At a recent Strategyzer webinar, Michael Wilkins shared insights into "Resilience as a strategy" – a powerful concept that challenges traditional thinking about business value creation. This approach focuses on making your revenue more predictable and resilient rather than simply larger.
The challenge: unpredictable revenue creates stress
Does this sound familiar? Your business experiences dramatic ups and downs throughout the year:
- One quarter you're overwhelmed with work
- The next quarter you're desperately seeking new projects
- You struggle with resource planning and talent retention
- Market uncertainties make growth forecasting difficult
In the webinar Michael used the company Cadesign Form (which creates computer-generated images of products) as an example to demonstrate how this caused enormous stress for the company. The organization was constantly adjusting staffing levels, creating uncertainty for both management and employees.
The insight: not all revenue is created equal
The key revelation came when comparing two Danish companies:
- MAERSK: Revenue of 350 billion DKK with a market value of 196 billion DKK
- Novo Nordisk: Revenue of 176 billion DKK with a market value of nearly 4,000 billion DKK
Why would Novo Nordisk be valued 20 times higher than MAERSK despite having half the revenue? The answer lies in revenue resilience.
MAERSK, a global shipping and logistics giant, must essentially rebuild its business each year despite its framework agreements. In contrast, Novo Nordisk's customers (diabetes patients) typically use their medications for life, and their government contracts span 10-20 years. This predictability makes Novo Nordisk's revenue far more valuable to investors.
The strategy: reorganizing revenue for resilience
To implement this strategy, Cadesign Form categorized their revenue into three buckets:
- Fixed revenue (committed, 100% certain)
Licenses, prepaid fees, upfront payments, retainers - Predictable revenue (80% certain)
Based on close relationships, historical patterns, customer insights - Variable revenue (requires active selling)
New business that must be aggressively pursued
The goal was simple: move as much revenue as possible from the variable category into the predictable and fixed categories.
The implementation: creating win-win value propositions
Cadesign Form took several practical steps:
- Offered retainer agreements where clients paid upfront
- Guaranteed access to preferred creative teams for committed clients
- Created framework agreements with clearer forecasting
- Digitized processes to deliver more value to committed clients
- Developed software tools sold on prepaid licenses
The key was ensuring these changes benefited clients as well—providing priority service, better planning, and enhanced value.
The results: dramatic value creation
In just one year, Cadesign Form transformed their revenue profile:
- Fixed revenue: Increased from 2% to 18%
- Predictable revenue: Increased from 39% to 63%
- Variable revenue: Reduced from 59% to 19%
The impact? A 72% increase in company valuation—far more than could have been achieved through growth alone.
Even more exciting: with 81% of revenue now predictable, the company was in a much stronger position to pursue growth in the following year.
Why revenue resilience matters for innovation
Alex Osterwalder, Strategyzer's founder, highlighted how revenue resilience can serve as powerful guidance for innovation efforts. This approach allows you to:
- Improve existing business models by adding resilience
- Acquire businesses or capabilities that enhance overall resilience of the company
- Divest parts that don't support resilience. Ie, reduce components that are variable revenue streams
- Explore new business models with built-in predictability
- Pivot innovation projects toward more resilient models
When to focus on revenue resilience
This strategy is particularly valuable when:
- Your business suffers from unpredictable revenue cycles
- You're preparing your company for sale
- You're competing in a market with limited growth potential
- You lack resources for aggressive growth
- You want to increase company value without requiring capital investment
Getting started: small steps toward resilience
Want to begin implementing revenue resilience? Try these approaches:
- For existing clients: Request partial prepayment for future work
- For key customers: Have open conversations about creating mutually beneficial long-term commitments
For your offerings: Develop value propositions that incentivize commitment (priority service, guaranteed resources, etc.)
Beyond valuation: the human benefit
Revenue resilience isn't just about company valuation—it creates a better work environment with less stress and more predictability for everyone involved. When properly implemented, it creates a triple win:
- For owners: Higher valuation and more stable profits
- For employees: Better work planning and job security
For customers: Improved service, resource allocation, and value
The resilience mindset shift
The most profound aspect of this approach is the shift in strategic thinking. Rather than pursuing growth at all costs, leaders can ask: "How can we make our revenue more resilient and predictable?"
This question often leads to innovations in business models that benefit all stakeholders while creating substantial value.
Ready to explore how revenue resilience could transform your business? Contact our team to learn how Strategyzer can guide you through this process.
