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

Step 2: Disruptive Scope
The next step in assessing the threat from a disruptive business model is 
to consider its likely scope. This describes how much of the market (how 
many customers) are likely to wind up switching to the disrupter once it 
is well established. Disruptive scope can be predicted by looking at three 
factors: use case, customer segments, and network effects.
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You should first identify various use cases where customers purchase and 
use your product or service. Make two lists: In what situations do custom-
ers purchase your offering? In what situations do they utilize it? (There 
should be overlap in the lists but also some differences.) Then, for each use 
case on both lists, consider the disrupter’s value proposition. In which cases 
is the disrupter clearly preferable for the customer? In which cases is there 
an advantage for your offer?
As we saw in the case of e-books versus print books, a disrupter may 
have a clear advantage for some use cases (e.g., boarding a plane with a 
variety of reading material) but be at a disadvantage in other use cases (e.g., 
giving a gift to a friend). You should also consider whether there are costs 
to multihoming (as discussed in chapter 3). How difficult is it for a cus-
tomer to buy from your business for some use cases and from the disrupter 
for others? For readers, it is not that difficult to buy printed books as gifts 
while keeping an e-reader stocked for their own travel.

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Next you should subdivide the customers for which you and the disrupter 
are competing. Rather than seeing them as one monolithic group, try to 
divide these customers into segments based on their shared needs. What 
drives them to use this product category? What are their relevant needs? 
(This may sometimes correspond to some of your use cases.) Then, for each 
segment, consider whether the disrupter is extremely attractive in compari-
son to your business.
Recall Zipcar (discussed in chapter 5). This on-demand car rental service 
seemed to pose a disruptive challenge to traditional car rental companies 
when it launched. Zipcar members pay a small monthly fee to have access 
to any of the Zipcars parked in their metropolitan area. They simply look on 
their phone app, walk up to a nearby car, and type an entry code into the key-
pad lock on the car door. This self-service model appears much more conve-
nient than the customer service experience of picking up a car at a traditional 
rental agency. But Zipcar never supplanted the traditional rental model for 
most customers. It turns out that certain types of consumers (e.g., those in 
dense cities with regular needs for short-term car rentals) were ideally suited 
to the membership model. But other consumers (e.g., those in rural areas or 
those with more infrequent rental needs) did not benefit as much from that 
model. While expanding to four countries and nearly a million members, 
Zipcar has stayed focused on college campuses and major cities.
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The third factor to consider in predicting a disrupter’s scope is network 
effects. Many services, especially platform businesses, become more valu-
able with each new customer that participates. As more customers bought 
iPhones, it became easier for Apple to attract more developers to create 
apps for the platform. As more developers built apps, the advantages of the 
iPhone versus an incumbent like Nokia grew as well. If you look at a cryp-
tocurrency like Bitcoin, there is certainly the possibility that it could dis-
rupt various incumbents that provide traditional financial services (credit 
card payments, savings accounts, foreign exchange). But the biggest hurdle 
to a currency like Bitcoin is that currencies are extremely dependent on 
network effects. As long as few merchants accept Bitcoin and few other 

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customers are using it, the benefits to a new user are mostly hypotheti-
cal. On the other hand, incumbents watching Bitcoin need to realize that 
enough momentum in user adoption could quickly lead to a snowballing 
effect (much like users flocking to a fast-growing social network such as 
Instagram or Snapchat) that transforms it quickly from a curiosity to a 
major disruptive force.
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M P L I C AT I O N S
Now that you have examined use cases, customer segments, and network 
effects, you should be able to make an informed prediction of the likely 
scope of impact of a new disrupter. Broadly, we can think of three likely 
outcomes of a disruptive business model. One is a niche case, where the 
disrupter is attractive to only a very specific portion of the market. Other 
disrupters may wind up splitting the market, with the disrupter’s and the 
incumbent’s business models each taking large shares. And in cases of a