What Is Disruptive Innovation? – Definition According to Christensen
Disruptive innovation is a term coined by Harvard Professor Clayton Christensen in his work “The Innovator’s Dilemma” (1997). It describes a process in which a smaller company with fewer resources successfully challenges an established company.
Important: Not every groundbreaking innovation is disruptive in Christensen’s sense. Disruption describes a specific mechanism: New providers start in overlooked market segments with simpler, cheaper, or more accessible offerings. These are initially inferior to established products—but improve continuously until they meet the needs of the majority of customers.
In the context of business model innovation and innovation management, understanding disruptive dynamics is crucial: Established companies must know when to cannibalize their own business model before a newcomer does.
Disruptive vs. Sustaining Innovation
Christensen distinguishes two fundamental types of innovation that require completely different strategic responses:
| Criterion | Sustaining Innovation | Disruptive Innovation |
|---|---|---|
| Target Market | Existing customers | Niche, non-customers |
| Performance | Better than existing products | Initially inferior, then sufficient |
| Price Point | Premium or market standard | Significantly cheaper or free |
| Business Model | Existing model optimized | New revenue model |
| Who Wins | Established companies | New market entrants |
A common misconception: Disruption and pivot are not the same. A pivot is a strategic change of direction by a single company—disruption describes a market-wide transformation process.
The Mechanism of Disruption
Disruptive innovation follows a characteristic pattern that Christensen describes as the “Innovator’s Dilemma”:
- Niche entry: A new provider (often a startup) serves a market segment that is unattractive to established companies—too small, too unprofitable, technologically too simple
- Rational ignorance: The established company focuses on its most profitable customers and their increasing demands—a rational decision from a management perspective
- Performance improvement: The new provider gradually improves its offering—often with a fundamentally different business model pattern, e.g., subscription instead of purchase
- Mainstream invasion: At a certain point, the disruptive offering also meets the demands of mainstream customers—at a fraction of the previous price
- Displacement: The established provider’s customers switch. The formerly dominant company can no longer respond because its entire business model is designed for the old world
Identifying Disruptive Threats
Early warning signals for potentially disruptive developments in your market:
- Overserved customers: Your customers use only a fraction of your product’s features—a sign of “overserving” that creates room for simpler alternatives
- Non-consumption: There is a large group of potential customers who do not use your product—because it is too expensive, too complex, or too inaccessible
- New technologies at the low end: A startup offers a significantly simpler version of your product—and is dismissed by your top customers
- Business model shifts: Competitors are experimenting with freemium models, platform business models, or subscription models that your industry has not known before
- Cross-industry entrants: Companies from other industries are entering your market with digital business models
Systematic competitive analysis and regular trend monitoring are essential to identify disruptive threats in time.
Responding to Disruption: 4 Strategies
Established companies have several strategic options when a disruptive threat is identified:
1. Acquire: Acquisition of the disruptive provider before it reaches critical mass. Risk: cultural integration frequently fails.
2. Establish autonomous unit: Build a separate organization with its own business model, its own culture, and its own market focus—as internal venture building.
3. Transform own business model: The business model transformation of the core business—the most difficult but often most effective path in the long term.
4. Defend premium position: Focus on the upper market segment that is affected by disruption last—a delay strategy that only works with strong brand positioning and a clear USP.
Self-Disruption: Challenging Your Own Business Model
The most effective response to potential disruption is proactive self-disruption. A company deliberately cannibalizes its own business model before a competitor does:
- Use Business Model Canvas: Visualize the current business model and systematically search for disruption vulnerabilities
- Apply Blue Ocean Strategy: Identify new market spaces that are overlooked by existing industry logic
- Analyze Jobs-to-be-Done: Understand what “job” customers really want to get done—independent of the current solution
- Build innovation labs: Create protected spaces for radical experiments that are allowed to question the core business
- Use Lean Startup methodology: Validate disruptive hypotheses quickly and cost-effectively in the market
Future-Proof Your Business Model
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Frequently Asked Questions About Disruptive Innovation
Is the iPhone an example of disruptive innovation?
Strictly according to Christensen’s definition: No. The iPhone was a sustaining innovation in the smartphone market—it was a premium product from the start that surpassed existing smartphones. However, it was disruptive for other industries: digital cameras, MP3 players, GPS devices, and calculators were displaced by a cheaper all-in-one device. This shows: Disruption always depends on perspective and the market being considered.
How can I protect my company from disruption?
There is no 100% protection, but you can significantly increase your company’s resilience: Systematically monitor the edges of your market and adjacent industries. Invest in multiple business models simultaneously. Build a strong innovation culture that sees change as an opportunity. And above all: Regularly question your own success formulas—because that is exactly what potential disruptors do.
Does disruption also affect small and medium-sized enterprises?
Yes, SMEs are particularly affected—and at the same time particularly well positioned. Affected because they often operate in niches that are being dissolved by digital business models. Well positioned because they bring the agility and customer proximity to be disruptive themselves. The key lies in actively defending one’s own niche while testing new business models.
Which industries are currently most threatened by disruption?
Particularly affected are industries with high margins, complex value chains, and traditional intermediary models: financial services (through FinTechs), healthcare (through HealthTechs and AI diagnostics), education (through EdTechs and AI tutoring), real estate (through PropTechs), and consulting (through AI-powered tools). Digital transformation and especially AI-powered business models are accelerating disruptive dynamics across industries.