In this case study, Can One Business Unit Have Two Revenue Models?, we take a look at a company with two similar products but under different revenue models.
Isolde targets the market of hospitals and big diagnostic labs. In this way, Isolde’s revenue model focusing on not the machinery and instead the supplies reflects its market, which require fewer instrument components in comparison to its high use of supplies. Because this market is frequently using the supplies at a high rate, it’s more lucrative to target supplies, and offer a low joining rate in terms of the instruments. By being their go to brand, it provides a stable source of income as these large hospitals and diagnosis labs constantly order the same supplies.
Emanuel’s business model involved selling his instruments at a higher rate and focusing less on the supplies. This flexible business model aligns with his primary target market of market of universities and research labs. Those markets aren’t necessarily focused on having the same brand of supplies as they go through different experiments from different brands, but are targeting more the instruments, which Emanuel emphasizes.
One key pro of a single revenue model for this company would be that the consolidation of their sales forces and operations would reduce costs, and also allow them to target the growing “middle market” between the two markets they already did target. This would also allow there to be smoother management, under one system. The perils of imposing this structure would mean that it was likely that the machines or the supplies would be emphasized over the other, which would potentially alienate a market. Having a flexible revenue model would allow the company to easily adapt to changes within the global market.
If I were to be a PM for this merger, I would mediate this interaction through valuing both department heads and if they’re at an equal footing, offering similar benefits for them both. Maintaining consistency is key, and allowing both department heads the same expectations and accountability will help prevent any resentment from either side.
