By Richard Branson, Entrepreneur.com

If you want to be successful in business, you need to welcome your competition with open arms — just don’t let them walk all over you. Strike the right balance between respecting your rivals and focusing on how you can beat them, and you’ll have a winning formula.

It’s not unusual for an entrepreneur to become overly preoccupied with what his competitors are up to. Starting a business is a lot of work, and it’s easy to convince yourself that the grass is greener on your rivals’ side of the fence (and to even become obsessed with peeking over the fence to see what they’re up to). These feelings do serve an important purpose: By doing market research on your competitors, you can work out exactly how to provide a product or service that is superior. This is the reason that I sometimes fly on other airlines – often, great ideas are sparked when you notice a problem that a competitor faces and try to find a good solution yourself.

While it’s beneficial to keep an eye on the competition, you must remain focused on your own team, and on your own products and services. Companies that are always trying to keep up with the Joneses will always be a step behind, and this can foster a culture that is, at its core, reactionary. Businesses that are reactionary forgo innovation and can quickly become irrelevant to consumers. After all, what’s the point in buying something from you that another company has already done better? Show ambition, put some effort into creativity and focus on developing the next big thing, and your company will emerge as the one that others want to copy.

Over the years at Virgin, we’ve had many battles with our competition — and we’ve welcomed them all. Sometimes what starts off as friendly opposition escalates into antagonism. The key to dealing with cases like these is knowing when to take a stand, and when to laugh it off.

Here’s an example. I headed to Mexico City recently to help launch our new company, Virgin Mobile Mexico. Before my arrival, a competitor leaked a fake story that we were launching “Virgin Tacos” there. There is no such company, of course, but rather than make a fuss about it, I met up with some of Mexico’s leading bloggers for lunch (we had tacos, of course!), introduced them to a few of our staff and explained why our mobile company can provide consumers with something different than the competition.

I usually favor directness, but when it comes to dealing with competitors, sometimes your point can be better communicated through subtlety. The viral launch of BLAH Airlines earlier this year is a great example. Below a deeply uninspiring tagline that assures passengers that “you will get there,” BLAH’s clunky website lists a few “special” features on their flights like windows and armrests. This beige, bland, boring business also launched a six-hour video last month showing what every excruciating minute on a BLAH Airlines flight was like.

People quickly realized that Virgin America was behind the whole thing. Many said that BLAH reminded them of our real-life rivals and highlighted how different Virgin America is. With some imagination and subtlety, our team was able to get one over on the competition — without mentioning any company by name.

Indeed, the aviation industry is one that thrives on competition. Virgin Australia’s battles with Qantas are well-documented, as is Virgin Atlantic’s long-standing rivalry with British Airways. In fact, our efforts to establish Virgin Atlantic as the leading airline in the U.K. has certainly gotten under British Airways’ skin. After their well-known “dirty tricks” campaign against us in the 1990s – which included passenger poaching and planting hostile stories in the press against Virgin — we sued them and eventually settled out of court. The proceeds were all distributed to our staff in what became known as the “BA Christmas Bonus”!

Two years ago, Willie Walsh, who runs British Airways these days, reignited our rivalry by betting me that the Virgin Atlantic brand would disappear within five years. The twist? Whoever loses the bet will receive a kick in the groin from the winner.

Virgin Atlantic recently launched our new Dreamliners aircraft in Atlanta, and we livestreamed the first-ever concert over the Atlantic on one flight, so I couldn’t resist pointing out to Willie that we’re going from strength to strength. I advised him to invest in a strong pair of trousers!

It’s not the first bet I’ve made with a competitor, and it won’t be the last. It’s a great way of maintaining a competitive spirit, standing your ground and, most importantly, having some fun along the way. Remember, take your competition seriously — but not yourself.

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Richard Branson’s Top 10 Tips for Succeeding at Business

Richard Branson on the Value of Debate in Business Partnerships

Richard Branson on Bouncing Back From Failure