Which statement distinguishes disruptive from sustaining innovations?

• A. Disruptive innovations improve existing products; sustaining innovations create new markets with initially lower performance.
• B. Disruptive innovations create entirely new industries and markets.
• C. Sustaining innovations improve existing products; disruptive innovations create new markets with initially lower performance; management must decide resource allocation.
• D. Sustaining innovations remove the need for resource allocation.

Answer: (C)

The distinction hinges on how an innovation changes who is served and how it performs. Sustaining innovations are incremental improvements to existing products that current customers value, so they enhance what incumbents already offer. Disruptive innovations start by appealing to a different set of customers or a new market, often with a simpler, cheaper, or more convenient solution that initially underperforms on the established metrics but provides a different value proposition. Over time, they improve and can move into mainstream markets, sometimes displacing incumbents.

Because these paths involve different investment needs and strategic risks, management must make deliberate resource allocation decisions to balance sustaining projects that protect and grow current solutions with disruptive efforts that explore new markets. The statement that best captures this dynamic says that sustaining innovations improve existing products, disruptive innovations create new markets with initially lower performance, and management must decide resource allocation. The other options either misstate which type starts in which market, overstate what disruptive innovations create, or claim that sustaining innovations remove the need for resource decisions.