I really don't see how you think Lester was in any position to take Malvo's place in any way. Lester is a weasel, Malvo is a hawk.
Why can the human eye see more shades of green than any other color? Malvo also viewed Lester as a weasel, and he got fucked up because of it. Lester went through a pretty profound transformation through the series. Remember him stapling the kids face? Or the whole awards dinner, or him confronting Malvo in the elevator. The writers couldn't have put more scenes in to illustrate his transformation from prey to predator, or Weasel to "Hawk".
I'm sure at the start of Malvo's career he wasn't a ruthless asshole either. That's the point, Lester, in the span of a year, went from a complete, spineless coward--to someone who actually took down a hit man. Not hard for me to imagine that, given his trajectory, in a few years, he could be the one doing the hits. All you really need is to be a sociopath, be ruthless and have some cunning; Lester was obviously
verycunning (They paralleled his tricks with Malvo's even), evading capture of the police AND Malvo, multiple times; and by the end, he had the lack of empathy needed to kill (In spades, obviously) and he was extremely ruthless--takes a cold fuck to use your own wife as a decoy.
I mean, two professional hit men barely scratched Malvo and he wasn't prepared for them at all. He was completely prepared to kill Lester, and Lester came out on top. How do you explain that? Him underestimating Lester? Well then refer to the question shades of green question
--As Malvo showed, twice in the series, good predators blend in as sheep.