high-reward shot. If you do it right, you almost certainly score a point when your opponent fails to return the ball. If you do it wrong, you give your opponent a point.
Modesty aside, I consider myself a "pretty good" Ping Pong player. I can slam the ball when necessary, but I hardly ever do. I can beat most other players by simply returning every shot with a little backspin. Hitting the ball hard simply isn't necessary. All I need to do is wait for the other player to make 21 mistakes. [...]
You can beat a lot of competitors by simply not beating yourself. Most companies go out of business because of their own stupid mistakes, not because of the brilliance or strength of their competitor. Stay conservative, and stay in business. Watch the years go buy, and you'll be surprised how many of your competitors come and go.
And Joel Spolsky has written about why he thinks better programmers are worth it.
The real trouble with using a lot of mediocre programmers instead of a couple of good ones is that no matter how long they work, they never produce something as good as what the great programmers can produce. [...]
The Creative Zen team could spend years refining their ugly iPod knockoffs and never produce as beautiful, satisfying, and elegant a player as the Apple iPod. And they're not going to make a dent in Apple's market share because the magical design talent is just not there. They don't have it.
