“Better” Isn’t Always Enough. Why Smart Leaders Use This Hidden Curve to Decide Who Wins

If you zoom out far enough, substitution always sounds clean.

Coal is old. Natural gas is new. So people say, “There are these new, more efficient natural gas generators. Let’s get all the coal off the grid and get these natural gas units there instead.”

And if you’ve ever been inside a real system, you already know what happens next: it doesn’t work like that.

What looks like a simple upgrade is usually a tradeoff. It’s substitution under constraints. And I care about this because leaders make the same mistake in business all the time, especially when capital and attention move faster than people expect. They treat substitution like a head-to-head comparison when, in practice, it’s a curve. 

The problem is that leaders tend to model substitution like it’s just dollars: what are we paying now, and what would we pay instead? 

But the substitution cost is more complicated than just the dollars. There are sticky market effects. Some constraints make the “obvious” switch not actually obvious. If you don’t account for that, you end up making decisions based on a narrative instead of the curve you’re actually operating on.

Fuel switching is substitution under constraints

When I say “natural gas versus coal,” I’m not talking about a debate. I’m talking about a substitution curve.

There are times when the system will burn more gas and push coal out. There are times when the system leans on coal. And it’s not because people suddenly changed their minds. It’s because the relative tradeoff shifted, and the constraints made the switch easier or harder at that moment.

That’s the leadership point: markets don’t substitute in a clean, linear way just because a new option exists. They substitute when the tradeoff makes sense under the real constraints.

This shows up as a really common failure mode in business. You look at a replacement option, you look at the “better” product, and you assume the old thing is about to get wiped out. Then it doesn’t happen. And you decide the market is irrational.

Most of the time, it’s not irrational. Most of the time, you’re ignoring the substitution curve.

Coal is like SAP: Old doesn’t mean gone

The easiest way I’ve found to explain this to a business audience is with an example that has nothing to do with power. Coal is like the old enterprise companies that exist, like SAP. SAP is still worth a lot, and it’s still in the mix at the top end of Europe, even when other companies rotate into the “most valuable” slot. 

You’d imagine SAP would have been wiped out by Palantir and these newer companies that can solve a lot of the same problems, but they haven’t been. And it’s because the substitution cost is more complicated than just “What are the dollars we’re paying to SAP versus the dollars to Palantir or Salesforce?” There are sticky market effects and stuff that lead to the persistence of SAP.

And it’s because the substitution cost is more complicated than just “What are the dollars we’re paying to SAP versus the dollars to Palantir or Salesforce?” There are sticky market effects and stuff that lead to the persistence of SAP.

That’s what leaders misread when they focus on the “better” story. They treat replacement like a feature comparison, or a pricing comparison, and they assume the market will behave like a spreadsheet.

But the incumbent persists when switching is messy.

Even when the replacement is genuinely strong, people want the story to be clean. Leaders want it to be clean because it makes planning feel clean. But if you’re actually trying to make a substitution happen, you need to think like you’re on a curve, not like you’re refereeing a debate.

Because in real markets, you can have a product that looks obviously “better” and still not see the switch happen at the speed you want.

A substitution checklist leaders can actually use

So what do you do with this, practically?

If you’re trying to understand a competitive dynamic, or you’re trying to replace something inside your own company, you need a substitution checklist. Not a slide that says “new is good, old is bad.” A checklist that forces you to name the tradeoff and the constraints.

Here’s the version I use:

• What are the substitutes? Don’t just list your favorite. List what people actually use as the alternative.
• What triggers switching? What has to be true for a switch to become rational?
• What are the substitution costs? Not just dollars. The other costs that show up in practice.
• What are the sticky market effects? The reasons the incumbent persists even when a replacement exists.
• What constraints stop switching even when the replacement looks better? The things that make the “obvious” move not obvious.

If you do this honestly, a lot of “surprising” outcomes stop being surprising.

The leader’s mistake is to look at the newer option and assume substitution is automatic. The leader’s mistake is to focus on a narrative instead of the curve. In power, you see it as fuel switching. In enterprise software, you see it as incumbents that keep persisting even when the replacement story looks compelling.

Stop arguing the story, start mapping the curve

If you’re trying to lead through a competitive shift, the question isn’t, “Which side is right?” The question is, “What’s the tradeoff, and what are the constraints that shape the substitution curve?”

That’s why natural gas versus coal is a useful lens. It trains you to stop thinking in binaries. It trains you to stop assuming that “better” means “replaced.” It trains you to ask why an old thing can persist and what it would actually take for the substitution to happen.

If you want to make good decisions in a market or inside a company, you don’t need a debate. You need a substitution checklist, and you need to take the sticky market effects seriously.