Strategic Business Leader · Enabling success: disruptive technologies

Disruptive Technologies and Digital Disruption Explained

Updated 11 October 2026 · Fact-checked

A disruptive technology is an innovation that starts in a niche or at the low end, is simpler or cheaper, then improves until it displaces established products and business models. To answer SBL questions, identify the disruption, assess its impact on the industry and the firm, then recommend a justified response.

Understand Disruptive Technologies and Digital Disruption

Start with the idea of sustaining innovation. This improves existing products for existing customers, such as a faster processor or a better camera in a phone. Established firms are usually good at it because customers ask for it and they pay more for it.

Disruptive innovation, a term from Clayton Christensen, works differently. A new entrant offers something that looks worse on the measures mainstream customers value today. It is often cheaper, simpler or more convenient. It first wins customers the leaders ignore: low-end customers who are over-served, or new customers who were not buying at all. Over time its performance improves until it is good enough for the mainstream. Customers then switch, and the leader's position collapses.

Incumbents often fail to respond for sensible reasons. The new product has low margins, small markets and no demand from their best customers. Their processes, cost structure and culture are built for the current model. This is why disruption is a strategy and culture problem as well as a technology one.

Digital disruption is the same pattern driven by digital technology, such as platforms, mobile, cloud, data analytics, AI and automation. It often changes the business model, not just the product. Examples include moving from selling products to subscriptions, replacing physical channels with online ones, or connecting buyers and sellers through a platform without owning assets. Digital technology also lowers barriers to entry, shifts power to customers and can break up the value chain.

In SBL, do not just describe the technology. Show how it changes the industry (for example through Porter's Five Forces), the organisation's value proposition and capabilities, and what leaders, governance, risk and ethics should do about it. Not every new technology is disruptive, and you should say so when the scenario facts do not support it.

Key rules to remember

Sustaining vs disruptive innovation: Sustaining = better products for existing customers; Disruptive = simpler/cheaper/more convenient, starts in low-end or new markets, then moves upmarket; Use this contrast to justify whether a technology in the scenario is really disruptive.
Christensen's pattern of disruption: Entry at low end or new market → performance improves → mainstream customers switch → incumbent loses position; Use it as a sequence to explain how and why the incumbent is at risk.
Typical responses to disruption: Ignore / Defend / Adapt core / Create separate unit / Acquire or partner / Lead the disruption; A checklist of options. Always evaluate them against the scenario, not just list them.
Evaluating a response: Suitability, Acceptability, Feasibility (SAF); Use SAF to test each response against strategy, stakeholder and resource constraints.

How to solve Disruptive Technologies and Digital Disruption questions

Use this sequence for any question on disruptive technology, digital disruption or the response to it.

1Read the requirement and note the verb (explain, evaluate, advise, recommend) and who you are writing for.
2Identify the technology or change in the scenario and decide whether it is sustaining or disruptive. Cite scenario facts: who adopts it, price, performance, growth.
3Analyse the impact on the industry: customers, entrants, substitutes, suppliers and rivalry. Five Forces and PESTEL help.
4Analyse the impact on the organisation's business model: value proposition, channels, revenue model, cost structure, capabilities and culture.
5Assess opportunities and risks together, including data, cyber, regulatory, ethical and workforce issues.
6Generate responses and evaluate them using suitability, acceptability and feasibility, linked to stakeholders and risk appetite.
7Make a clear recommendation with next steps, and state any assumptions or limits.
8Check professional skills: apply points to the scenario, use the required format and give balanced, commercial judgement.

Quickest way: Impact, model, response in three blocks

When to use it: Use when time is short and you need a structured answer in about a third of the time you would normally take.

Block 1 (the disruption): one or two points naming the technology and why it is disruptive or only sustaining, with scenario evidence.
Block 2 (the impact): two or three points on industry and business model effects, such as customers, competitors, revenue model and capabilities.
Block 3 (the response): two or three options, each with a quick SAF comment, then one clear recommendation.
Add one risk or ethics point if marks allow, such as data protection, jobs or cyber risk.

Common mistakes in Disruptive Technologies and Digital Disruption

Treating any new technology as disruptive.
Students use the word loosely, as a synonym for innovation or change.
Fix: Test it against the definition: simpler or cheaper, entry at low end or new market, then moving upmarket. If it only improves existing products, call it sustaining.
Describing what the technology does without linking to the business.
Students rely on technical knowledge and forget the scenario.
Fix: Tie every point to a named scenario fact: customers, products, margins, culture or competitors.
Recommending that the firm simply adopt the technology.
It feels like the obvious answer, so no alternatives are weighed.
Fix: Compare options such as defending, adapting, a separate unit, partnering or acquiring. Evaluate with SAF and explain why your choice fits.
Ignoring risks, ethics and governance.
Disruption is seen as only an opportunity.
Fix: Add points on cyber and data risk, regulation, job losses, customer trust and the board's risk oversight.
Blaming incumbents for stupidity.
Students miss why ignoring a niche is rational in the short term.
Fix: Explain that low margins, small markets and demands from best customers make early responses unattractive, and that this is exactly why the threat grows.
Giving a generic list with no recommendation.
Students run out of time or fear committing.
Fix: Finish with a clear, justified recommendation and next steps. Professional skills marks reward judgement.

