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

Disruptive Response Planner
Customer trajectory
Outside-in v. Inside-out
Who’s first
Next + triggers
Disruptive scope
Use case
Customer segments
Network effects
Becoming the disrupter
Acquire
Launch
Split
Mitigating losses
Refocus
Diversify
Exit
Six incumbent responses
Other incumbents
Value train
Substitution
Laddering
Figure 7.2
The Disruptive Response Planner.

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Step 1: Customer Trajectory
The first step in predicting the possible impact of a new disruptive business 
model is to understand its customer trajectory: What customers are likely 
to adopt the disrupter’s offer first, and how will its market spread from there 
if it is successful?
O
U TS I D E
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N
O R
I
N S I D E
-O
U T
?
As we have seen, there are two types of customer trajectories for disrup-
tive business models: outside-in and inside-out. It is critical to start by 
judging which of these paths your disrupter is likely to take in entering 
the market.
Outside-in disrupters begin by selling to noncustomers of the incum-
bent and then work their way inward to encroach on the incumbent’s own 
customers. As described by Christensen, outside-in disrupters don’t appeal 
at first to the incumbent’s customers because of their lesser features, but 
they do appeal to customers who could not afford or access the traditional 
incumbent’s services. As the disrupter improves, it begins to attract the 
incumbent’s customers as well. Christensen’s theory has shown how indus-
tries with barriers that exclude many potential customers—higher edu-
cation, health care, financial services—are ripe for disruption. As he and 
Derek van Bever write: “If only the skilled and the rich have access to a 
product or a service, you can reasonably assume the existence of a market-
creating opportunity.”
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Inside-out disrupters follow a different path. They begin by selling to 
a segment of the incumbent’s current customers and then work their way 
outward to take more of its market. We have seen many examples of these: 
iPhone versus Nokia (started by selling to existing mobile phone users) and 
Netflix versus Blockbuster (explicitly marketed to existing movie renters 
as a better alternative). Rather than starting out as inferior to the incum-
bent’s offer but “good enough” for buyers who could not afford the incum-
bent, these disrupters offer much better value from the beginning. These 
are business model innovations that would quickly draw a competitive 
response from the incumbent except that they rely on a value network that 
the incumbent finds impossible to imitate.

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W
H O
I
S
F
I R ST
?
Once you know if the disruption will be outside-in or inside-out, you will 
want to identify which specific types of customers will likely be first to 
adopt the disrupter’s product or service.
For inside-out disruptions, you should ask these questions: Who 
among your current customers would be most attracted to the disruptive 
offer? Are there any hurdles to their early adoption (e.g., reliability is not yet 
proven)? Are there some current customers for whom those hurdles matter 
less (e.g., they are eager to try out new products or are less concerned about 
established brands)?
For outside-in disruptions, you should ask these questions: Who is 
currently most motivated but unable to afford or access your products 
or services? Which of these hurdles (price or access) is the bigger bar-
rier for them? Which hurdle does the disrupter’s offer help them more to 
surmount?
W
H O
I
S
N
E X T
, 
A N D
W
H AT
W
I L L
T
R I G G E R
T
H E M
?
Once you identify the likely first customers for a disrupter’s offer, you 
need to identify who will be attracted to the offer next. For inside-
out disrupters, that is likely another subgroup of your customers. For 
instance, if Warby Parker starts by appealing to the supporters of social 
causes, will its next customers be tech-savvy eyeglasses wearers? For 
outside-in disrupters, the key question here is this: When will the dis-
rupter “tip” from selling to noncustomers and start to reach your own 
customers?
You also need to think about what will trigger these second-wave cus-
tomers to come on board. These triggers can often be other customers’ 
behaviors; wait-and-see customers, for example, may become interested 
as they see others using a product, or they may be persuaded by word of 
mouth. The trigger may be some further innovation by the disrupter, such 
as dropping prices further or improving features or both. Or the trigger may 
simply be visibility—as press coverage, marketing, or geographical distribu-
tion brings the disrupter’s offer to the attention of the next wave of new 
customers.

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I
M P L I C AT I O N S
Knowing the likely customer trajectory has important implications. As the 
incumbent, you need to know which of your current customers to keep 
an eye on first to see if they defect. You must also know if the challenger 
doesn’t need any of your customers to get started (an outside-in disrupter). 
In that case, you should develop a strategy to compete for these same “out-
side” customers, where the disrupter may grow first before moving into 
your own market.