A Really Short Explanation of Disruptive Innovation
Disruption Innovation is a theory about who wins competitive battles. The disruptive innovation model pictured above illustrates how challengers with innovations that are **inferior** to incumbents gain a market foothold by **competing against non-consumption**.
How does one compete against non-consumption? In simple terms, disruptive innovators start by targeting beachhead market micro-segments that 'opt-out' of participation in the existing marketplace. These segments are usually non-consumers because existing products are too expensive, inconvenient, or require too much expertise to use, and as a result incumbent market leaders generally do not even consider these unserved segments to be part of the market. As disruptors succeed in converting these non-consumers into viable market segments, they simultaneously change the playing field of competition, introducing a new set of performance metrics that users judge the product category on (they effectively create new product categories that the incumbents don't fit into), and thereby turn old competitive strengths into weaknesses.
Finally, the new platform improves over time until it is **good enough** to satisfy the requirements of mainstream users and become the new market incumbent.
This process is possible because in most mature markets, incumbent products exceed the true performance needs of most of their customers and especially of the non-consumers, saddling themselves with a higher-than-necessary cost structure that the market isn’t willing to pay for if there is a significantly lower-priced alternative. This type of disruption is called **low-end disruption**.
A second type of disruption abstracts the notion of inferiority based on the **job to be done** (often shortened to JTBD) rather than the traditional product categorization, such that the new market entrant may not resemble the incumbent in any obvious way, except that the consumer considers it an acceptable alternative to the incumbent product.
Thus, it may be **inferior** when compared on the basis of attributes that the existing market values, but superior when evaluated on a different value set. Typically, such innovations are sufficiently different that they are not easily copied or adapted into existing products or solutions, which is what makes it difficult for incumbents to respond and avoid disruption.
This second sub-type of disruptive innovation follows the same pattern, but is referred to as **new-market disruption**. New-market disruptions don't always offer a lower price, but they do offer a significantly better value/price ratio when compared to existing solutions.
Notably, it is possible for an innovation to be a low-end and new-market disruption simultaneously, and products that achieve this tend to be the most successful -- the iPhone is an example whose enormous success was driven by being a dual disruptor, and it dramatically altered the competitive landscape and set new standards and market expectations for everything from user interface to design elegance to simplicity to integration to form factor.
For a complete explanation of disruption theory and how to apply it to create intentional market disruption, refer to the book "Disruption by Design".
Note: terms surrounded by double stars (**) are key concepts of disruption theory, and have precise meanings which may differ from common use of these words.