Harvard professor Clayton M. Christensen theorised the concept of disruptive innovation and disruptive technologies.
Disruptive innovation occurs when new services and goods enter a market, often neglected by large, well-established companies.
An entrepreneur finds that big companies are already serving their premium customers by innovating their products (sustainable innovation) and not paying attention to the needs of low-paying customers. She then presents her new, low-cost, poorly developed product to the untapped market.
Initially, this product is not given attention due to its low cost and fewer features compared to the products of bigger companies. But as iteration continues, the new startup product improves and starts matching the expectations and standards of customers.
The big companies either tend to ignore this new product or continuously go on iterating their product.
As the quality of the new product improves, a flood of bigger company customers flock to this new product, thereby disrupting the market.
Now, three options are there with the well-established company:
A disruptive innovation thus qualifies on the following points:
Netflix is a prime example of disruptive innovation. It has changed the movie watching experience.