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Disruptive Innovation, a concept pioneered by Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.

In his book, "The Innovator's Dilemma," Christensen showed that time and again almost all the organizations that have "died" or been displaced from their industries could see the disruption coming, but did nothing until it was too late.

Most good companies are on a path of sustaining innovations by catering to their most profitable customers. This leaves them open for disruptive technologies. This is because the established companies are designed to maximize profits through sustaining innovations.

When Disruptive Innovations emerge, established companies are unable to react quickly enough. They almost always go up-market rather than to defend these new or low-end markets, and ultimately the disruptive innovation improves, steals more market share, and replaces them.

Companies tend to innovate faster than their customers' needs evolve. Thus, they produce offerings too sophisticated, too expensive, and too complicated for many customers.

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Source: Disruptive Innovation Primer PowerPoint document

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