Cash cow disease arises when a public company has a small number of products that generate the lion’s share of profits, but lacks the discipline to return those profits to the shareholders. The disease can progress for years or even decades, simply because the cash cow products produce enough massive revenues to distract shareholders from the smaller (but still massive) amounts of waste.
For example, with Microsoft, Windows and Office carry the company, roughly speaking, allowing the company to lose billions (that’s with a ‘b’) on failed projects without incurring any serious backlash from stockholders. Without cash cows, Microsoft could not have launched a new cellphone, then canceled it a few weeks later, all while pouring more money into yet another generation of cellphone. […]
Meanwhile, at Google, the cash cow is search-driven advertising. That allows the company to encourage engineers to waste 20% of their time on “projects”, like Google Wave.
He’s not arguing that companies should stick to one thing. He’s arguing that each new product or service should be expected to pull its own weight. (Thanks to DF reader Tim Ambler.)