The Advantages You Have vs The Advantages You Need
You can’t always win with the cards you have, sometimes you need new cards.
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Almost all strategy discussions start the same way. First, you list all of your strengths and then you list all of your weaknesses. Then you move on to opportunities and finally you cover threats. From those you try to build strategies that use your strengths to take advantage of your opportunities while negating your threats.
If that sounds familiar, it’s called a SWOT analysis and it’s a very common strategic tool.
Unfortunately, it’s only effective if the strengths needed to win in your market are strengths that you already have. If not, you are just trying to do the best you can with what you have and that might not be good enough.
Or, in other words, you might not be able to win with your current strengths.
A much more productive way to start strategy sessions, in my experience. Is to start with two lists:
What are our strengths?
What strengths are needed to win in our market?
Those two lists are rarely the same! The real question of strategy is how we can turn 1 into 2. How can we use the strengths we have to create the strengths needed to win in our market?
For example, take a company that was the leader in their market until a slew of lower cost competitors entered the market. The strengths of the company include distribution partnerships, tons of customers, product features and brand recognition. Unfortunately, the market shifted and the only strength that matters is low cost which this company does not have.
Could they just lower prices? Sure, but price is often tied closely to the business model and it can be hard to be profitable at a lower price point, especially for an existing business built for a higher price. Losing money on every sale is not a great way to run a business.
Instead, can they use their existing strengths to build a strength that will win in the market? There are a few options:
Use their distribution and brand advantages to create a “premium” product category, making the higher price seem worthwhile. This happens in luxury goods all the time.
Use their product features advantage to create an “entry” level price point with reduced capabilities, where the existing customer base helps subsidize the lower price. Then upsell these entry customers to the higher priced, full product.
Undercut the competition by giving partners an incentive to work exclusively, perhaps by paying a share of revenue. That would be better than lowering the price as it would ensure distribution and growth in the future.
Those are just some examples of how you can turn your existing strengths into the strengths that matter. This is where creativity is rewarded! Think outside the box and look at your existing strengths as building blocks to work with, not as museum exhibits that cannot be touched.
Every market shifts, and no strengths last forever. When the strengths required to win shift and you no longer have them, don’t try to force your business model to keep working. Use your strengths to build new ones.
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