In the startup ecosystem, the word “disruptive” is thrown around like confetti. Every new app claims to be disrupting an industry. Usually, they are just offering a slightly better user interface or a slightly lower price. This dilution of language is dangerous because it hides the specific mechanics of a powerful business theory.
Disruptive Innovation is an innovation that creates a new market and value network and eventually disrupts an existing market. Coined by Clayton Christensen, it describes a specific process where a smaller company with fewer resources is able to successfully challenge established incumbent businesses.
It does not simply mean “good technology.” It refers to a product that initially takes root at the bottom of a market or in a new market entirely. It is usually cheaper, simpler, and often technically inferior to the status quo. Because of this, the giants ignore it. This gives the startup time to improve until it eventually takes over the entire industry.
The Mechanics of the Attack
#To understand disruption, you have to look at the motivations of the incumbent. Big companies are addicted to high margins. They focus on their most profitable customers. They build “sustaining innovations,” which means making their current products better and more expensive.
This leaves a gap at the bottom. There is a segment of the population that is “overserved.” They do not need all the fancy features; they just want something that works and is cheap.
The disruptor enters here. They offer a “good enough” product at a much lower price point. The incumbent looks at this and laughs. They do not want those low margin customers anyway. They willingly cede the ground. This is the trap.
Disruptive vs. Sustaining Innovation
#Founders must determine which game they are playing.
Sustaining Innovation is about being better. It is about releasing a faster computer or a higher resolution camera. If you play this game against Google or Apple, you will likely lose. They have more money and more engineers.
Disruptive Innovation is about being different. It is about changing the metric of value.
Netflix did not start by offering 4K streaming. They started by mailing DVDs. It was slower than going to Blockbuster. You had to wait days. But it was convenient and cheap. It appealed to people who did not want to drive to the store. Eventually, the technology improved to streaming, and by then, Blockbuster could not catch up.
The Innovator’s Dilemma
#The reason disruption works is not because big companies are stupid. It is because they are rational. This is the Innovator’s Dilemma.
For a massive company, investing in a tiny, low margin market makes no financial sense. It does not move the needle on their stock price. They are logically incentivized to ignore you.
For a startup, that tiny market is everything. You have the freedom to be small. You have the freedom to have low margins for a few years while you refine the product.
Are You Actually Disrupting?
#Founders need to be honest about their strategy. If your plan is to launch a premium product for the elite users of an industry, you are not a disruptor. You are a high end entrant. That is a valid strategy, but it requires a different playbook.
True disruption feels risky. It often looks like a toy. It usually involves selling to people that the industry leaders do not respect.
If the incumbents are ignoring you because they think your product is garbage, you might be on the right track. If they are ignoring you because they think your market is too small to matter, you are almost certainly on the right track.