Disruptive Innovation
Disruptive innovation doesn't beat market leaders on the metric they excel at. It bypasses them by serving a segment they considered too unprofitable to deserve attention.
“When a competitor seems too small and too cheap to worry about, that's the exact moment you should be worrying the most.”
Otto GTM ObservatoryHow a disruptive GTM is built
A disruptive GTM doesn't compete on the same price or feature metrics as market leaders: it builds a simpler, often cheaper offering aimed at those the current market considers too small or unprofitable to serve well.
Initial growth is slow and looks irrelevant to established competitors, precisely because per-customer margins are lower. The advantage materializes when the product improves enough to climb toward premium segments, bringing along a lower cost structure than those who always served that segment.
Anti-patterns
Common incumbent mistake: ignoring a new entrant because its average ACV is a fraction of their own, without noticing that the growth rate of that underserved segment is much higher than their own mature segment.
Common mistake for whoever launches the disruptive innovation: trying to compete immediately on the leaders' enterprise features instead of first consolidating the base in the underserved segment, losing the cost advantage that made them competitive.
Practical Application
An enterprise software vendor ignores a new entrant serving only companies under 50 employees with an ACV of €2,400, versus their own average ACV of €48,000. In 3 years, the new entrant grows its segment by 340% and starts climbing toward 200-500 employee customers with a matured product, eroding 18% of the incumbent's historical base in the mid-market segment.