Weakness Isn’t Negative If It Can Create An Advantage, Say Texas A&M Researchers

A football team with a phenomenal scoring offense can win plenty of games, even with a poor defense. Similarly, a company that has, for example, a great product but poor service may perform very well in certain markets, depending on the competition.

All firms possess some capabilities that represent strengths and others that represent weaknesses. However, the majority of research focuses only on building strengths, rather than understanding how strengths and weaknesses interact.

New research from the Mays Business School at Texas A&M University on competitive advantage and capability sets suggests that weaknesses may be leveraged instead of eradicated, as it’s not necessarily the firms with the lowest amount of weakness that will perform best — at least, in the short term.

David Sirmon, Michael Hitt and colleagues investigated how durable competitive advantage is. Their findings suggest that as rivals continue to invest in their weaknesses, any one firm’s capabilities become vulnerable, leading to modifications in strengths and weaknesses.

As expected, Sirmon found that in low strength/high weakness firms, performance suffered. In low strength/low weakness firms, performance was average. The surprising finding was that in firms characterized by high strength/low weakness, performance is high, but in high strength/high weakness firms, performance can be higher.

“Capability Strengths And Weaknesses In Dynamic Markets: Investigating The Bases Of Temporary Competitive Advantage” is forthcoming in “Strategic Management Journal.” It was written by David Sirmon, assistant professor of management, W. Cater ’77 faculty research fellow; and Michael Hitt, distinguished professor, Joe B. Foster ’56 Chair in Business Leadership; with J-L Arregle and J.T. Campbell.

The research indicates that if a high strength/high weakness firm is leveraging one area (such as product development) to boost another area (such as marketing), the strategy may be rewarded with stellar success — or failure. It’s a risky combination, but the risk can lead to reward, if it yields a competitive advantage. Sirmon says that such firms’ outcomes are more volatile than firms with other strength/weakness sets.

“They can, for a time, produce high performance but that is not always going to last. It depends on how they invest to maintain strengths and mitigate weakness,” he says.

The high strength/high weakness set is frequently seen in new or newly restructured businesses, where there aren’t enough resources to reduce weaknesses. If weaknesses can be isolated from strengths, this combination can work, says Sirmon, but if they interact, the weaknesses can pull down the strengths.

It all comes down to the competitive marketplace. Sirmon says that strength and weakness sets change significantly over time in competitive markets as firms adjust their strategies to compete. If a high strength/high weakness firm had been outperforming the competition in price, but not service, it presents an opportunity for another firm to offer both price and service, thus eliminating the first firm’s competitive advantage. In a shifting marketplace, it is challenging for a high strengths/high weakness firm to maintain a competitive advantage.

Over time, high strength/high weakness firms will likely invest assets to bring their capabilities to parity, suggests Sirmon. However, if there is no direct competitor to threaten their marketplace advantage by attacking that weakness, firms have no incentive to address it. In some situations, then, it makes sense to ignore weaknesses, as it might be costly to improve.

The take away for managers is this: take a real look at the company’s capability portfolio to create an effective strategy. “Human nature makes us often underestimate weakness and overestimate strength,” says Sirmon. But, he warns, if you ignore weaknesses, you’re missing out on improving the overall strategy of your business. “We see that weaknesses matter. They have a direct effect that can hurt the firm. They also work together with strengths.”