Large profitable businesses can't economically afford to take on new businesses that are significantly less profitable than their current businesses
Whoa there, isn't that completely backwards? Who can afford to invest in new businesses if not large, profitable companies?
because the rational business decision then is to reallocate the resources being given to the unprofitable sub-business and give them to the profitable sub-business to make more profits. [...] Obviously I'm simplifying a complex thing here. I understand that's a complicated topic, but details would be an unimportant-to-my-point waste of time for all.
(Edit to add: I think that apparent paradox is easily resolved by thinking in terms of long-term versus short-term investment.)
I agree there are complications, but fundamentally, big profitable companies are the ones which have spare resources to invest.
One problem is company culture and skill sets, and the difficulty of ramping up in a new area, but that's why big tech companies try things like internal "startup incubators" with lots of autonomy. Amazon in particular seems really effective at expanding into new areas.
It's not clear to me that Amazon actually has one business line that is both huge and so massively profitable that it prevents them from spreading out. They are huge, but they don't make the profits that Google, Microsoft, or Apple does.
I wouldn't be surprised to see AWS get spun out as it continues to grow in the next 3-10 years, because unless the trajectory of that subbusiness changes, it threatens to become the business that is too profitable to put resources anywhere else.
But Amazon has explicitly chosen to keep its margins tight, and aggressively invest for expansion. In a sense they choose not to make huge profits. They're famous for it!
I still don't buy your general point. It's true that some large companies have run into trouble because they were afraid of damaging their core product. But that's a risk everyone's aware of now -- the whole "innovator's dilemma" thing.
What's an example of a large successful company that was thereby prevented from spreading out? I don't mean companies that failed due to complacency, or overly rigid business practices, but where their size actually worked against them.
(Hmm, possibly we really mean the same thing, we're just describing it in different ways...)
Whoa there, isn't that completely backwards? Who can afford to invest in new businesses if not large, profitable companies?
because the rational business decision then is to reallocate the resources being given to the unprofitable sub-business and give them to the profitable sub-business to make more profits. [...] Obviously I'm simplifying a complex thing here. I understand that's a complicated topic, but details would be an unimportant-to-my-point waste of time for all.
(Edit to add: I think that apparent paradox is easily resolved by thinking in terms of long-term versus short-term investment.)
I agree there are complications, but fundamentally, big profitable companies are the ones which have spare resources to invest.
One problem is company culture and skill sets, and the difficulty of ramping up in a new area, but that's why big tech companies try things like internal "startup incubators" with lots of autonomy. Amazon in particular seems really effective at expanding into new areas.