Companies often use the wrong competitor set.
1) They use larger companies most alike them, not fast growing companies that can easily shift to do what they do.
I'll never forget being in a pitch to win the Audi/Porsche advertising account 5 years ago and the company point blank refusing to accept Tesla could ever take some of their market share.
Working with Nokia 16 years ago ( blimey I'm old) we were obsessed with Sony Ericsson, concerned by Motorola, but never thought about Samsung, BlackBerry and least of all Apple.
2) They fail to see the threat of entirely new ways to do what you do.
Drones disrupt Fireworks
Vaping disrupts Cigarettes
Trains disrupted canal boats
Navigation technology disputed lighthouses
MP3 software disrupted CD makers.
Often what replaces you, isn't something you were ever looking at.
They need wildly different skills, expertise, mindsets, knowledge
3) Comparison set is often a better framing than competitor set.
Uber and Fedex are very different companies, but Fedex can learn a lot about the way logistics on Uber feels and the user experience
EasyJet may never threaten Emirates for any business, but a lot can be learned from great software team working at EasyJet, by the amazing airline running teams at Emirates.
When we book a hotel, a flight or buy car insurance or order food or visit a shop, we are not simply comparing each company with their most alike. We don't see our Banking app and consider it only against other banking apps. We see it and compare the User Experience with every great user experience we've ever had. The delight of using Apple Card, the wonderful account opening of Lemonade, the design of Natural. Ai etc