Isolde was the head of Siiquent, which sold supplies to hospitals and big diagnostic labs for gene-based diagnosis. This equipment included biological and chemical compounds, test kits, and other consumables. Their revenue model involved providing these consumables to hospitals and labs for slightly cheaper than the reimbursements they received from insurers and the national health service. They also stood out from the competition by providing free help with complying with the regulatory procedures their clients had to undergo and allowing their customers to pay by the number of tests they performed. On the other hand, Emanuel was the head of Teomik, which sold biological research equipment and materials, including instruments for gene-based studies, to labs and universities. They focused on selling to big funders of genetic research, such as the Max Planck Institutes, who were not very price sensitive, allowing them to earn high margins. They also provided support in times of trouble and provided free advice.
Imposing the structure of a single revenue model ensures that the company can benefit from a simpler experience for customers, who will no longer be confused by the company’s offerings. Also, the company can take advantage of revenue synergies like cross selling and upselling. It can also streamline operational efficiency and offer stronger financial transparency. However, in this case, merging the revenue models can turn away existing customers. Siiquent benefits from charging less than the market to retain customers, whereas Teomik needs to charge higher to maintain thicker margins. Also, merging the revenue models can dilute the customer experience. Since Siiquent’s product is built off of more customer support than Teomik’s, merging their revenue models will either cause customers to churn from a lack of support on Siiquent’s end or increase costs to provide equivalent support on Teomik, which is not necessary.
If the CEO decided that the department heads must merge their divisions together, I would scaffold the decision to ensure a fair merging process by first interviewing members of different departments within the Siiquent and Teomik teams to understand their experience with what customers value about their product and see if it lines up with Isolde and Emanuel. Then, I would sit together with Isolde and Emanuel, prioritize the key differentiators of both of their businesses, and ensure that they remain preserved. Then, I would want to understand and prototype hybrid revenue structures where we can maintain a unified pricing philosophy without compromising the value behind Siiquent’s pricing structure. Finally, to ensure that this new revenue model does not break the existing operations, I would interview and test it for a short period of time on a select group of 10 customers, collecting all of the necessary metrics to determine whether the decision is a good one.
