The Digital Transformation Playbook: Rethink Your Business for the Digital Age

Business disruption happens when an existing industry faces a chal-
lenger that offers far greater value to the customer in a way that existing 
firms cannot compete with directly.
Let’s unpack that definition.
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 Business disruption: We are talking specifically about disruption in 
the sphere of business. I state this because the idea of disruption is 
frequently applied to changes in culture, society, politics, and other 
domains. For example, one can argue that the birth control pill was a 
disruptive innovation in terms of its impact on social mores, marriage 
law, and political ideologies. But it may not have transformed business 

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or industry. In a case like this, an innovation may be disruptive to soci-
ety but not be an example of business disruption.
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 Existing industry: Disrupt is a transitive verb! In order for something 
to be disruptive, something else must be disrupted. When we see a 
radically innovative new business or product, we sometimes leap to 
the conclusion of disruption before considering its impact on exist-
ing industries. Think of the self-driving car first pioneered by Sebas-
tian Thrun and others in Google’s Google[x] division. A mainstream, 
affordable self-driving car may soon be commonplace—and even 
become the dominant mode of transportation within a decade or two. 
If so, this will clearly be a transformative technology for drivers. But 
it is less clear that self-driving cars will disrupt existing automakers. 
So far, Google has shown little interest in entering car manufacturing 
and is looking to partner with major automakers. Some of them, like 
Toyota, are even launching their own parallel efforts in this area. It is 
quite possible that self-driving cars will radically transform the expe-
rience of driving and the world of transportation but do so without 
undermining the existing automobile industry.
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 Offers far greater value to the customer: Whenever disruption occurs, 
it is because a new offering is suddenly much more attractive to cus-
tomers than the offering that the existing industry provides. Photo-
graphic film maker Kodak did not collapse into bankruptcy because 
digital cameras offered somewhat better value for consumers. It did so 
because digital cameras—with nearly unlimited shots, instant display 
of the picture taken, and free replication and transmission of images—
were vastly better than film cameras for the average snapshot taker. The 
first thing that separates disruption from traditional competition is this 
wide gap in value, which can lead to a tipping point when customers 
shift en masse to the new offer.
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 Cannot compete with directly: This is the other key distinction between 
disruption and traditional competition. In traditional competition, 
roughly similar businesses duke it out to offer the customer better 
product features, lower prices, or greater personalization and service.
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When Ford Motor Company comes out with a faster, more fashion-
able, or more fuel-efficient car, Chrysler redoubles its efforts to com-
pete on the same dimensions. When Macy’s draws traffic with holiday 
sales, JCPenney does the same. When British Airways uses data to offer 
more personalized service to its travelers, Virgin Airways may aim to 
do the same for its customers. But disruption is different. Disruption 
is caused by asymmetric competitive threats. A disruptive challenger is 

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not selling a different version of the same product or service. It meets 
the customer’s needs with a product, service, or business model that 
the existing industry does not, and cannot, offer.
The most important lesson to take from a clear definition of disruption 
is this: not all innovation is disruptive. I stress this because many times