Disruptive innovation
Disruptive innovation refers to a transformative process that creates a new market, ultimately disrupting existing markets. Coined by Harvard Business School professor Clayton M. Christensen, the concept highlights innovations that simplify and make products more accessible, targeting previously unserved or underserved consumer bases. While often associated with new technologies, it is primarily the innovative application of existing technologies that drives market change. Disruptive innovations typically emerge in environments dominated by high-end products catering to elite consumers.
An example of this phenomenon can be seen in the early personal computing market, where products like the Apple IIe created a new consumer base by making computing more user-friendly and affordable. This allowed new entrants to challenge established market players, compelling them to adapt or lose relevance. Generally, smaller start-ups are the main drivers of disruptive innovations, while larger companies tend to focus on sustaining innovations within higher-margin segments. This dynamic opens up opportunities for new competitors to reshape markets and redefine value over time.
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Disruptive innovation
A disruptive innovation is one that, when introduced, creates a new market and eventually goes on to interfere with existing markets. While these sorts of innovations are often tied to new technology, it is typically an innovative application of the technology, rather than the technology itself, that changes markets. Disruptive innovations tend to flourish in an environment where a high-end market catering to elite customers is already in place. The disruptive innovation builds up its own market of consumers, which is generally broader than the existing market, and, over time, forces the entities that previously dominated the marketplace to become more competitive in order to survive.
Overview
Harvard Business School professor Clayton M. Christensen coined the term “disruptive innovation” in a 1995 article for Harvard Business Review. He presented his theory of disruptive innovation in expanded form two years later, in his book The Innovator’s Dilemma (1997). According to Christensen, an innovation has the potential to disrupt a market when it targets a previously unserved or underserved consumer base, typically by simplifying an existing product to make it more accessible and affordable, thereby undermining that market’s status quo.
The early days of personal computing provide a textbook example of disruptive innovation. Prior to the advent of the desktop computer, mainframes and minicomputers were the dominant products on the computing market. They were massive, prohibitively expensive, and required a certain level of engineering knowledge to operate. In the early 1980s, Apple Computer released the Apple IIe, an early iteration of the then-fledgling company’s desktop product. Apple marketed the personal computer, with its games and relatively user-friendly interface, as something even children could play with. While the Apple IIe could not compete with the more powerful minicomputers in the already-established market, it succeeded in creating its own market and, with time and improvements in capability, forced minicomputers out of the broader computing marketplace.
Firms that engage in disruptive innovation are typically smaller start-ups, as larger companies tend to remain focused on market segments with the highest profit margins. These large companies must instead devote resources to developing new products, or "sustaining innovations," that will allow them to remain competitive within an already-profitable market. This leaves room at the bottom end of the market for new competitors to enter—and, perhaps, to disrupt the upper market’s value as their product evolves.
Bibliography
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