Clay Christensen's landmark theory of disruptive innovation has proven to be a powerful way to think about innovation-led growth.

“Disruption” describes a process by which a small business with fewer resources is able to successfully challenge incumbent businesses. Specifically, while incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they overshoot the needs of some segments and ignore the needs of others. Disruptive new entrants begin by successfully targeting neglected segments, gaining a foothold by offering more tailored features, often at a lower price. Incumbents, seeking higher profitability in more demanding segments, tend not to respond vigorously. New entrants then move upmarket, offering the performance demanded by traditional customers of incumbent operators, while preserving the advantages that led to their initial success. When mainstream customers begin to adopt new entrants' offerings in volume, disruption occurs.

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