MySpace.com was in the market far ahead of Facebook.com. Facebook re-defined the market space (innovated a new category) and took over the lead (measured by the rate of new users signing up). Serial entrepreneurs do that to win. They find new, unoccupied spaces to dominate. They avoid fighting head-on wars.
When you are looking at a gorilla in the space you intend to attack, think again. Attacking the Defender using the Offensive strategy demands that you focus on a single weakness in the gorilla. Most of the time the gorilla Market Leader quickly covers the exposed weakness and the Offensive attacker bleeds to death.
It is wiser to use the Flanking strategy. Find an uncontested market segment. Something fresh, large and growing, with room for competitors, including you. Give the new category a new name. Focus all your effort on taking over the lead in that fresh market segment. That is the winning strategy for startups.
Sometimes your "Wow!" factor depends on a feature. It may be superior fidelity, or look and feel, or speed or less power. But those are features that will quickly be copied close enough by competitors to turn your product into a commodity. A commodity is a product that cannot be distinguished. You cannot build a brand with a commodity. You get a quick lead but competitors rush in and try to do the same as your company. Soon "everyone is doing the same thing" and yours has become a commodity. Then the VCs cancel their appointments with you, recruiting gets tough, bloggers get confused and customers yawn.
REDEFINE THE MARKET
When you find your space suddenly buzzing with annoying competitors, make your move: redefine the market. Find a fresh space to focus on, one you can be branded in. Look for your product to be much more than a thing. Add value to it so it becomes so valuable to customers that competitors cannot duplicate it.
To do that you will need a fresh positioning. That is the psychological space in the mind of your ideal customer, the space no one else yet occupies. Expensive premium coffee, Starbucks. Search, Google. Portal, Yahoo. Yours. Branded. That is no longer a commodity. You own it. Congratulations.
Yes, it is not easy. But nothing worth doing is. Right? Right.
So get clever. Be innovative. Learn from the veterans. Remain positive. It is not walking on water. Many have done it before you. So you can do it, also.
BOTTOM LINE: Focus on uniqueness. Run away from better. Or quicker, or more beautiful, or less power. Go for the gold. Find a new market segment to dominate. Do your homework, your market research. Then have courage. Execute with brilliance. Then you'll avoid getting sucked into a losing game. Winners are differentiated. That's what they brand. It is central to building your unfair advantage.