Isolde, the head of Siiquent, targets hospitals and big diagnostic labs, selling everything necessary for gene-based diagnosis. Isolde describes her revenue model as “the classic razor-blade model,” meaning that Siiquent sells the machines at a relatively low cost and profits primarily off of selling the materials the machines use. The frequency of gene-based diagnosis necessitates reuse of machines and resupply of these materials, making this a viable revenue model.
Emanuel, the head of Teomik, targets research labs and universities, selling machines needed for gene-based studies. The revenue model of Teomik revolves around making money off of the machines themselves, meaning that whether the materials the machines use are sold by Teomik or some other supplier is less relevant to Teomik’s revenue model. This aligns with the lower frequency of machine use in gene-based studies relative to gene-based diagnosis.
Imposing the structure of a single revenue model allows for standardization, simplicity, and efficiency. This change could lead to operations cost reduction. The lines between the two markets also began to blur, leading to internal competition as one unit became more feasible than another in the other’s market.
However, a single revenue model reduces flexibility and decreases the company’s ability to adapt to market demands. Catering to different markets entails using different approaches. Restricting the company to one revenue model could also stifle creativity.
If I were a PM assigned to mediate the interaction between department heads while merging departments, I would focus on facilitating communication and allowing each head to identify their revenue model’s strengths and weaknesses, identify common ground between the revenue models and identify the necessary differences, assess how the market may change in the future in order to see which revenue model is most adaptable, suggest compromises when necessary, and create a clearly defined, incremental plan to adapt the new revenue model.
