If you have been doing SEO for a little while you have most likely heard the phrase "My competitors are doing it, why should we do the same thing?!" or my personal favorite "Why is this guy that is nobody in our industry ranking above me with that spammy link exchange directory thingy, shouldn't install one too!?!".
Those questions never allow for a single dull moment when with working with new or existing clients. The question either becomes incredibly annoying or comical if you heard it enough. Sometimes I imagine saying, "Sure lets install that spammy link exchange directory thingy and see what happens!!!". However you know you would never do such a thing as the secret to your ranking success is hardly ever going to lie in what "other" people are doing. Pageoneresults on WMW, thought so too and started on a thread on WebmasterWorld talking about the My Competitors Are Doing It Syndrome.
Over the years I've heard the expression "My competitor's are doing it" more times than I care to remember. If your competitors jumped off a bridge, would you follow them? ;) Okay, so your competitor attached a link exchange directory to their site. Time to run out and do the same. Okay, so your competitor purchased links from that particular site. Time to run out and do the same.
Why not look at this from another angle. How about doing something that your competitors are not doing?
Some of the forum members voice thoughts on their own experience with this type of thinking. Europeforvisitors brings up an excellent suggestion, that instead of studying the tactics that you competitors are doing, you need to study what their weaknesses are. He mentions "my biggest competitors have less flexibility than I do, because they're stuck with corporate overhead and existing business models, (e.g., the need to recycle content from print publishing or to rely on user-generated content of questionable quality). In niche markets, there can be advantages to being a mom-and/or-pop business. "
He is exactly right. You could use time as your weapon as a smaller website you are more nimble to quickly adapt and change your content. This won't always work, but its one angle you could approach with.
Finally, Mikedee points out that if you like what your competitor is doing, you could always buy the website/company or steal the idea and do it better.
Continued discussion on WebmasterWorld - The "My Competitor's Are Doing It! Syndrome"