Except that's just not how the market work. Focusing might sound good on the surface, but in reality it's not going to be the most successful. It might even be better for the customers that it has, but it's not going to make more money. First off, if you can buy everything from one place then you are used to and comfortable with buying stuff from that place, so a vast majority of people will buy stuff from that store. Who do you think sells more dog food in America, Petco or WalMart? Secondly, if you're a company with more revenue streams, you have more resources to develop new products, and you have more resources to hold yourself up between the time you release those products and the time you actually start making a profit off of them.
I'm just going to point out a few minor flaws in your argument. In Petco vs Walmart example, WalMart is still only in one industry, retail. This is considered relatively focused as far as the market is concerned. The issue with Amazon is that they've actually diversified outside of retailing such as Video Streaming, Cloud Vending, Logistics (third party sellers and Amazon then distributes), and other smaller segments. So Amazon is not focused. But on the other hand, Kobo is too focused. They only do one thing. But I totally agree with you that they need something amazing to beat Amazon since Amazon has such a head start on Kobo in the market.
So I guess what I'm trying to say is that there is a spectrum of focus. 1. Ultra-focused: Petco and Kobo, 2. Focused: Walmart, 3. Not Focused: Amazon, 4. Conglomerates: 3M, Time Warner.
Corporate Finance basically tells that Ultra-focused companies usually end up in niche positions. Companies like Walmart generally do very well. Amazon will still do OK, because their "diversified" businesses come from core capabilities required to succeed at their core business, ie logistics and excess server power. And then conglomerates generally trade at a discount in the stock market because generally the disadvantages of diversification outweighs the advantages, and individual investors can diversify themselves as opposed to having to invest in diversified companies.
That being said, I don't think Kobo will be able to beat Amazon anytime soon. After all there aren't that many David vs Goliath stories unless there is mismanagement or the "Goliath" is resting on its laurels.