What is the meaning of 'disruptive innovation'?

'Disruptive innovation' refers to significant changes in products or services that disrupt the established market and displace existing competitors. This concept, developed by Clayton Christensen, explains how smaller companies with fewer resources can successfully challenge established companies. These innovations often start in niche markets and gradually move upmarket, eventually redefining the industry landscape.

In contrast, the other options do not capture the essence of disruptive innovation. The introduction of gradual improvements to existing products describes incremental innovation, which enhances existing solutions without fundamentally altering market dynamics. Focusing solely on cost reduction overlooks the broader impact of disruptive innovations that also address customer needs in new and effective ways. Lastly, innovations that do not affect market dynamics would not be classified as disruptive, as they do not cause a significant impact on the competitive landscape. Thus, the correct answer clearly reflects how disruptive innovations change the marketplace and challenge established businesses.