It happens time and time again. A small start-up enters an established field and in a few years changes the rules of the game so drastically that previously dominant companies are suddenly in the shadows. Why does this happen? What does the journey look like from the perspective of the start-up and from the perspective of the giant? What matters when disruption is not about a completely new market but about a radically different solution in an existing market?
Let’s explore by starting in theory and trying out some practical advice for both small and large players.
The logic of disruption according to Christensen
Clayton Christensen placed disruption in a framework that few others have done as influentially. His central point was that disruptive innovations are often born in niches that large companies do not care enough about. The established players are partly right to say no to the niche from their perspective. The resources they have are used for the customers that generate the most revenue now. The large companies also have processes and priorities that optimize existing business models. This combination allows newcomers to develop simpler, cheaper or radically different solutions that at first seem unimportant to the regime-level core customers, but which slowly improve and eventually meet broader needs.
Christensen’s analysis points to three central factors that shape a company’s ability to respond to disruption: resources, processes and priorities. Startups often have few resources but flexible processes and radical priorities. Large companies have resources but rigid processes and priorities that lock them into the status quo.
But Christensen doesn’t capture everything. Disruption today can also come through business model innovation, new value propositions around sustainability or by exploiting system changes. This means that even in a saturated market, small players can create major disruptions if they combine creativity, testing and structural advantages.
The startup story and how the small player sees the journey
A startup very rarely starts with the ambition to crush a giant player. It often starts with an observation, a frustration or an opportunity. The founders find a niche where customers are poorly treated or where existing models have weaknesses. They work quickly, have no major legacy concerns, and can experiment all the time. They live in a culture where failures are lessons learned and do not have negative personal consequences.
They build prototypes early, test with real users, and learn iteratively. By focusing on a narrow problem, they can create a solution that is much simpler, cheaper, or perceived as better from a customer perspective. What makes the difference is not necessarily technical novelty but the creativity of the business model. Subscription services, product as a service, peer-to-peer models, and platforms can all turn ordinary products into radically different offerings.
As the market begins to respond and the niche grows, the startup gains momentum. Customer preferences shift, investors come in, and the company can scale. Momentum is amplified by network effects, platform dynamics, or a strong brand. Suddenly, the conditions are different: the small player had time and leeway to iterate, while the large companies had difficulty reallocating resources or changing priorities in time. The exponential effect when customers talk to each other is hard to predict.
The big organization that loses and what happens from the inside
For the big company, the process is often more dramatic on the inside than it seems from the outside. They see a small player on the margin, note any volume growth but judge it as unimportant. Internally, they continue to optimize for scale, cost efficiency and existing customer segments. Strategic investments are directed at defending current market shares. Changes that require undermining their own revenues are politically and organizationally difficult.
The company’s reward system, budget cycles and customer focus build a culture where radical change is difficult. In addition, bureaucratic and internal political processes can make rapid experimentation impossible. The result is that once the market shifts, or when the niche solution has improved enough, the big company is left with expensive factories, long contracts and a business system that is not designed to change quickly.
When the market is not new but disruption still happens
Disruption does not have to mean a completely new market. Often it is about a startup changing how value is delivered in an established market. It can be about the same product category, but with a new logic: product becomes service, one-time purchase becomes subscription, simple things become modular and upgradeable. The value proposition is moved from transaction to relationship.
A classic example is how some small players have changed the packaging logic in the food industry through circular services. The product and customer experience are basically the same: consumers want drinks, soap or food. But a different way of packaging, deliver and return changes the entire chain. Disruption then occurs not through the customer’s fundamental preference, but through new business logic.
Unusual examples that clarify the dynamics
Fairphone is an example of a startup that uses circularity and ethical design to challenge mobile manufacturers. The smartphone market is mature and capital-intensive. Fairphone started in a niche: an ethically conscious consumer who wants repairable and socially responsible hardware. Through modularity, transparency in the supply chain and take-back programs, they created a value that large manufacturers did not prioritize. Fairphone challenges not only through product design but by changing the relationship between users and hardware. They have not outmaneuvered Apple or Samsung but have remained surprisingly relevant given the resources and influence of legislation and the giants’ offerings.
Loop, an initiative of TerraCycle, is another interesting case. Loop offers reusable packaging as a service for large consumer brands. Instead of fighting over small improvements in single-use plastic, Loop is changing the entire user flow. The technology is not groundbreaking in the classic sense. What is revolutionary is the model: the packaging is circulated, returned, cleaned and reused. Customers get the same product but in a different way. The big incentive here is system change rather than technical innovation.