Worked examples

Example 1

A long-established taxi company serves city customers with licensed drivers and phone bookings. A new entrant runs a mobile app that connects private drivers with riders at lower prices. At first it served only low-cost, short trips. Its service is now improving and attracting business travellers. Explain why this is an example of digital disruption and not sustaining innovation.

Show the solution

Define the contrast: sustaining innovation improves existing products for existing customers. Disruptive innovation starts at the low end or in a new market and then moves upmarket.
Apply the entry point: the app began with low-cost, short trips, which the taxi company valued least. This matches low-end entry.
Apply the business model change: the entrant uses a platform and private drivers. It does not own vehicles or employ drivers, so its cost structure and pricing differ from the taxi company's.
Apply the improvement: service quality is rising and it is now winning business travellers, who are more profitable customers. This is the move upmarket.
Explain why the incumbent may have ignored it: low margins on short trips and a cost base built around licensed drivers made an early response unattractive.
Conclude that the facts fit digital disruption, since a digital platform changed the business model, not just the product.

Answer: This is digital disruption because the app entered at the low end, uses a different platform business model and is now improving to win mainstream and higher-value customers. A sustaining innovation would instead have improved the existing taxi service for existing customers.

Example 2

Your board is advised that a start-up's online-only lending platform is taking small loans from your bank's branch customers. The platform uses data analytics for fast approval at lower cost. Advise the board on how the bank should respond.

Show the solution

State the position: the start-up looks disruptive, with low cost, a digital model and a growing share of small loans that the bank may treat as low value.
Assess impact: the bank faces lower barriers to entry, price pressure on small loans, customers who expect speed and risk to its branch-based cost structure.
Set out options: ignore, defend by cutting prices, improve digital services within the bank, set up a separate digital unit, or partner with or buy the start-up.
Evaluate with SAF: a separate digital unit is suitable because it avoids branch-based cost and culture and protects the core. It is acceptable if shareholders see a credible return and regulators are satisfied. It is feasible if the bank has data and technology skills, otherwise a partnership can fill the gap.
Consider risks: data protection, credit-model bias, cyber security, regulation and staff concerns over branch jobs. Say the board should set risk appetite and oversee these.
Recommend: set up a separate digital lending unit, with a partnership if skills are missing, while keeping the branch network under review. Link to staged milestones and board monitoring.

Answer: Recommend a separate digital lending unit, possibly through a partnership, because it is suitable, acceptable to key stakeholders and feasible with the right skills. Ignoring or only price-cutting would leave the bank exposed. The board should oversee data, cyber, regulatory and workforce risks.

Exam tips

Name the type of change first: say whether it is sustaining or disruptive, and justify it with scenario facts before going further.
Link technology to business model elements: value proposition, channels, revenue model and cost base. Examiners reward this over technical description.
Always evaluate more than one response and finish with a recommendation. A list of options without judgement scores poorly.
Add a short point on risk, ethics or governance, such as data, cyber, jobs and regulation. This lifts an answer from good to strong.
Match the format asked for, such as a briefing note or report, and keep points scenario-specific to earn professional skills marks.

Practice questions from Enabling success: disruptive technologies

Disruptive Technologies and Digital Disruption: frequently asked questions

What is the difference between disruptive and sustaining innovation?

Sustaining innovation improves existing products for existing customers, usually on measures they already value. Disruptive innovation starts in a niche or at the low end with something simpler or cheaper, then improves until it takes over mainstream customers.

What is disruptive innovation according to Christensen?

Christensen described how new entrants can beat established leaders by serving overlooked customers with simpler, cheaper products. As performance improves, the entrant moves upmarket. Leaders often ignore it early because it does not suit their best customers or margins.

How does digital disruption affect business models?

It can change how value is created, delivered and paid for. Common shifts include subscriptions instead of one-off sales, online channels instead of physical ones, and platforms that connect users without owning assets. It can also lower entry barriers and shift power to customers.

Is every new technology a disruptive technology?

No. Many technologies only help firms improve existing products or processes, so they are sustaining. In SBL, justify the label with facts from the scenario, such as who adopts it first, its price and how fast it is improving.