Disruptive technology

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Types of Innovation[1]
Sustaining
Revolutionary
An innovation that creates a new market by allowing customers to solve a problem in a radically new way. (E.g., the automobile)
Evolutionary
An innovation that improves a product in an existing market in ways that customers are expecting. (E.g., fuel injection)
Disruptive
An innovation that creates a new (and unexpected) market by applying a different set of values. (E.g., the lower priced Ford Model-T)
A disruptive technology or disruptive innovation is a technological innovation that improves a product or service in ways that the market does not expect, typically by being lower priced or designed for a different set of consumers.
Disruptive innovations can be broadly classified into low-end and new-market disruptive innovations. A new-market disruptive innovation is often aimed at non-consumption (i.e., consumers who would not have used the products already on the market), whereas a lower-end disruptive innovation is aimed at mainstream customers for whom price is more important than quality.
Disruptive technologies are particularly threatening to the leaders of an existing market, because they are competition coming from an unexpected direction. A disruptive technology can come to dominate an existing market by either filling a role in a new market that the older technology could not fill (as cheaper, lower capacity but smaller-sized flash memory is doing for personal data storage in the 2000s) or by successively moving up-market through performance improvements until finally displacing the market incumbents (as digital photography has largely replaced film photography).
In contrast to "disruptive technology", a "revolutionary technology" introduces products with highly improved new features into the market, such as the automobile or telephone. A "sustaining technology or innovation" improves product performance of established products. Sustaining technologies are incremental.
Contents
1 History and usage of the term
2 The theory
3 Examples of disruptive innovations
4 Examples of revolutionary innovations
5 Business implications
6 See also
7 Notes
8 References
9 Additional Readings
10 External links
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History and usage of the term
The term disruptive technology was coined by Clayton M. Christensen and introduced in his 1995 article Disruptive Technologies: Catching the Wave[2], which he coauthored with Joseph Bower. The article is aimed at managing executives who make the funding/purchasing decisions in companies rather than the research community. He describes the term further in his 1997 book The Innovator's Dilemma[3]. In his sequel, The Innovator's Solution[4], Christensen replaced disruptive technology with the term disruptive innovation because he recognized that few technologies are intrinsically disruptive or sustaining in character. It is the strategy or business model that the technology enables that creates the disruptive impact. The concept of disruptive technology continues a long tradition of the identification of radical technical change in the study of innovation by economists, and the development of tools for its management at a firm or policy level.
The theory

How low-end disruption occurs over time.
Christensen distinguishes between "low-end disruption" which targets customers who do not need the full performance valued by customers at the high-end of the market and "new-market disruption" which targets customers who have needs that were previously unserved by existing incumbents.
"Low-end disruption" occurs when the rate at which products improve exceeds the rate at which customers can 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 which exceeds the requirements of certain segments, thereby gaining a foothold in the market.
In low-end disruption, the disruptor is focused initially on serving the least profitable customer, who is happy with a good enough product. This type of customer is not willing to pay premium for enhancements in product functionality. Once the disruptor has gained foot hold in this customer segment, it seeks to improve its profit margin. To get higher profit margins, the disruptor needs to enter the segment where the customer is willing to pay a little more for higher quality. To ensure this quality in its product, the disruptor needs to innovate. The incumbent will not do much to retain its share in a not so profitable segment, and will move up-market and focus on its more attractive customers. After a number of such encounters, the incumbent is squeezed into smaller markets...(and so on)

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