This is illustrated in The Innovator's Dilemma and happens all the time. Established companies want to focus resources, increase profit margin, and improve operational efficiency. They improve their best product and sell to big customers. Not-so-successful product with not so wealthy clients got de-prioritized. They don't mind letting competitors take the market share. Why would they? It is lower margin business with low quality customers anyway. They may even sell the money losing product to competitor to milk out the last pennies.

The section "Q: Won't Big Company X just clone your product and steal all your customers?" in https://apenwarr.ca/log/20180724 also described this phenomenon