You're asking for something impossible. Software patents exactly analagous to Benson, Flook and Diehr are de-facto allowed. Software is such a broad and fast-moving field that you can't expect any patent office to be able to fairly judge novelty and non-obviousness.
If there's any hope for the patent office it involves an act of congress explicitly making software non-statutory material for patents.
They do discourage competition. Here's why that's important:
Amazon has more money than god. For whatever reason, they decide that your thing is valuable to them, and is extremely easy to create but also extremely novel in its inception (nobody thought of this before). It took you years of work to create, and you're now unable to monetize that work because Amazon/Google/Apple/Walmart/Whoever is able to create it faster using there tens of billions of dollars of muscle to stomp you out. Because they're better positioned to produce, your years of work is now financially useless.
The idea of "how long would it take for someone else to realize the same thing" is silly. They didn't. You did. innovation is a large part of what makes software valuable. Anyone can type code if you gave them a sheet of paper that would make the machine do what you need it to. The only reason software has any value is because it took someone time to figure out what code to type in the first place.
Why does doing something first give you the right to sell it? How do you deal with the problem of multiple discovery?
I'm not saying inventors aren't intelligent, but I really think that if they had not existed someone else likely would have invented the same thing.
What your saying though is that some other company could have advanced the product in a way that people would prefer it over the original. The negative effects here seem stifling to innovation.
This is true in theory, but in your example does your small company really have the leverage to take them to court anyway?
They have more money than god as you say, how can you hope to win against them in any reasonable amount of time? You would almost need angel funding, but if you have that anyway can you really not compete with them?
If there's any hope for the patent office it involves an act of congress explicitly making software non-statutory material for patents.