What is disruptive innovation? Understanding how big changes happen fast

Disruptive innovation theory is a cautionary concept for large, established companies: There's danger in becoming too good at what you do best. Delivering to the mainstream market is good and all, but a disruptor could target a market underserved by your current product with a new business model. 

Harvard Business School professor Clayton Christensen developed the concept of disruptive innovation in the 1990s with his groundbreaking book The Innovator's Dilemma, and the theory became wildly popular in the decades to follow. But in some respects it has become a victim of its own success: "Despite broad dissemination, the theory's core concepts have been widely misunderstood and its basic tenets frequently misapplied," notes The Harvard Business Review.

Disruptive innovation is a process by which entrepreneurs break into a low-end or new market and create business models that are different from existing ones in those markets. Disruption has occurred when their business model becomes mainstream.

So a new company targets an overlooked customer base -- and manages to deliver a better product at a lower price point. At first, the incumbents don't take the threat seriously, which allows the potential disruptors to gain a foothold. Then the disruptors target the incumbents' mainstream customers. If the potential disruptors create something that the mainstream adopts in volume, they have successfully disrupted the market.

Defining disruptive innovation isn't easy and not everyone is going to agree on every example. Classic disruptive innovation should not simply describe just any situation of upheaval. If a new company shakes things up a bit for incumbent competitors, that scene is not necessarily one of disruptive innovation -- that could simply be a breakthrough. In order for this theory to have power and be used as an analytical and predictive model, it needs to be precisely defined. 

Christensen, for example, argued that Uber is not a disruptive innovator according to his definition. It fails to meet two requirements, in that it did not start in a low-end or new market. Instead, it built a name for itself in a mainstream market and then started drawing unserved customers with less expensive solutions. And being less expensive or creating an app to hail rides sustains the existing model rather than disrupts.

Not everyone thinks that's the case and other perspectives can be found that argue Uber actually is a disruptive innovator. From this perspective, Uber started with a low-market foothold by offering on-demand black car services. It was only when the startup introduced UberX, a low-end market offering, that it was able to move into the mainstream. 

What counts as disruption is up for debate, especially as Christensen's theory is applied to shifting contexts.

Disruption isn't a fixed point; it's the evolution of a product or service from the fringes of customers to the mainstream. It's important to define it this way because then it becomes more about the experimental nature of the process than about the output. See, disruptive innovations don't always succeed and not every successful company is a disruptor. The process is about building new business models previously unseen in the target industry and appealing to a more niche customer base at first.

No, it is not the primary factor of innovation. According to HBR, "disruption theory does not, and never will, explain everything about innovation specifically or business success generally." It does, however, help predict which businesses will succeed and it provides a solid foundation for further research – it's captured academic attention for 27 years.

Netflix was around since 1997, and at first, it didn't appeal to Blockbuster's core clientele. Renting movies usually happened in person, and Netflix was all online. Plus, Netflix took a few days to deliver movies because selections came through the mail. Blockbuster could easily ignore Netflix because it didn't have the brick-and-mortar infrastructure needed to dominate the market at that time.

Over time though, as streaming technology developed, Blockbuster's target clients were drawn toward Netflix. The same impulsiveness that made renting a movie right away more desirable than getting a movie a few days later translated into wanting to watch movies with a click of a mouse instead of going to a physical location to rent a DVD. Disruptive innovation technology, in this case, streaming, goes hand in hand with implementing innovation.

Online learning is a technology to watch because it's reaching a population that in-person learning can't reach at a lower price point. 

The main technologies to keep an eye on are the ones that tackle an underserved market and have the potential to expand their offerings to appeal to the mainstream. 

Something like autonomous vehicles, for example, can seem innovative, but they aren't disruptive according to the theory because they'll be quickly absorbed into existing industries. The incumbent advantage is strong. 

The important thing to remember is that innovation does not always lead to disruption. 

Christensen, wrote another book in 2012 called How Will You Measure Your Life?. He wrote it after overcoming the same type of cancer that had claimed his father's life and he addresses questions of job satisfaction, personal relationships, and integrity.

Christensen went to business school with some of the most well-known executives around, and found himself questioning why good people fall into not-good practices and gives advice on how to lead the best life possible. 

I'm working my way through the book, inspired to read it after watching Christensen's TEDx Talk. The praise for successful disruptive innovation often goes to the company, but what about the individual? The employees of disrupted industries feel the aftershocks of the process, but that doesn't always have to be so. 

Strategically consider where you're allocating your time and how that aligns with your goals. How can you best develop your skills to make the mark you want on the world? The pursuit of achievement and immediate gratification is intoxicating, but that investment strategy leads to companies that fail and people who feel defeated.

As Christensen said in his talk:

The reason why successful companies fail is that they invest in things that provide the most immediate and tangible evidence of achievement. The reason why they have such a short time horizon is that they are run by people like you and I. And we then apply that very same thinking pattern in our personal lives, with sad results." 

Disruption theory is difficult to define and even experts don't agree on every interpretation of it. It is all about the long haul, though. Having that long-term vision helps people and companies alike avoid temporary markers of success for long-term growth. When it comes to defining your own life, you have control over what you prioritize.