I think the authors overstate the case a bit, but the principle is valid. Don't just blindly copy features; the real product breakthroughs come when you recognize the functions important to customers and innovate in ways that the competition hasn't fathomed.
For instance, suppose you are building a new car, and the competitive analysis says that the other cars in this class all have gold monograms on the steering wheel. When the marketing people try to make "gold monogram on steering wheel" into a requirement, ask, "What function does it serve?"
Most commonly, you'll get the reply, "It doesn't serve any functions. It's just there to match the competitors."
"In that case," you say, "the function is 'match the competitor's.' And just what is it about the competitor's we're trying to match?"
"Their pizzazz! Their sales appeal!"
"Great. So we can say that the function we want is 'match the competitor's sales appeal.'"
"Sure, but how are we going to do that?"
"Possibly with a gold monogram on the steering wheel, but possibly not. Perhaps the designers will give us a platinum monogram on the dashboard. Or perhaps they'll product a combination of price, performance, and pizzazz that will do the trick. That's up to the designers to decide. Our job is to tell them our requirements."
Amid the rush to match competitor features one for one, keep in mind the following passage from Gause and Weinberg's Exploring Requirements: