Disruptive technology

What is disruptive technology (disruptive innovation)?
Disruptive technology, often referred to as disruptive innovation, is when a new business model attracts an underserviced market or revenue stream and grows until it supplants incumbent competitors. Technologies are not in themselves disruptive, but their application in a new business model can be.

The term disruptive technology was originally coined by Harvard Business School professor Clayton Christensen in 1995 and further expounded in his book The Innovator's Dilemma in 1997. In the follow-up work, The Innovator's Solution, he replaced the term with disruptive innovation.
What are the characteristics of a disruptive innovation?
In The Innovator's Dilemma, Christensen separates new technology into two categories: sustaining and disruptive. Sustaining technology relies on incremental improvements to an already established technology and supports existing players in the market.

Disruptive technology is a development that allows a new player to service a lower market segment that incumbent players do not cover due to lower profitability. As the disruptive technology advances, the quality improves so that it supplants the incumbent in the more profitable high-end market.

In The Innovator's Solution, Christensen instead uses the term disruptive innovation. He recognized that a technological advancement is not in and of itself either sustaining or disruptive. Instead, it is how the technology is applied to a new market or in a new business plan that it becomes disruptive to the market.

Key to understanding this is the fact that most incumbent players in a market have large research and development departments and follow technological advancements themselves. So, they will quickly adopt any obviously superior technology. Disruptive companies instead use the innovation to open a new market segment at a lower price point. It is the lack of market flexibility of the incumbent players that allows companies to eventually disrupt the market, not pure technological superiority.