The Harvard Business Review case “Can One Business Unit Have Two Revenue Models?” explores a classic tension companies face after a merger: whether to impose a single, unified revenue model for clarity and strategic focus, or preserve the flexibility that has fueled past success. The story of Siiquent and Teomik illustrates how revenue models evolve to fit their markets — and why merging them is far more complex than simply choosing one approach over the other.
Isolde’s Siiquent operates in the world of hospitals and diagnostic labs, a heavily regulated environment where budgets are tight and reimbursement structures dictate purchasing decisions. Her business follows the classic “razor-blade” model: instruments are sold at or near cost, while profits come from consumables like reagents and test kits. This model aligns perfectly with her customers’ priorities. They value predictable costs, compliance support, and the reassurance that equipment downtime will be minimized. Siiquent’s willingness to adapt, even introducing a pay-per-test model in response to customer frustrations, shows how deeply its revenue strategy is shaped by real-world needs.
Emanuel’s Teomik serves a very different market. Research institutions and universities, driven by the pursuit of scientific prestige, are less constrained by reimbursement rules and more willing to invest in high-end technology. Teomik earns substantial margins on sophisticated instruments, while consumables remain a secondary source of revenue. Here, the focus is on enabling cutting-edge research, and the willingness to pay reflects that ambition. Despite their shared origins in genetic technologies, the two divisions developed revenue models that mirror the demands of their distinct customer bases.
Choosing between imposing one revenue model or allowing flexibility carries trade-offs. A unified structure can simplify operations, align messaging, and create a more coherent market strategy. It offers the comfort of predictability. Yet it risks erasing the nuance that makes each unit successful, potentially alienating customers and slowing innovation. Flexibility, by contrast, keeps the company responsive and inventive, allowing it to pivot quickly as markets shift. But that same agility can breed internal confusion, inefficiency, and unintended side effects — as seen in the moral hazard created by Siiquent’s pay-per-test system, which led to wasteful customer behavior.
If I were the product manager mediating the merger, I would focus less on declaring a winner and more on designing a path forward. The process would begin with building a shared understanding of each unit’s strengths, customers, and revenue drivers. From there, the discussion should move toward agreeing on overarching principles — customer-centricity, compliance, and innovation — that both sides can embrace. With this foundation, the merged unit could explore new revenue approaches through small-scale experiments in overlapping market areas, learning from real data rather than speculation.
