Innovation isn’t one-size-fits-all. Depending on whether you’re an established company or a new and emerging brand, there are different ways you can create value, achieve differentiation, and outpace the competition.
At your organization, innovation might mean making gradual improvements to an existing product, creating a breakthrough technology, or developing an entirely new market. In the online course Disruptive Strategy, former Harvard Business School Professor Clayton Christensen outlines three types of innovation:
Sustaining innovation
Low-end disruption
New-market disruption
How and when you leverage each innovation type depends on your place in the market. Here's what each category means and how you can apply it to achieve long-term business success.
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Types of Innovation
1. Sustaining Innovation
Sustaining innovation is an improvement on an existing product. Companies that pursue sustaining innovation develop enhanced versions of their top-tier products to target their most profitable customers who are willing to pay for improved performance. Businesses benefit because they can leverage their current processes and cost structures and, in turn, maintain or improve their profit margins.
In Disruptive Strategy, Christensen succinctly describes the characteristics of sustaining innovation as “better products that you could sell for better profits to your best customers.” Apple applies this practice with each new iPhone release. Every iteration introduces new, often breakthrough, features, such as built-in Apple Intelligence—a suite of AI tools that enhance everyday tasks—introduced with the iPhone 17.
Despite these advancements, Apple isn’t creating a new market. Instead, it’s refining and strengthening its position within its existing one. Each product launch builds on Apple’s established ecosystem and value network, reinforcing its market position through continuous improvement.
Sustaining innovation is where incumbent leaders typically win because they’re listening to their existing customers and using those insights to develop superior products and services. In the process, however, they create opportunities for new companies to break in at the low end of the market.
2. Low-End Disruption
Enter low-end disruption, which is when businesses come in at the bottom of the market with a “good enough” product at a cheaper cost. Christensen describes this as “disruptive innovation,” in which a smaller company with fewer resources moves upmarket and, ultimately, captures the incumbents’ customers, who have adopted it into the mainstream.
“If you come to the bottom of the market, you create a situation where the giant company is motivated to flee, rather than fight you,” Christensen says in Disruptive Strategy. “They won’t fight you, because there’s no profit in it, and it’s very hard for companies to pursue opportunities where there’s no profitability.”
Learn about the differences between sustaining and disruptive innovation in the video below, and subscribe to our YouTube channel for more explainer content.
Here's a breakdown of the differences between sustaining and disruptive innovation, and the importance of incorporating disruptive innovation into your strategic mindset.
Low-end disruption is how new entrants typically win. For example, Airbnb got its start in 2007 when co-founders Brian Chesky and Joe Gebbia had the idea to rent out air mattresses in their apartment to people attending a design conference in San Francisco. Although not an ideal sleeping situation, it was “good enough” for the three guests who showed up, and much cheaper than staying in a hotel.
Fast forward to today, and the online vacation rental marketplace is offering travelers more than nine million accommodations across over 220 countries worldwide. Hotels have since turned to Airbnb to generate more bookings.
The online encyclopedia Wikipedia followed a similar path. When it launched in 2001, the reference market was dominated by carefully curated, expert-written sources such as Encyclopedia Britannica. Wikipedia entered with a free, crowdsourced platform that was initially viewed as less reliable. Yet, for many users, it was “good enough” because it was fast, easily accessible, and constantly updated.
Because it lacked the accuracy and authority of traditional encyclopedias, incumbents largely dismissed it and had little incentive to compete in a free, low-margin space. Over time, however, Wikipedia improved in quality, expanded its content dramatically, and became the default source for general knowledge. As it moved upmarket, it drew in mainstream users—and ultimately contributed to the decline of traditional print encyclopedias.
3. New-Market Disruption
New-market disruption is when businesses create a new segment in an existing market to reach underserved customers. Through a new measure of performance, they turn products and services that were once expensive and unattainable into something affordable and accessible to a larger population of people.
“Low-end disruption doesn’t create new markets,” Christensen says in Disruptive Strategy, “you just gain market share against the old. New-market disruption competes against the original players by going after new customers that these [companies] aren't interested in, selling them a simple product.”
Duolingo offers a strong example. Traditionally, learning a new language required a significant investment of time and money—through classes, private tutors, or expensive software. The company changes this by offering a free, mobile-first, gamified experience that makes language learning more accessible and easy to fit into daily life.
Features like bite-sized lessons, learning streaks, and AI-powered personalization helped it attract well over 50 million active users—many of whom had never participated in the language-learning market before.
The result isn’t just competition with traditional providers; it’s the creation of an entirely new segment of casual, self-directed customers.
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Pursuing Innovation Opportunities
There are multiple ways to pursue innovation. If you’re an incumbent business, thinking strategically through how you might improve your current products can help you maintain a competitive advantage, while industry entrants will want to create new products or markets to achieve success.
If you’re interested in learning more about disruptive innovation, explore Disruptive Strategy—one of our online strategy and entrepreneurship and innovation courses—and download our free strategy formulation e-book to start enhancing your business success.
This post was updated on June 4, 2026. It was originally published on October 1, 2020.