Six Common Steps to Disruption

1. Disruptive innovation is first developed at an established firm.
2. The established firm elicits feedback from its customer base. More often than not, customers will not recognize the disruptive innovation’s actual value.
3. The management team at the established firm chooses to ignore the disruptive innovation.
4. New companies, often founded by ex-employees of the established firm, are created to make use of the disruptive innovation.
5. Through trial and error, the newer companies find product-market fit. 
6. The established firm belatedly tries to defend itself against a fleeing customer base. It is usually too late.

There is a distinction between disruptive innovation and sustained innovation. Sustained innovation brings about sustained success. Disruptive innovation brings about cannibalization. Management teams loathe disruptive innovation for this very reason. A good management team is expected to lead its firm toward sustained success. Disruptive innovation steals from this goal by eating into profits that get generated by a sustained innovation.

Disruptive innovation often overshoots market demand, but over time market demand catches up with technological capability. Each sustained technology has a certain purchase threshold. Once the threshold has been passed the market is said to have become overserviced. In economics, one would say that supply had outpaced demand. Such markets are ripe for disruption.