Disruptive Innovation

According to the late Harvard Business School Professor Clayton Christensen, there are three types of innovation: 1) efficiency, 2) sustaining, and 3) disruptive. 

Efficiency innovation focuses on improving the cost-effectiveness of existing products or services, as well as improvements to the existing business model or enabling technology. 

Sustaining innovation seeks to improve the performance of existing products or services in ways that are valued by existing customers. Sustaining innovations usually result in evolutionary changes and improvements in the technology, design, and features of existing products and services in order to enhance the market position and competitive advantage of an organization.

Perhaps the most misunderstood and misapplied of his theories, disruptive innovation occurs when new entrants dislodge an incumbent by introducing a new product or service at the low-end of the market or claiming a new market segment of under-served or non-consumers. It is a theory of competitive response. 

Most disruptive innovations are initially considered inferior in terms of performance or quality in comparison to existing products and services in the market. However, they offer alternative advantages that make the innovation accessible to more people, often at a much lower cost. Over time, disruptive innovations move upmarket as they continually improve, eventually displacing the incumbent products and services who have reached a point where they're over-serving the customer's needs. 

Most incumbent organizations overlook disruptive innovations because they are seen as unprofitable (or insufficiently profitable compared to existing margins), too risky, or unable to satisfy their highest-paying and most demanding customers. An important element to consider about disruptive innovation can be summarized by a quote from Jeff Bezos:

"Invention is not disruptive. Only consumer adoption is disruptive."

The product, service, or technology itself is not disruptive. For a disruptive innovation succeed, it needs a business model enabled by technology and a value network that can reach consumers in the context of their job(s) to be done.

Additional Resources

The Clayton Christensen Institute provides exceptional content on the theory of disruptive innovation.