What is a disruptive technology? Christensen coined the term in his best seller, The Innovator's Dilemma, published in 1997, and it has since become the hottest buzzword in business today as the Merrill Lynches react to the E-Trades. It's nothing new. Japanese automakers used disruptive technology in the 1970s to seize market share. A disruptive technology is often an inferior product or service, but one good enough to win wide swaths of market share.

Disruptive innovations are different. Current customers reject them because they offer worse not better performance. Market research tells these well-run companies not to invest, that such products will fail. A typical disruptive innovation was the PC. Customers of industry leaders, such as Digital and Data General, were not interested: PCs were too slow, underpowered and would not meet their needs as effectively as the increasingly powerful mainframe and minicomputers.

But disruptive technology does appeal to other customers with different needs.

On the other hand, disruptive technologies introduce a very different package of attributes from the one mainstream customers historically value, and they often perform far worse along one or two dimensions that are particularly important to those customers. As a rule, mainstream customers are unwilling to use a disruptive product in applications they know and understand. At first, then, disruptive technologies tend to be used and valued only in new markets or new applications; in fact, they generally make possible the emergence of new markets. For example, Sony’s early transistor radios sacrificed sound fidelity but created a market for portable radios by offering a new and different package of attributes — small size, light weight, and portability.