Clayton Christensen's theory that new entrants initially serve overlooked market segments with simpler, cheaper products, then progressively move upmarket to displace incumbents.
Deeper Explanation
Christensen's disruption theory explains why dominant companies consistently fail to respond to the threats that ultimately destroy them: disruptive products initially appear inferior and serve only the least profitable customers, so incumbents rationally choose to ignore them. By the time the disruptive product reaches "good enough" quality for mainstream customers, the incumbent's cost structure and business model are incompatible with competing at the disruptor's price point. For growth investors, identifying genuine disruption — rather than hype — requires asking: is the new entrant currently serving a market that is over-served by incumbents (too much quality at too high a price) or non-consumption (customers who weren't buying at all)?
Continue Learning
Go deeper into the Growth school — frameworks, case studies, and decision systems.