An unexpected example with a wider societal impact is Oatly. The oat milk company was small compared to dairy giants. They not only turned product preferences around, but built a brand through storytelling around sustainability. A large part of the disruption lay in marketing and business model rather than in any technological revolution. Oatly showed that in a mature market, a combination of product differentiation, storytelling and distribution strategy can turn market shares around.
Fairphone, Loop and Oatly illustrate that disruption with sustainability or circularity as a driving force can happen in existing markets by offering a different value. Not always fast-growing mass markets first, but niches that are expanding.
System innovation and niche dynamics
Understanding these changes requires systems thinking. The Multi Level Perspective shows how niches develop in the shadow of regimes and landscapes. Circular startups often live in niches with experimental infrastructure. They can grow thanks to policy shifts, customer preferences or technological improvements in the landscape. System innovation therefore requires both technical solutions and changed institutions, incentives and cultures.
Startups become catalysts in the niche. By showing working business models, they can attract capital, partners and political support. When the regime falters, it becomes possible for niche solutions to spread. Therefore, it is important for circular startups to work both with market testing and with influencing policy, standards and partnerships. System innovation is not about just making different products but changing the whole.
The role of creativity: to do, test and learn
A recurring success factor for startups is a culture of experimentation and rapid learning loops. Being able to prototype, test in real environments and iterate is central. The creative work is often tangible: build a prototype, run a pilot, ask real users. This “doing” is different from theories and PowerPoint strategies. Large companies tend to rely on analysis and extensive due diligence before acting. Startups often win by doing and learning quickly.
When sustainability and circularity are in focus, this doing becomes even more important. You can theorize about why a take-back circle should work, but nothing beats real pilots where logistics, customer behavior and cost structures are tested. The creative process is about finding a practically feasible business model that also delivers sustainable impact.
Advice for startups using sustainability and circularity as a disruptive force
For startups that want to disrupt with circularity, it’s a lot about combining design, business model and system impact. Start in a clear niche where the customer values sustainability or where system weaknesses make traditional players ineffective. Prioritize design for reuse and modularity so that the product is built for circulation. Test logistics chains early. Measure not only traditional KPIs, but also circularity indicators such as take-back rates, material recycling and customer engagement in the return process.
Seek partnerships with local actors and with brands that can act as a springboard. Use living labs and pilot projects to create real evidence and collect data that shows business potential. Work actively with regulations and standards. Often political incentives and regulations are the catalyst that enables rapid scaling in circular models.
Be clear in your communication. Sustainability can be complicated in the eyes of the customer. Make it easy to understand the value: convenience, cost benefits over time, and the feeling of contributing to something bigger.
Advice for large companies at risk of being overtaken
For large companies, the answer is not just to buy up startups. Acquisitions can work but risk stifling what made the startup successful: agile culture, customer focus and a desire to experiment. Instead, large companies should create structures that enable experiments free from legacy requirements. Create separate units with their own goals, budget and governance. Set incentives that reward long-term values and circularity rather than short-term quarterly profits.
Companies must also redefine their priorities. Resources must be able to be shifted to niche projects even if they initially seem small. Build ecosystems with startups, suppliers and policy actors. Support pilot projects and living labs. Invest in understanding the system: where are the levers, which rules create inertia, how do customer preferences change?
An important part is also organizational flexibility. Processes that require endless approvals must be replaced with rapid prototype cycles. Leadership needs the courage to experiment and tolerate failure as learning.
Risks, pitfalls and ethical considerations
Neither startups nor large companies can rely solely on sustainability hype. Greenwashing is a real risk. Startups must be transparent in their claims and measure real environmental benefits. Large companies that buy startups must maintain the credibility of their offerings and avoid watering down circular models in an attempt to adapt them to short-term financial goals.
There are also systemic risks. When many small players enter the same niche, fragmentation can inhibit scale. Therefore, cooperative structures or partnerships are often suitable for building common infrastructure networks that enable circularity at scale.
Why the small can win and what it takes to stay in position
Small disruptive startups can grow past large giants because they often have the right combination of focus, flexibility, business model innovation and a willingness to experiment. They put creativity into practice: they do, test and learn faster than large organizations. When disruption is built on circularity and sustainability, the advantage of being small also comes from the opportunity to design completely different value chains that avoid the legacy backpack.
The big companies can still win, but it requires a conscious shift: changed priorities, separate experimental units, partnerships with niches, and a systems perspective that recognizes that business value and sustainability can reinforce each other. System innovation becomes a necessary resonance box here. Without understanding and influencing the whole system, both startups and giants risk getting stuck in the same old logic.
Disruption is fundamentally not a privilege for technological breakthroughs but for those who dare to reformulate the question: what is value and how can it be delivered better in the future? When the answer is shaped by circularity and sustainability, the conditions for the small to become big are often even stronger.
