(FORTUNE Small Business) – One morning last summer I literally danced a jig in my office. A major competitor, the one I frequently knock heads with when bidding, had fallen into turmoil. Over the weekend its lead salesperson and minority owner had quit, taking several staffers with him to open a competing sales organization. Our shared customers, worried about reliability, clogged our phone lines, begging us to take additional business. What joy! What opportunity!

What a mess! Almost a year later the bust-up of my competitor has become my personal version of the Soviet Union's implosion and has caused unforeseen ripples. Today I no longer inhabit a binary, predictable universe, where I understand the behavior of my most significant rival. Instead the estranged-shareholder-turned-vengeful-salesperson has recruited a bunch of bag suppliers, dragging new competitors into the mix. My longtime rival, which built its reputation on excellent customer service--mainly thanks to the departed sales staff--has attempted to hold on to its customers and keep its machines full by chopping prices. As a result, my margins have taken some mighty hits.

Often now, driving home in the evening, I find myself feeling like an old Kremlinologist, longing for the certainty of those Cold War days. I wish my rivals would kiss and make up instead of bashing prices and flinging lawsuits. Then, after I accept that it won't happen, comes the tougher question: Why on earth didn't I see it coming? And the inevitable follow-up: Could I possibly have done anything to temper the resulting chaos?

Certainly I pride myself on knowing my competition. My brother and I invested significant time in getting to know the owners of this rival firm, visiting their facility and having lunch with them on occasion when we were in Los Angeles. Oddly, we also had used them as a supplier of raw plastic, something they manufactured that we didn't. That helped us keep abreast of their expansion plans--they grew their business dramatically in the late 1990s--and cemented cordial ties. We also constantly badgered purchasing agents to benchmark our company against theirs, which helped us understand our relative strengths and weaknesses.

Looking back, I knew tensions existed within our rival's management team. Former employees, including two who now work for us, reported that the family members did not always see eye to eye. And I remember a couple of years ago watching as the owners broke into a fairly bitter argument during lunch. Suppliers also passed along rumors of discord. Still, I figured the success of the business papered over any animosity. And, hey, I've had tough words with my brother.

Well, I guess I knew more than I thought I did. But could I have done anything with that knowledge to control the outcome? Certainly I could not have prevented the ownership group bust-up. No outsider could have. Nor could I have prevented one side from competing with the other. And I haven't been able to dissuade our rival from his price cutting, no matter my personal appeals that he remain calm in the face of attacks by his onetime partner. Even with the best information, I'm afraid--and I've read the documents pertaining to the lawsuits between the two parties--I couldn't have prevented where we've ended up.

That is perhaps the most troubling lesson in this entire scenario. Most entrepreneurs try to control every aspect of their environment so that they can increase the predictability of their business. Planning depends on it. Then shocks come along--the breakup of a rival, for example, or the electricity crisis in California--that hammer you. And it becomes an issue of how--and how quickly--you respond.

I'll admit that these days I'm teasing more possibilities out of the intelligence I collect on rivals. But more important, I'm working hard to make sure I adjust more rapidly to change rather than resist it by holding on to wishful thinking. While my onetime rivals fight it out in court and chop prices, I'm cutting costs and investing in new capacity to handle the business I've been awarded since their bust-up. And now, whenever I hear bad news about my competitors, no matter how good it sounds at first, I stay in my seat. After all, you just never know.