Following the crowd is obviously not a good way to start a business even if the crowd is doing well, it means that no matter how good you see a business is working that someone else is doing, you should get into that business only because it's giving good revenue to the other business owner but you should go for something that you feel you can do very well and you have the ability to manage that business with all your potential and your business will be unique and isn't a copy of another business that already exists because that wouldn't give you an edge.
One shouldn't do that, but even if someone starts a business someone around them is already doing it, they should make their business different than theirs, and offer something that the other business isn't providing to their customers so that they get more customers and your business starts flourishing.
following the crowd is fine if you can see some untapped potential in the trend that you're about to follow, many AI based startups are just following the crowd but they could score funding of billions because they know there are many potential. if its just following some random crowd then of course the business will eventually fail at the end of the day.
but its all about innovation when it comes to business, and give the better product than the other at more cheaper price then you will come out victorious.
otherwise, you might rethink your decision if you just following around other people without making innovation, therefore thats why many business out there going out of business.
when it comes to small scale business, just trying out some ideas might also work wonders.
Not really. Following the crowd will not make you "real" successful. The crowd decides the trend, they also decide what to discard. The untapped potential that you're talking to, is mostly ignored by the crowd as their focus is only on the trend.
The idea needed should be unique, reading the needs and the flow of the crowd is required when starting a business. Like for example, in your city, everyone opens a convenience store but you observe that the crowd needs a grocery store, so you open one. You gain the crowd as you provide their needs and give the solution for what they are looking for.