Disruptive Innovation: Is Your Product Really Disruptive?

Written by Dave Bailey

Airbnb and Uber founders at TechCrunch Disrupt

Find out if you're truly operating a disruptive business like Airbnb or Uber with these four questions which evaluate your startup's business model.

I used to think that disruption referred to any dramatic breakthrough innovation in a certain field. When I researched the origin of the term ‘disruptive’, I found out it means something quite different.

Disruption is a theory of competitive response. It explains why some innovations cause competitors to attack while other innovations stay off the radar until it’s too late to compete.

Sustaining innovation vs. disruption

Products that target the same customers as existing solutions are called ‘sustaining innovations’. They compete head on with their rivals by outperforming in some important way. And when competitors start losing valuable customers, they fight back . . . hard.

In contrast, products that are disruptive go after non-consumers who are currently priced out of the market. They are inferior to existing products in an important way, but also radically cheaper. Being inferior is important, because it allows these products to slip under the radar of existing players.

How Airbnb disrupted hotels

In the early days, Airbnb let you book a couch in someone’s living room, like you would book a hotel room. Airbnb’s early users weren’t the same people who stayed at the Marriott, which offered higher reliability and service levels.

Airbnb didn’t own the property or employ the operating staff. This lower cost structure enabled rock-bottom prices that appealed to the ‘bottom of the market’. It was only when Airbnb expanded that they started offering higher-quality options that appealed to more traditional hotel customers. But by then, Marriott’s asset-heavy business model was making it harder and harder for them to compete.

How Uber is a sustaining innovation to taxis

Uber started off as a high-end black car service that offered a premium alternative to taking a taxi. Cars arrived quicker and could be summoned by tapping a single button. Uber started at the ‘top of the market’, competing directly with existing black car services and worked its way down. As Clay Christensen (who wrote the theory of disruption) himself said:

“Relative to the taxi industry, Uber is a sustaining innovation.”

Uber faced a direct competitive response from the beginning. All around the world, taxis protested violently, with the mission of killing Uber as a competitor.

However, Uber may yet become disruptive. There is a line of reasoning that suggests Uber may go on to disrupt car ownership by offering a cheap alternative. I’ve heard this called ‘Full Uber’ and time will tell if it actually happens en masse.

Is your product really disruptive?

Here are some questions you can ask yourself to evaluate the disruptive potential of your product:

  1. Are today’s existing competitors pricing out a large, untapped need?
  2. Does your business model allow you to serve customers radically cheaper than existing competition?
  3. Will your future competitors write you off as low-quality?
  4. As your product develops, will the quality increase to satisfy higher-value customers?

If the answer to all of the above questions is yes, you’re sitting on a potentially disruptive product. To stave off competitors, don’t compete on their definition of quality. Instead, focus on creating a business model that’s structurally cheap enough to serve non-consumers.

If you’re non-disruptive, the biggest mistake is to underestimate the competition. Marketing to the customers of big players is expensive, and getting people to switch products is notoriously hard to do. The simple rule of thumb is that you need to be ten times better than what already exists. 

Continue reading about innovation and disruptive products:

Originally published Sep 3, 2019, last updated Aug 19, 2021

idea-stage product

About Dave Bailey

Hi, I’m Dave Bailey and I coach tech CEOs from Series A to pre-IPO. Join 20,000 entrepreneurs who receive my new essay every week. 

I will never sell your information, for any reason.

Trending essays

How to Use Nonviolent Communication at Work

All my biggest regrets as a founder are around not having difficult conversations sooner...

How to Coach Your Team and Get The Result You Want

If you’ve found it difficult to get the results you want from other people, try this simple technique...

How to Drive a Culture of Ownership

Do you wish your team took more ownership? Here’s how to trust them to get the job done without you...

10 Communication Techniques Used by Great Leaders

Whether you’re leading a meeting, a team, or a company, your ability to communicate can set you apart...

How to Ask Your Team The Right Questions

To improve your ability to ask great questions, it helps to understand the types of questions you can ask...

A Guide to Running Exceptional One-on-Ones

How effective are your one-on-ones? Here's a practical guide for managers and their direct reports...

Serious about levelling up as a CEO?

The Clarity Program is an accelerated coaching program that helps startup and scale-up CEOs communicate their customer need, strategy, and vision.

Learn about Clarity

Previously, Dave co-founded Delivery Hero and other scale-ups, and he's coached hundreds of scale-up CEOs across the US, Europe, Asia and Latin America.

Dave studied at Stanford Graduate School of Business and Oxford University. His writing has been featured in many of the world's top business publications. He has a passion for communication and strategy.

Learn more about Dave


©2023 Founder Coaching Limited. All Rights Reserved.
FOUNDER COACH® is a registered trademark of Founder Coaching Limited.