Skip to Main Content
HBS Online
  • Courses
    Open Courses Mega Menu
    • Business Essentials
      • Credential of Readiness (CORe)
      • Business Analytics
      • Economics for Managers
      • Financial Accounting
    • Leadership & Management
      • Leadership Principles
      • Management Essentials
      • Negotiation Mastery
      • Organizational Leadership
      • Strategy Execution
      • Power and Influence for Positive Impact
    • Entrepreneurship & Innovation
      • Entrepreneurship Essentials
      • Disruptive Strategy
      • Negotiation Mastery
      • Design Thinking and Innovation
    • Strategy
      • Strategy Execution
      • Business Strategy
      • Economics for Managers
      • Disruptive Strategy
      • Global Business
      • Sustainable Business Strategy
    • Finance & Accounting
      • Financial Accounting
      • Leading with Finance
      • Alternative Investments
      • Sustainable Investing
    • Business in Society
      • Sustainable Business Strategy
      • Global Business
      • Sustainable Investing
      • Power and Influence for Positive Impact
    • All Courses
  • For Organizations
    Open For Organizations Mega Menu
    • Corporate Learning
      Help your employees master essential business concepts, improve effectiveness, and expand leadership capabilities.
    • Academic Solutions
      Integrate HBS Online courses into your curriculum to support programs and create unique educational opportunities.
    • Need Help?
      • Frequently Asked Questions
      • Contact Us
    • Black, Latinx, and underrepresented minority professionals
      Pathways to Business

      Stories designed to inspire future business leaders.

  • Insights
    Open Insights Mega Menu
    • Business Insights Blog
      • Career Development
      • Communication
      • Decision-Making
      • Earning Your MBA
      • Entrepreneurship & Innovation
      • Finance
      • Leadership
      • Management
      • Negotiation
      • Strategy
    • All Topics
    • Sample Business Lessons and E-Books

      Gain new insights and knowledge from leading faculty and industry experts.

    • Free Guide

      Learn how to formulate a successful business strategy.

  • More Info
    Open More Info Mega Menu
    • Learning Experience
      Master real-world business skills with our immersive platform and engaged community.
    • Certificates, Credentials, & Credits
      Learn how completing courses can boost your resume and move your career forward.
    • Learning Tracks
      Take your career to the next level with this specialization.
    • Financing & Policies
      • Employer Reimbursement
      • Payment & Financial Aid
      • Policies
    • Connect
      • Student Stories
      • Community
    • Need Help?
      • Frequently Asked Questions
      • Request Information
    • Apply Now
Login
My Courses
Access your courses and engage with your peers
My Account
Manage your account, applications, and payments.
HBS Home
  • About HBS
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
HBS Online
  • Courses
  • Business Essentials
  • Leadership & Management
  • Entrepreneurship & Innovation
  • Strategy
  • Finance & Accounting
  • Business in Society
  • For Organizations
  • Insights
  • More Info
  • About
  • Media Coverage
  • Founding Donors
  • Leadership Team
  • Careers
  • My Courses
  • My Account
  • Apply Now
  • …→
  • Harvard Business School→
  • HBS Online→
  • Business Insights→

Business Insights

Harvard Business School Online's Business Insights Blog provides the career insights you need to achieve your goals and gain confidence in your business skills.

 
Filter Results Arrow Down Arrow Up

Topics

Topics

  • Accounting
  • Analytics
  • Business Essentials
  • Business in Society
  • Career Development
  • Communication
  • Community
  • ConneXt
  • Decision-Making
  • Earning Your MBA
  • Entrepreneurship & Innovation
  • Finance
  • Leadership
  • Management
  • Marketing
  • Negotiation
  • News & Events
  • Productivity
  • Staff Spotlight
  • Strategy
  • Student Profiles
  • Technology
  • Work-Life Balance

Courses

Courses

  • Alternative Investments
  • Business Analytics
  • Business Strategy
  • CORe
  • Design Thinking and Innovation
  • Disruptive Strategy
  • Economics for Managers
  • Entrepreneurship Essentials
  • Financial Accounting
  • Global Business
  • Leadership Principles
  • Leading with Finance
  • Management Essentials
  • Negotiation Mastery
  • Organizational Leadership
  • Power and Influence for Positive Impact
  • Strategy Execution
  • Sustainable Business Strategy
  • Sustainable Investing
Subscribe to the Blog
RSS feed

