Target Markets and Business Models

Isolde Kraft, the head of Siiquent, a DNA-sequencing startup, targeted hospitals and big diagnostic labs and sold them everything needed for gene-based diagnosis. According to the HBR article, Isolde used a razor blade business model, in which shavers were sold at cost and the real money was made off selling blades. After realizing they could not earn high margins from selling test instruments, Isolde sold their instruments at cost and made profit from selling consumables, biological and chemical compounds, and test kits. This aligns with their market as hospitals and labs often faced intense budget pressures, and focusing on consumables helped these organizations acquire consumables for less than the the fixed reimbursements, which presented Siiquent as a revenue generator for the hospitals and labs.

Emanuel Geiger, the head of Teomik, a research equipment provider, targeted research labs and universities and sold them everything needed for gene-based studies. According to the HBR article, Emanuel’s business model focused more on selling machines and had higher margins on their machines, unlike Siiquent. This aligns with their market as the funders for these research institutions did not mind the high price tag of instruments.

Structure vs. Flexibility

The benefit of “imposing the structure of a single revenue model” is that it allows for consolidating resources and effort toward a single market; however, the detriment is that it requires abandoning one of the existing revenue models, which loses the company the customers and share in that market. Another detriment is that the head of the abandoned revenue model would likely have to depart from the company, which would have been a great loss in leadership and expertise.

The detriment of “letting [the company] continue on its flexible way” is that it requires splitting resources and effort toward each of the two revenue models; however, the benefit is that it allows the company to more dynamically respond to changes in the market, which it had already started to see with the changes to their existing customer bases. As Isolde said, “We give customers what they want, we respond to
competitors’ initiatives, and we listen to employees,” and maintaining this existing level of flexibility will be key in proactively responding to the market. This also would allow for both heads to remain at the company and combine their expertise and leadership to grow the company.

A Fair Merger

As a PM wanting to ensure a fair merger process, I would first study past mergers (Disney-Fox, Kraft-Heinz, etc.) to adopt the most effective tactics they used in their merger. Overall, I would aim to first see what core values and strategies overlap between the companies, so as much can be retained as possible. Even if something like target markets seem diametrically opposed, I would look for how they could be combined while maintaining those values (e.g. prioritizing the customer experience). As the article showed, a merger does not necessarily mean choosing one or the other; there are times when seemingly different visions can move forward together.