Disruptive innovation is a term used to describe a product or service that starts out small or simple and moves quickly through the lower tiers of a market segment, often displacing established businesses and technologies in lower margin sectors.
Generally, a disruptive innovation focuses on lower profit markets and customers, allowing a new startup or emerging business to be profitable by targeting customers who are underserved in the existing market. In time, the new product or service moves upwards in the market and can eliminate established companies who are slow to react or respond to the innovations.
Examples and Origins of the Phrase
Netflix is an example of a successful disruptive innovator business. When Netflix started, there was no direct competition in the established market (i.e. Blockbuster) but the innovative on-demand streaming model disrupted Blockbuster by focusing on a segment of underserved customers to gain industry presence.
Another classic example of disruptive innovation is the PC market. Personal computers were an innovation that improved over time and eliminated the mainframe industry. Blockchain is another example of a disruptive technology in financial markets.
The phrase disruptive innovation was coined by Harvard Business School professor, Clayton M. Christensen in his research on the disk-drive industry and later popularized by his book The Innovator s Dilemma, published in 1997.
Today, the phrase disruptive technology is a preferred synonym of disruptive innovation.