Filters

Topics

Topics

  • Accounting
  • Analytics
  • Business Essentials
  • Business in Society
  • Career Development
  • Communication
  • Community
  • ConneXt
  • Decision-Making
  • Earning Your MBA
  • Entrepreneurship & Innovation
  • Finance
  • Leadership
  • Management
  • Marketing
  • Negotiation
  • News & Events
  • Productivity
  • Staff Spotlight
  • Strategy
  • Student Profiles
  • Technology
  • Work-Life Balance

Courses

Courses

  • Alternative Investments
  • Business Analytics
  • Business Strategy
  • CORe
  • Design Thinking and Innovation
  • Disruptive Strategy
  • Economics for Managers
  • Entrepreneurship Essentials
  • Financial Accounting
  • Global Business
  • Leadership Principles
  • Leading with Finance
  • Management Essentials
  • Negotiation Mastery
  • Organizational Leadership
  • Power and Influence for Positive Impact
  • Strategy Execution
  • Sustainable Business Strategy
  • Sustainable Investing
Subscribe to the Blog
RSS feed

Disruptive Innovation Theory: What It Is & 4 Key Concepts

game-changer-2-to-1
  • 15 Nov 2016
Chris Larson Author Staff
tag
  • Disruptive Strategy
  • Strategy

Disruptive innovation has been a buzzword since Clayton Christensen coined it back in the mid 1990s to describe the way in which new entrants in a market can disrupt established businesses. It’s gained even more prominence in the past two decades as companies like Uber, Lyft, Etsy, and countless other startups have emerged with a goal of changing their respective industries.

For a term thrown around so frequently, it’s surprising how often it’s misunderstood. What does “disruptive innovation” actually mean, and how can today’s businesses—both the disruptors and the disrupted—form an understanding that will allow them to spot potential opportunities and threats?

This post explores disruptive innovation and offers four key concepts that can help you apply the theory to your business.

What Is Disruptive Innovation?

According to Christensen, disruptive innovation is the process in which a smaller company, usually with fewer resources, is able to challenge an established business (often called an “incumbent”) by entering at the bottom of the market and continuing to move up-market. This process usually happens over a number of steps:

  1. Incumbent businesses innovate and develop their products or services in order to appeal to their most demanding and/or profitable customers, ignoring the needs of those downmarket.
  2. Entrants target this ignored market segment and gain traction by meeting their needs at a reduced cost compared to what is offered by the incumbent.
  3. Incumbents don’t respond to the new entrant, continuing to focus on their more profitable segments.
  4. Entrants eventually move upmarket by offering solutions that appeal to the incumbent’s “mainstream” customers.
  5. Once the new entrant has begun to attract the incumbent business’s mainstream customers en masse, disruption has occurred.

4 Tips for Understanding the Theory of Disruptive Innovation

1. Not All Innovation Is Disruption

According to Merriam Webster, disruption is "to cause (something) to be unable to continue in the normal way: to interrupt the normal progress or activity of (something)." If this definition is applied to business, then really anything that enters a market and is successful can be seen as "disruptive." At least that’s how the term is often used today.

But this isn’t how Christensen defined it when writing in the 1990s.

An article by Ilan Mochari discusses the misuse of the word disruption when referring to business. As he clarifies, disruption is "what happens when the incumbents are so focused on pleasing their most profitable customers that they neglect or misjudge the needs of their other segments."

2. Disruption Can Be Low-End or New-Market

Disruption can come in different varieties: Low-end disruption and new-market disruption.

  • Low-end disruption refers to businesses that come in at the bottom of the market and serve customers in a way that is "good enough." These are generally the lower profit markets for the incumbent and thus, when these new businesses enter, the incumbents move further "upstream." In other words, they put their focus on where the greater profit margins are.

  • New-market disruption refers to businesses that compete against non-consumption in lower margin sectors of an industry. Similar to low-end disruption, the products offered are generally seen as "good enough," and the emerging business is profitable at these lower prices.

The main difference between the two types lies in the fact that low-end disruption focuses on overserved customers, and new-market disruption focuses on underserved customers.

Disruptive Strategy - Create winning strategies for your organization. Learn more.

3. Disruptive Innovation Is a Process, Rather Than a Product or Service

When innovative new products or services, such as Apple’s iPhone or Tesla’s electric car, launch and grab the attention of the press and consumers, do they qualify as disruptors in their industries?

In the Harvard Business Review, Christensen cautions that it takes time to determine whether an innovator’s business model will succeed. He cites Netflix as an example that didn’t threaten Blockbuster at first; its DVDs-by-mail service didn’t satisfy customers who wanted to get their hands on the latest new release instantaneously. But in shifting to an on-demand streaming model, Netflix siphoned away Blockbuster’s core users before the company could stage an adequate response.

