I remember being at Novell in the late 90's and feeling absolute hate emanating towards Microsoft. This was despite us all using many of their products internally - including Windows - Microsoft has some extremely good products (Excel is a case in point). Novell's hatred of Microsoft caused them to go on an irrational buying binge to assemble products (Wordperfect, DR DOS et al) and compete head-on with Microsoft. As we know, this didn't work - nobody can beat a bigger adversary by attacking them head on. Hatred created a flawed strategy that led to failure.
Of course you have to observe your competitors carefully. Frequently, you'll need to react to what they're doing. However, that's not the same thing as shadowing their every move.