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The word "Disruption" is one of the most controversial words in business today. It is a word so misinterpreted that any time it is mentioned discussions go off the rails immediately.
The most common misuse of the term is when it's applied to any product new enough that it's not yet been replicated by competitors. The thinking most have is that if you're doing something competitors aren't, it must be disadvantaging them. In other words, they're being "disrupted" by your activity.
Now, as you'd expect, since it is easy for competitors to replicate most things easily, such "disruption" is short lived.
The reality is new things are only disruptive when they are not easily replicable by competitors.
Researchers usually use the term "disruption" in a few, very specific cases. Normally, they argue, a product or service is disruptive only in two situations:
1. A product or service is disruptive if it serves a segment that incumbents don't want. Generally, this is for a financial reason: maybe margins are too thin to make the customer a decent proposition, or else the functionality the supplier is selling is more than the customer can afford. In this scenario, a disruptor with a small cost base is in the position to enter the market with something that's excellent for the low end market, and use this as a beach-head for expansion upward. Practically speaking, an incumbent supplier is pretty much unable to respond because their cost bases are optimised to serve high end customers. This form of disruption is the model that was pioneered by South West Airlines and Ryan Air.
2. The incumbent provides a product or service which is much more capable than the customer needs. In this scenario, customers are paying a premium, but not getting any value, so a disruptor is able to offer a product that does less whilst undercutting the price of the incumbent. In this instance, the incumbent is also unable to respond, because they have to continue to provide all their features to the high end or lose their best customers altogether. This is the scenario that Microsoft has found itself in, now that most of its customers use 20% of the available functionality of its Office product.
Both these cases are common in the fact that an incumbent supplier is threatened long term. The new player is able to serve customers in ways that they're not able to do. The result is that disruption occurs, and often this means that very large companies with strong and entrenched market positions can be overturned by much smaller ones.
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