He's wrong. You have to pay attention to competitors because (a) so many people will ask why you're better, (b) you may be able to get new ideas from them, and (c) even a lame competitor can motivate you to work harder.
Getting new ideas doesn't just mean getting ideas to copy. If the competition is really lame, studying them can be a way to learn what's good about what you're doing. Often you're doing something right unconsciously, and don't even realize it till you see someone not doing it.
What you don't want to do is change your direction to do something just because competitors are.
You should read the competition and talk the customers, not the other way round. Also, you shouldn't work for competition, you want to work for customers. That's the post point.
Think about the competition when talking to your customers, not when talking to yourselves. Don't anthropomorphize the problem. Focus on the problem space, not the people that populate it.
I meant you, but unless you were quoting him in order to disagree with him, you're both making the same point, so the answer to your question taken literally is "both."
Getting new ideas doesn't just mean getting ideas to copy. If the competition is really lame, studying them can be a way to learn what's good about what you're doing. Often you're doing something right unconsciously, and don't even realize it till you see someone not doing it.
What you don't want to do is change your direction to do something just because competitors are.