Just Because You Can Make Money at Something, Doesn’t Mean You Should
I often see people want companies to do X because they are sure that the company will make money doing it. One such example was +Dan Frommer
lamenting the fact that Wordpress does not have a hosted solution for its product. http://www.splatf.com/2012/04/wordpress-hosting-business/
As a wordpress user who hosts his blog on a 3rd party server, I get where Dan is coming from. I would like a solution with this too. However, I often understand why companies should not do everything that makes money.
Those who read me regularly know I’m really all about focus. The problem with pursuing every revenue opportunity out there is that you are usually going to spread yourself too thin in areas you have no expertise in.
I've seen it happen all too often. A company who has been successful in one way expands to get the "low hanging fruit" of a complimentary business. They don't really have expertise in that area but its not that hard and it would bring in some decent revenue. They send a small team to go build out something, diverting resources away from the core business. The team cobbles something together and comes up with a decent but not great solution. Now you have a product that doesn't really stand out and you have fallen a little bit behind in your core strength since you diverted resources away. Doing one thing well always beats doing two things mediocrely.
I mean, don't you think In-N-Out could make money selling Onion Rings? Or maybe include Bacon in the menu? Of course they could. And it would be really easy. I'm certain they have probably been given this suggestion a million times but they stick with their core and it serves them well.
How do you think companies should try and balance this? Can you think of other examples of companies that stuck to their core even when there were other, really easy, revenue opportunities?