This Harvard Business Review case study examines a newly merged diagnostics company grappling with whether to standardize under a single revenue model or continue operating with two distinct ones. Isolde leads the division targeting markets focused on gene based diagnosis, primarily serving hospitals and large diagnostic laboratories. As she explains, similar to many business-to-business companies, her unit sells two things: the diagnostic machines themselves and the consumable materials those machines require. They operate on a razor and blade model, meaning they sell the instruments at a low cost and generate profits from the consumables such as reagents, test kits, and compounds used with the machines. Over time, the division evolved into a pay-per-test pricing system, allowing hospitals to pay based on the number of tests performed rather than fixed quantities of materials.
In contrast, Emanuel leads the division focused on research laboratories, scientific institutions, and universities, making their stronghold the academic and research and development sector. His revenue model relies primarily on earning profits from high-margin equipment sales, while consumables face intense competition and thinner margins.
The question of whether or not to merge carries significant implications and potential benefits. Peter and the two divisions must carefully balance the advantages of this integration with the risk of disrupting what already works. Siiquent focuses on generating profits from consumables, while Teomik earns profits primarily from machines. This distinction suggests that a merger could create opportunities to combine strengths while also introducing new complementary services that could boost overall profits. Moreover, as patents expired, competition intensified and the two markets began to overlap, so it appears that a merger is a logical way to reduce costs, streamline operations, and gain a stronghold against competition.
However, the merger also presents challenges. It must be noted that each division’s revenue model is deeply aligned with its specific market, and forcing a unified approach could risk alienating customers or lowering the effectiveness of either of the two models. For instance, Siiquent’s hospital clients value regulatory support and cost efficiency, whereas Teomik’s research customers prioritize innovation and technical performance. An immature combination of these two distinct business logics under one structure could compromise the flexibility and focus that made each unit successful.
As a PM assigned to mediate the merger discussions, I would approach the process in four key phases, focusing on clarity in communication, fairness, and alignment between the two department heads.
Phase 1: Internal Reflection
Each division would first hold internal meetings to identify its guiding principles, business priorities, and long term vision. I believe this step is crucial as both teams should enter the discussion with a clear understanding of their core values and areas of focus.
Phase 2: Joint Alignment
Next, I would facilitate a structured meeting between the two department heads to share their visions, strengths, and goals. The focus would be on finding areas of overlap, understanding differences, and building mutual respect through clear communication.
Phase 3: Framework and Criteria Setting
Once alignment is established, I would guide both sides in defining objective criteria and norms for decision-making. This could be things like customer impact, operational efficiency, and long term sustainability. This phase would also include setting ground rules for communication and establishing shared success metrics.
Phase 4: Workback Planning and Accountability
Finally, I would create a clear workback plan that outlines next steps, responsibilities, and checkpoints to ensure progress remains collaborative and measurable, while also keeping both teams aligned with the overall vision. This phased process provides structure without forcing premature decisions, allowing both sides to move toward a unified goal in a fair and respectful manner.