Will the next new launch be a flash in the pan, or a formidable competitor? Keeping a close eye on the process, and being able to determine whether that product or service is evolving its business model to better serve customers’ needs, will help you evaluate the extent of the threat.

4. Choose Your Battles Wisely

If you’re currently an incumbent, you want to be on the lookout for potentially disruptive emerging businesses. It’s important to note, however, that not all new entrants will prove to be disruptive.

Every fire doesn’t need to be extinguished, nor will it threaten your house. If you treat every fire as dangerous because someone else calls it “disruptive,” you’ll soon discover it’s not possible to put every fire out and, in the interim, will waste your resources. The fires you have to worry about are the ones that truly threaten you. Understanding the correct meaning and application of the word “disruption” will help you identify and target true threats.

On the other hand, new entrants can also benefit from achieving a better understanding of disruption, as it will help you identify opportunities to start or scale your business. An understanding of disruption, coupled with Christensen’s other theory of "Jobs to be Done," can help you create products and services that will be desired by customers and, ideally, left alone by incumbents.

Understanding the Impact of Disruptive Innovation

Whether you're an incumbent intent on defending your market share and profits or you are a new entrant seeking to grab a piece of the pie, understanding disruptive innovation as a process can offer valuable insights you can incorporate into your business plan.

Do you want to learn more about disruption and explore other theories from Professor Christensen? Our six-week online Disruptive Strategy course will equip you with the tools, frameworks, and intuition to develop executive-level strategy and organize for innovation.

This post was updated on August 30, 2019. It was originally published on November 15, 2016.

About the Author

Chris Larson is a former intern at Harvard Business School Online who worked with the marketing and product management teams.
 
All FAQs

Top FAQs

How are HBS Online courses delivered?

+–

We offer self-paced programs (with weekly deadlines) on the HBS Online course platform.

Our platform features short, highly produced videos of HBS faculty and guest business experts, interactive graphs and exercises, cold calls to keep you engaged, and opportunities to contribute to a vibrant online community.

Do I need to come to campus to participate in HBS Online programs?

+–

No, all of our programs are 100 percent online, and available to participants regardless of their location.

How do I enroll in a course?

+–

All programs require the completion of a brief application. The applications vary slightly from program to program, but all ask for some personal background information. You can apply for and enroll in programs here. If you are new to HBS Online, you will be required to set up an account before starting an application for the program of your choice.

Our easy online application is free, and no special documentation is required. All applicants must be at least 18 years of age, proficient in English, and committed to learning and engaging with fellow participants throughout the program.

After submitting your application, you should receive an email confirmation from HBS Online. If you do not receive this email, please check your junk email folders and double-check your account to make sure the application was successfully submitted.

Updates to your application and enrollment status will be shown on your Dashboard. We confirm enrollment eligibility within one week of your application.

Does Harvard Business School Online offer an online MBA?

+–

No, Harvard Business School Online offers business certificate programs.

What are my payment options?

+–

We accept payments via credit card, wire transfer, Western Union, and (when available) bank loan. Some candidates may qualify for scholarships or financial aid, which will be credited against the Program Fee once eligibility is determined. Please refer to the Payment & Financial Aid page for further information.

We also allow you to split your payment across 2 separate credit card transactions or send a payment link email to another person on your behalf. If splitting your payment into 2 transactions, a minimum payment of $350 is required for the first transaction.

In all cases, net Program Fees must be paid in full (in US Dollars) to complete registration.

What are the policies for refunds and deferrals?

+–

After enrolling in a program, you may request a withdrawal with refund (minus a $100 nonrefundable enrollment fee) up until 24 hours after the start of your program. Please review the Program Policies page for more details on refunds and deferrals. If your employer has contracted with HBS Online for participation in a program, or if you elect to enroll in the undergraduate credit option of the Credential of Readiness (CORe) program, note that policies for these options may differ.

 

Sign up for News & Announcements

Subject Areas

  • Business Essentials
  • Leadership & Management
  • Entrepreneurship & Innovation
  • Strategy
  • Finance & Accounting
  • Business & Society

Quick Links

  • FAQs
  • Contact Us
  • Request Info
  • Apply Now

About

  • About Us
  • Media Coverage
  • Founding Donors
  • Leadership Team
  • Careers @ HBS Online

Legal

  • Legal
  • Policies
Harvard Business School
Copyright © President & Fellows of Harvard College
  • Site Map
  • Trademark Notice
  • Digital Accessibility