TLDR:
Disruptive innovation, a theory by Clayton Christensen, describes how new entrants displace established competitors by initially serving overlooked customer segments with simpler, cheaper alternatives.
How Disruption Works
Disruptive innovations typically start by serving low-end or new-market customers that incumbents overlook because the opportunity seems too small. Disruptors offer products that are cheaper, simpler, and good-enough for these segments. Over time, the disruptor improves its technology and moves upmarket, eventually challenging incumbents in their core markets. Classic examples include Netflix vs. Blockbuster, smartphones vs. PCs, and AWS vs. enterprise IT.
Disruption vs. Sustaining Innovation
Sustaining innovations improve existing products for current customers along well-understood dimensions. Disruptive innovations create new performance trajectories that incumbents initially dismiss. Incumbents are usually well-equipped to handle sustaining innovations but struggle with disruptive innovations because the new technology threatens existing revenue streams and business models.
Lessons for Founders
Founders pursuing disruption should target underserved customer segments where incumbents are vulnerable, focus on jobs-to-be-done rather than product features, and resist the temptation to copy incumbent business models. Many startups that claim to be disruptive are actually pursuing sustaining innovations or new markets — true disruption requires asymmetric advantages and a willingness to look unimpressive to incumbents in the early years.