Isolde (Siiquent): Targets hospitals and diagnostic labs that require gene-based diagnosis equipment and consumables. Her business operates using the razor-blade model, selling machines at lower costs but profiting primarily from consumables such as test kits and biological/chemical compounds. The business model align because these institutions are under heavy money regulation. so Siiquent sells these equipment at a lower price so these institutions become dependent on it and then sell the less expensive things but with higher volume with higher margin consumables on these machines.
Emanuel (Teomik): Targets research institutions such as universities and labs, primarily focusing on selling sophisticated research equipment. His market is driven by the sale of high-margin machines and instruments protected by the patent. Since the target customers are researchers, they are less sensitive to the prices and care more about the ability of these machines to allow them to perform cutting-edge research. They can sell their patented machines at a higher margin.
- Pros of a Single Revenue Model: A unified revenue model ensures clarity in how the company makes money, making strategic decisions more straightforward and reducing customer confusion mentioned at the beginning of the article. A unified revenue mode; can also streamline internal operational processes, cutting down costs related to managing multiple models.
- Perils of a Single Revenue Model: Since two unites are serving two different markets. They each may require a different approach. For example, research institutions might not respond well to a razor-blade model, whereas hospitals might benefit from it. A single model might fail to cater to the needs of diverse customer segments.-
- Pros of a Flexible Approach: The flexibility to shift between models allows the company to react to market dynamics aligning each market segment with the best of its needs, and maximizing revenue potential across different customer groups.-
- Perils of a Flexible Approach: Managing multiple revenue models can cause confusion within the company, increase operational costs, and create confusion for the customers as mentioned in the article.
In the preparation phase, I would hold individual meetings with both department heads to gain a clear understanding of their key concerns, motivations, and what they value most about their current business models.
During the merger discussion, I would bring Isolde and Emanuel together to facilitate an open conversation about the strengths and weaknesses of each model. I would start by acknowledging any concerns they may have about losing control or compromising their division’s identity. Conflict is likely to arise during this process, and if it does, I would redirect the discussion to focus on the customer experience. Specifically, we would consider how each market (hospitals, labs, research institutions) would be affected by the merger and how the new entity could best serve these customers.
I would also facilitate a brainstorming session that encourages both teams to propose ideas on how to move forward in a way that lowers costs while addressing the needs of both markets. The goal would be to collaboratively explore solutions that leverage the strengths of both business models.
If I were the CEO, I would not merge two units. The confusion of the customers does not have to be dealt with high operational cost move. I would propose to the CEO to deal with the root of the problem, I just do not believe that merging two operational well-functioned units is the right move.
