Bertini and Tavassoli’s “Can One Business Unit Have Two Revenue Models?” asks just that, diving into the case of Scherr Pharmaceuticals and dealing with their acquisitions of Siiquent and Teomik.
Siiquent / Isolde: Profits on Stuff
- Approach: focus on most revenue possible at any point. “We make money. Lots of it.”
- Attitude: quick mind, pithy, confident, assertive.
- Market: B2B (business-to-business). Sells consumables. Make money by selling the stuff that machines need and will inevitably have to be bought by customers.
- Purposefully makes their products last a little less than what hospitals/labs get insured, which makes a lot of revenue.
- This model aligns with their market because hospitals will always need to restock their basic materials / stuff; they’ll never stop having patients. This means they will constantly be buying and consuming, thus giving the “lots of money” to Siiquent.
- Attractiveness: super active customer support, always asks for feedback and iterates based on customer input.
- Siiquent can quickly iterate and make changes on basically the same products, then just continue selling to hospitals/labs.
Teomik / Emanuel: Profits on Machines
- Approach: map out the details, adjust pricing policies over time based on customer. demands, understanding competitive threats.
- Attitude: proud of flexibility as the factor that sets them apart.
- Market: research. Sells bio research equipment and acquired patents, so huge funders of research labs pay them a ton to use their devices.
- This model aligns with the research market because researchers must be flexible — when they get results that were totally unexpected, they need to go back to the drawing board, or perhaps change the procedure (thus the materials) of the experiment itself. Each lab is so nuanced in what it needs, so it makes sense that Teomik must work around that.
- Attractiveness: able to provide expert support if needed, since they’re so research-based.
One Way vs. No Way
Single-Revenue
- Pros
- Consistency
- Better organization
- Able to grasp the market
- Cons
- Rigidity
- Doesn’t account for change and customer flexibility / needs
- In this case, would make both Isolde and Emanuel (who both have very successful experience) unhappy and unsatisfied
Flexible Way
- Pros
- Room for ingenuity in a constantly changing market
- Built on strong strategies that have worked in the past
- Can shift to new strategies as needed.
- Cons
- Unclear how to select customers
- Unclear what the competitive landscape consists of
Merging Fairly
I believe in the importance of the 1-1 conversations like Isolde and Emanuel got to have. Even if this was multiple department heads, I’d want to let the department heads chat in 1-1 conversations to determine what their top priorities are, and get a better sense of what they’d be willing to compromise on.
I’d also want to meet with all department heads involved to draw the lines of responsibility and make sure that positions weren’t getting mushed together. (i.e. when X comes up, should I go to person A or B?)
The department heads’ (who have the experience) voices should come first, my job would simply be to listen, learn, and make a decision from there.
