Isolde and Emmanuel essentially provide the same suite of products and services. Isolde’s Siiquent started out with a focus on hospitals whereas Emmanuel’s Teomik focused on dedicated research labs. Over time, however, these markets have become far less differentiated, leading to cannibalization of each other’s businesses. Compounding the problem is a lack of strategic alignment. Indeed, Teomik’s salespeople “took a certain pride in undercutting Siiquent, seeing it as an internal competitor”. For Siiquent, hospitals lacked the budget to expensive and highly priced machinery and equipment, so they focused on providing those at cost and making profits on consumables like compounds and test kits. Teomik had the exact opposite approach. Their well resourced customers were able to pay high prices for equipment where they had established already established brand recognition and presence. Furthermore, the patents they owned protected their equipment from competition but the consumable market for test kits and compounds was already crowded.
The benefit of a unified business model is that it provides complete alignment for the overall entity and prevents the cannibalization of their businesses. Moreover, a combined revenue strategy could mean they’re better able to leverage economies of scale and reduce their operating and production costs. Conversely, a unified business model means less flexibility and less reach for the business as a whole. Currently, with their dual business strategy, they are able to take advantage of both the small budget players like hospitals as well as research giants like Max Planck Institutes. A combined revenue model would mean picking one of these markets and focusing on solely extracting profits from either equipment or consumables instead of both. If their choice turns out to be incorrect, switching to the other revenue model could be extremely cost if at all possible, reducing the agility and flexibility of Scherr.
I think the process would need to maintain an clear level of transparency which can be done in a few ways. First, we will need to establish the evaluation criteria of what will determine the final revenue model strategy. For example, we would need to decide if growth potential, market share, profit margin, revenue, or combination of such factors will be the determinant of which strategy is better. Second, after establishing criteria it will be important to allow both departments to pitch their models based on these criteria. Then the company executives will vote based on their pitches to determine the final model. Lastly, we will need to establish an empathetic and collaborative process for how the two departments will merge and operate based on the combined model, capitalizing on their competitive advantages. Overall, it is critical that the process remain transparent with communication as the priority to prevent conflict and misunderstandings between the two departments.
