Disruptive technology
The definition
The term disruptive technology was coined by Clayton M. Christensen to describe a new, lower performance, but less expensive product. The disruptive technology starts by gaining a foothold in the low-end (and less demanding part) of the market, successively moving up-market through performance improvements, and finally displacing the incumbent's product.
By contrast, a sustaining technology provides improved performance and according to Christensen will almost always be incorporated into the incumbent's product.
The theory
In certain markets, the rate at which products improve exceeds the rate at which customers can learn and adopt the new performance. Therefore, at some point the performance of the product overshoots the needs of certain customer segments.
At this point, a disruptive technology may enter the market and provide a product which has lower performance than the incumbent, but exceeds the requirements of certain segments thereby gaining a foothold in the market. Christensen distinguishes between low-end disruption which targets customers that have been overshot and new-market disruption which targets customers that could previously not be served profitably by the incumbent.
The disruptive company will naturally aim to improve its margin (from low commodity level) and therefor innovate to capture the next level of customer requirements. The incumbent will not want to engage in a price war with a simpler product with lower production costs and will move up-market and focus on its more attractive customers.
After a number of iterations, the incumbent has been squeezed into successively smaller markets and when finally the disruptive technology meets the demands of its last segment the incumbent technology disappears.
Examples of disruptive technologies
