Dear Friends,
If you've ever used "disruption" to mean "big change," "bold move," or "tech-forward strategy," you're in good company. You're also slightly wrong.
That's not a criticism. It's actually an invitation, because Disruptive Innovation Theory is one of those frameworks that gets borrowed, stretched, and occasionally flattened until it barely resembles the original. And in an era when the word "disruption" is practically ambient noise, it feels worth clearing the air on what the theory actually says—and what it doesn't.
Myth #1: Disruption is good.
Or bad. Or worth celebrating. Or fearing. Take your pick—people have argued all of these.
In reality, Disruptive Innovation is a market phenomenon. It isn't inherently positive or negative; it's descriptive. As our own Ann Somers Hogg writes in her recent piece, "No, disruption isn't a strategy": "By Christensen's definition, Disruptive Innovation is a theory of competitive response. When you understand if a product or service has disruptive potential, you can determine how both the demand and supply sides of the market will respond."
The confusion is understandable. Disruption can produce outcomes we celebrate, like democratized access, lower costs, and better products for people previously left out. But it can also leave behind workers, destabilize functional institutions, or benefit investors more than customers.
The theory explains the mechanics. What we do with those mechanics is a human choice.
Myth #2: Disruptive Innovation is the best way to innovate.
Calling Disruptive Innovation the pinnacle of innovation is a little like calling offense the most important part of a football team. Sure, it's exciting. But you still need defense.
There are at least four distinct types of innovation, each with a different role in a healthy economy:
Sustaining Innovation improves existing products for existing customers, usually at a higher margin. Think every new iPhone Apple releases: better camera, better battery, same target buyer.
Hybrid Innovation pairs a disruptive technology with traditional methods to maintain competitive trajectories. Hybrid cars. Blended learning schools that combine brick-and-mortar with online delivery.
Efficiency Innovation changes the process without changing the product or the customer—it frees up cash flow and tightens margins. Toyota's just-in-time production system is the classic example.
Disruptive Innovation targets overserved customers or nonconsumers with simpler, more affordable alternatives, then works its way up.
Understanding which type of innovation your business model should be built around—and where its future potential lies—is the real competitive edge. You can see how these types compare in this graphic.
Myth #3: There's one kind of Disruptive Innovation.
Even within disruption itself, there's a meaningful distinction that often gets collapsed.
Low-end disruption enters at the bottom of an existing market, targeting the least profitable, most overserved customers with a "good enough" solution at a lower price. Walmart is the textbook case: it didn't need to impress the most sophisticated shoppers. It needed to serve the ones the incumbents had stopped caring about.
New-market disruption takes a different path: it creates a market where none existed before by making a product or service accessible to people who couldn't previously participate at all. The personal computer. The Xerox copier in its earliest iterations. These didn't steal customers; they found entirely new ones.
Both eventually move upmarket and challenge incumbents. But they start in very different places. Understanding which type you're watching (or building) changes how you should respond.
New truth: Disruption may be getting faster.
Here's where the theory meets the present moment.
Historically, disruption operated on a slow clock. Entrants would find their foothold at the low end or in nonconsumption, then spend years (sometimes decades) building the business model and capabilities needed to move upmarket.
AI may be rewriting that timeline.
The combination of AI's capabilities and its potential as a technological enabler—for creating new business models, scaling operations, and delivering value at low cost—suggests that the journey from foothold to displacement could compress dramatically. What once took a generation might take a few years. Or less.
We're watching this closely at the Institute. While the theory hasn't changed, the clock's speed might.
If you've ever used "disruption" to mean "big change," "bold move," or "tech-forward strategy," you're in good company. You're also slightly wrong.
That's not a criticism. It's actually an invitation, because Disruptive Innovation Theory is one of those frameworks that gets borrowed, stretched, and occasionally flattened until it barely resembles the original. And in an era when the word "disruption" is practically ambient noise, it feels worth clearing the air on what the theory actually says—and what it doesn't.
Myth #1: Disruption is good.
Or bad. Or worth celebrating. Or fearing. Take your pick—people have argued all of these.
In reality, Disruptive Innovation is a market phenomenon. It isn't inherently positive or negative; it's descriptive. As our own Ann Somers Hogg writes in her recent piece, "No, disruption isn't a strategy": "By Christensen's definition, Disruptive Innovation is a theory of competitive response. When you understand if a product or service has disruptive potential, you can determine how both the demand and supply sides of the market will respond."
The confusion is understandable. Disruption can produce outcomes we celebrate, like democratized access, lower costs, and better products for people previously left out. But it can also leave behind workers, destabilize functional institutions, or benefit investors more than customers.
The theory explains the mechanics. What we do with those mechanics is a human choice.
Myth #2: Disruptive Innovation is the best way to innovate.
Calling Disruptive Innovation the pinnacle of innovation is a little like calling offense the most important part of a football team. Sure, it's exciting. But you still need defense.
There are at least four distinct types of innovation, each with a different role in a healthy economy:
Sustaining Innovation improves existing products for existing customers, usually at a higher margin. Think every new iPhone Apple releases: better camera, better battery, same target buyer.
Hybrid Innovation pairs a disruptive technology with traditional methods to maintain competitive trajectories. Hybrid cars. Blended learning schools that combine brick-and-mortar with online delivery.
Efficiency Innovation changes the process without changing the product or the customer—it frees up cash flow and tightens margins. Toyota's just-in-time production system is the classic example.
Disruptive Innovation targets overserved customers or nonconsumers with simpler, more affordable alternatives, then works its way up.
Understanding which type of innovation your business model should be built around—and where its future potential lies—is the real competitive edge. You can see how these types compare in this graphic.
Myth #3: There's one kind of Disruptive Innovation.
Even within disruption itself, there's a meaningful distinction that often gets collapsed.
Low-end disruption enters at the bottom of an existing market, targeting the least profitable, most overserved customers with a "good enough" solution at a lower price. Walmart is the textbook case: it didn't need to impress the most sophisticated shoppers. It needed to serve the ones the incumbents had stopped caring about.
New-market disruption takes a different path: it creates a market where none existed before by making a product or service accessible to people who couldn't previously participate at all. The personal computer. The Xerox copier in its earliest iterations. These didn't steal customers; they found entirely new ones.
Both eventually move upmarket and challenge incumbents. But they start in very different places. Understanding which type you're watching (or building) changes how you should respond.
New truth: Disruption may be getting faster.
Here's where the theory meets the present moment.
Historically, disruption operated on a slow clock. Entrants would find their foothold at the low end or in nonconsumption, then spend years (sometimes decades) building the business model and capabilities needed to move upmarket.
AI may be rewriting that timeline.
The combination of AI's capabilities and its potential as a technological enabler—for creating new business models, scaling operations, and delivering value at low cost—suggests that the journey from foothold to displacement could compress dramatically. What once took a generation might take a few years. Or less.
We're watching this closely at the Institute. While the theory hasn't changed, the clock's speed might.
Saludos,
Jdavid
Jdavid