Disruptive innovation

What is disruptive innovation?

Disruptive innovation is the pattern in which a newcomer starts with a cheaper, simpler product for customers that market leaders neglect, then improves it until it takes the leaders' core customers. Joseph Bower and Clayton Christensen described the pattern in a 1995 Harvard Business Review article on disruptive technologies. Incumbents tend to ignore the entrant at first, because its early customers look unprofitable and its product falls short of what their best customers need.

Why it matters to a revenue leader

The term gets applied to almost any new competitor, which makes it less useful. For a revenue leader, the signal to watch sits at the low end of the market and among customers the team has chosen not to serve. In commercial services, a low-cost provider that starts with small sites can build route density and processes, then begin bidding on the mid-market accounts that carry the plan.

A pest control company ignores a new entrant that serves small restaurants with app-based scheduling at prices 30% lower. Three years later the entrant has 400 accounts in the metro area and starts bidding on the company's mid-size restaurant groups.