A hypothetical example of the difference between competing by outdoing and by undoing:

Say we’re a company competing in the sporting goods business.  After years of nobody making anything but traditional wooden tennis rackets, a small startup company introduces an aluminum model.   It’s lightweight and strong, and it boosts the player’s power dramatically.  That’s outdoing, and the world is a slightly better place because of it.

How might the established companies react?  They might go out and invent the graphite racket, giving players both superior power and superior control.  This would continue the process of outdoing the competition, and would thus continue to make the world an incrementally better place.

On the other hand, the established companies might try to undo the startup.  They might try to corner the market on catgut and nylon strings, leaving their competition with no way to produce a ready-to-use product.  They might pressure distribution outlets with threats of withdrawing their whole line of merchandise, if the retailers allowed the single new tennis racket to appear on their shelves. 

There are many other possible approaches to undoing the competition, and every one of them makes the world a slightly worse place.