As the head of Siiquent, a DNA sequencing startup, Isolde targets hospitals and diagnostic labs. While they don’t make profit on the machines they sell, they are able to generate profit on the testing kits, compounds, reagents, and other consumables that are necessary for the machine to complete its function.
Alternatively, as the head of Teomik, Emanuel targets research institutes by selling research equipment. Teomik sells equipment for a large profit, but they sell the consumables for little to no profit.
Hospitals and diagnostic labs are continually running tests that require Siiquent’s materials, which helps Siiquent maintain a steady revenue stream. Alternatively, while research institutes may not be continually running tests with these expensive machines, they have the money necessary to make the big one-time purchase of Teomik’s products.
If the company were to continue with this mixed revenue model, they could continue being able to service both of these markets. If one of the markets were to fail, the overall company could still succeed and rely on the revenue from the other unit. However, for this revenue model to sustain, there’s a lot of fragmentation within the company–if they were to streamline their company and their revenue model, they could cut down on overhead cost which could lead to higher profits. Additionally, as their patents expire, competitors with a more focused strategy can focus on one market at a time which might give them the edge they need to capture the market currently held by Teomik-Siiquent. Finally, attempting to service both markets and be adaptable and responsive can have unattended side effects, such as more waste and damage in the case of pay-per-test.
In order to find a solution to the merger if it were forced to happen, I would start with a lot of research. I would look for financial reports on competitors, study their revenue models, and conduct interviews with our customers and our competitors’ customers. After I (probably with a team of third party researchers) had collected a significant amount of data–enough to thoroughly understand the landscape–I’d ask Emanuel and Isolde to make their case for which revenue model we should choose. I would include board members and investors in the conversation and invite them to ask questions and introduce their considerations as well. The final decision would come down to a vote.
