Why VoIP is “Disruptive,” iPhone Is Not

In order for a company to disrupt a market, the revenue and cost structure of the incumbents that the company faces must keep them from responding. By that test, VoIP is disruptive, but the Apple iPhone, though a transforming technology, actually is not disruptive, oddly enough. 

Disruption, though sometimes equated with "better products," is more than that. Disruption of a market occurs when an incumbent in the market finds it almost impossible to respond to a disruptive product. 

That can happen because the incumbent's cost structure means the incumbent really cannot serve some customers. In some cases, that means a disrupting company can build a market out of a segment that the market leaders cannot afford to serve.  

People sometimes say a technology is "disruptive." It’s more appropriate to call the business model “disruptive," in that sense. 

Characteristics of disruptive businesses, at least in their initial stages, can include:  lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics, according to Professor Clayton Christensen. 

Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market for new disruptive competitors to emerge.

Some examples of disruptive could include:

Disruptor	Disruptee
Personal computers	Mainframe and mini computers
Mini mills	Integrated steel mills
Cellular phones	Fixed line telephony
Community colleges	Four-year colleges
Discount retailers	Full-service department stores
Retail medical clinics	Traditional doctor’s offices