A disruptive product meets the needs of a lower price point customer. For these users, the disruptive product is sufficient. The established company has overshot what the mass market needs in an effort to get more value out of their best customers.
Typically then the disruptive product is much better in a different metric. In his hard drive example, as each physical size had a much higher capacity than was necessary for the average user, metrics such as speed or physical size became more important. In his excavator example, once every shovel could move enough dirt, flexibility, maintainability, and mobility became more important.
Cheaper is often a part of the whole thing, but just making a cheaper product won't suffice. You generally have to compete on a metric orthogonal to the metric everything is judged based on now.
CPUs are going through it, the average CPU was more powerful than what "normal" people needed about 5 years ago, so now we're in a race along the power consumption/thermal output metric rather than raw computing power.
Good Enough is a very powerful thing. If you can beat the competition on price while still delivering a Good Enough product, you'll be buried in money.
Most young, talented developers never held a job inside one of those places in their lives, hence why they build Facebook clones instead.
Honestly, seek out some soul-sucking corporate job for a summer and see what you could do to improve the operations with software/hardware.
Yeah...
[1] http://techcrunch.com/2011/09/14/and-the-winner-of-techcrunc...
Good grief.
(Then again, I usually describe my startup as "a group chat/collaboration tool that has learned from the reasons people prefer MMOs to IRC." Framed that way, it doesn't sound nearly so priggish--but I don't decide how it's framed, the public does. Sort of makes me worry.)
I have literally had conversations with founders there that went,
"So tell me how you are different from Facebook,"
"Well we built our entire platform on node so it is infinitely scalable"
"Is that a problem with Facebook now? That it doesn't scale?"
"Well no, but we also re-imagined the interface"
"It looks like facebook, if Facebook was done in Twitter Bootstrap"
"That's exactly Right!"
"Did users ask for that?"
"Well No, but we also added support for sharing code snippets"
"That's interesting, so it is really a Facebook for Developer communities"
"Well No..."
"Do you think most people's mom and 4th grade english teacher want to see the code snippets in your timeline?"
"We don't really have a timeline, everything shared happens in realtime like the front page of hacker news"
"So if my friends want to see the pictures I took last week of my trip to Belize they can't see them?"
If you want to be disruptive you have to do something truly new. Something that will change the way everyone else does things. You also have to be prepared for all the knock-offs that might have better marketing, or better connections, so you should also have a bit of something no one can duplicate in your core.
The Disrupt conference has always been a showing of MVP's and betas that aren't even an MVP. But disruption occurs when you have something that is more than an MVP it is a Product no one can live without afterwards.