Research by Thomas Thurston has shown that startups that adopt a disruptive innovation strategy are more likely to be successful than startups that adopt a sustaining innovation strategy.
Disruptive innovation simply means that you provide a capability that a set of target customers wants and needs, but they do not have access to a solution today for one of these reasons:
1. Existing solutions are too expensive (low cost innovation)
2. Existing solutions are to hard to use (ease of use innovation)
3. Existing solutions are too inconvenient to use (convenience innovation)
4. There is no existing solution (new market innovation)
Sustaining innovation means that you are providing a capability that is superior to existing solutions, typically because it has better performance or more features. That sounds good - but, again, research says that as a startup you're better off with one of the above disruptive innovation strategies.
Disruptive innovations tend to be lower cost and have fewer features or worse performance than existing solutions - but they serve a customer segment that for some reason didn't have access to the capability before, and the disruptive capability being offered is "good enough" for those customers (even though it tends to be not as good as existing solutions).
Example: Toyota successfully entered the U.S. car market in the mid-60's even though there were three large, entrenched, and well funded competitors (GM, Ford and Chrystler). Toyota did this by realizing that as U.S. cars got more and more features and performance (a sustaining innovation strategy) they also were getting more expensive, and there were a growing number of people who wanted a car, but could not afford a GM, Ford or Chrystler. Toyota introduced a low cost car and sold it to that market. It worse than existing cars in almost every way: smaller (less room), uglier, low horsepower, etc. But for people who could not afford a GM, Ford or Chrystler it was "good enough".
Of course, Toyota then pursued a sustaining innovation strategy, and kept making the car better every year, eventually becoming the e#1 car maker in the world. They maintained the cost advantage that they had to develop back in the 60's.
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