Harvard professor Clayton Christensen asked a brilliant question: Why do great, well-managed companies fail?

His answer: Because they do exactly what they are taught to do in business school. They listen to their most profitable customers and invest in Sustaining Innovations.

Meanwhile, a startup introduces a Disruptive Innovation. Initially, it's a joke.

• Example: When Netflix first started streaming, the quality was terrible and the movie selection was awful. Blockbuster ignored them because Blockbuster's best customers wanted high-def DVDs on a Friday night. Blockbuster was acting rationally!

• But the disruptor improves rapidly. Within a few years, streaming quality matched DVDs, and the convenience was unbeatable. Blockbuster was destroyed from the bottom up.