Some entrants present existential, disruptive threats to incumbents, but many do not. Entrants often fail to generate meaningful profits and move upmarket, allowing incumbents to wait them out -- albeit with a temporary sales loss. The incumbent eventually regains the sales -- it just takes time for entrants with unprofitable business models to start exiting the market.
A strong balance sheet makes it easier for incumbents to wait out competition from unprofitable entrants. If the entrant has a disruptive model that's profitable, and is therefore a true long term threat, an incumbent with a strong balance sheet can either: (1) alter its business model to compete with the entrant (often difficult to do, for reasons explained by Christensen), or (2) shed assets and serve a smaller share of the total market. A leveraged incumbent may find downsizing difficult or impossible, since it must generate revenues/profits sufficient to service debt.
A lot of investors assume every entrant poses an existential, disruptive threat to incumbents without considering whether the entrant's model is profitable/sustainable or whether the incumbent can survive through business model changes or downsizing.