Define disruptive innovation and its implications for strategy.

• A. Innovations that upgrade existing products within current markets.
• B. Innovations that create new markets and displace incumbents; strategies must be adaptable or preemptive.
• C. Innovations that only reduce costs in mature industries.
• D. Innovations that are limited to high-tech sectors and do not affect incumbents.

Answer: (B)

Disruptive innovation describes new offerings that create a new market or reshape an existing one, and over time displace established incumbents. They often start by serving overlooked or low-end customers with a simpler, cheaper, or more convenient solution, then improve in ways that eventually meet the needs of the mainstream market. Because of this trajectory, strategy must be adaptable or preemptive: incumbents should anticipate disruption, or create autonomous teams or new business models to pursue it, rather than only strengthening current products for existing customers. This contrasts with innovations that merely upgrade what’s already offered in current markets, or efforts that focus solely on cutting costs in mature industries, or disruptions limited to high-tech sectors.