An interesting article bower, christensen-1995 from the 1995 edition of Harvard Business Review.

They outline why it is that market leaders often lose to disruptive technologies; how to identify disruptive technologies; and how a company can effectively embrace disruptive technologies.

Interestingly,

• The reason why market leaders lost to disruptive technologies is actually because they're "too close" to their existing customers.
• One method of identifying a disruptive technology is when there's a strong disagreement between marketing and engineering.
• Companies cannot use the same metric to foster disruptive technologies as they do with their sustaining technologies. An interesting quote, "In the history of the disk-drive industry, /every/ company that has tried to manage mainstream and disruptive businesses within a single organization failed."

Some interesting characteristics of disruptive technologies

• they often fall well below the performance metrics of the established technologies.
• What they do, however, is address different metrics disruptive technologies

My comments below will make more sense after you read the article...

It's interesting to note the relevance even today (over a decade after the article was written). The 3rd generation consoles are a great example. Because of the success of the PlayStation2, the head offices of Sony took notice and decided to put more of their company behind the PS3. Because of that, they ended up designing the PS3 in such a way that it made use of all the "cool" things Sony corporate wanted it to leverage; they also were trying their best not to compete with other Sony products. The result of that was a product that was almost entirely what their customers didn't want.

Microsoft, however, realized their mistakes with the original XBox. They realized that the Microsoft corporate culture was not right for the XBox, so they basically setup a trailer somewhere off campus, stuck a bunch of VP's there with phones and told them to go make it work. (Time magazine has a great article that goes into this in great depth). The result was a far more successful product.

Both, however, were shadowed by the Wii. The previous metrics for game consoles had been pixel pushing graphics. The Wii, however, far under performs the PS3 and XBox360, and probably doesn't even do much better than the PS2. However, by making clever use of accelerometers Nintendo was able to establish an entirely new market for game consoles. For a Sony or Microsoft, the Wii would likely never have happened because it just wasn't what their existing customers were asking for. They both, however, will likely have products coming out that try to compete with the Wii in this new market, but Nintendo will have had a few years advantage.

But of course, we all know the "console wars" has seen several kings over the years. It's quite likely that Nintendo will be oblivious to the next new disruptive technology.