Companies innovate faster than the evolution of customers’ needs. This results in products that are too advanced to what the typical customer really needs.
But that kind of product is attractive to the higher tier customer in the market, for which the company charges premium proces to maximize their profit. But at the same time, the typical customer cannot afford this product due to premium pricing. And these customers are less attractive to companies, due to the lower margins than what top tier customers can pay.
This dynamic creates a large pool of customer that would like a much simpler product with (adequately) lower pricing. And this is the segment targeted by disruptive innovation.
Disruptive innovation often targets lower margins, smaller market segments, much simpler products than what the market offers.
Companies may try to ignore the disruptive innovation. But with time, the disruptive innovation improves, targeting higher and higher tier markets with products better leveled to customer’s needs and with more adequate pricing, pushing incumbents out to higher and higher tier and eventually getting rid of them.
Companies may try to attack the disruptive innovation by improving on different dimensions, for example on their product.
Companies may try to match moves of the disruptor by creating fighting brands, but this may harm the brand (imagine Ferrari selling budget 5.000 USD cars at the same time with their premium offering).