Why Every Company Needs a Story

'I n recent years, social scientists have come to appreciate what political, religious, and military figures have long known; that stories (narratives, myths, or fables) constitute a uniquely powerful currency in human relationships. . . . And I suggest, further, that it is stories . . . of identity -- narratives that help individuals think about and feel who they are, where they come from, and where they are headed -- that constitute the single most powerful weapon in the leader's . . . arsenal.'

-- From Leading Minds, An Anatomy of Leadership, by Howard Gardner, professor of education at Harvard University

Of course you know your company's story. You built the business, after all.

So why, when someone -- a prospective employee, a potential investor, a worried vendor -- asks, do you point to that yellowing mission statement tacked to your wall, or begin reading from that slick brochure you paid a corporate-communications specialist too much to craft? It's not because you can't recite the basics: the day the company was founded, the century you project profitability, the exact species of self-starter you employ.

It's probably because knowing your company's story actually involves much more than reeling off the corporate highlights. And these days it can be much more powerful than any marketing pitch. In a perilous economy, a story can serve as a competitive tool that defines a company's sense of self and its place. It's not just a question of having a story that can open wallets on Wall Street or among other swanky investor types: you need a story to tell employees, suppliers, customers, and -- most of all -- yourself. By forcing its teller to reveal what is unique about a company's aims, a story helps a company's management, acting as a useful reminder that what matters most of all is focus.

Robert Metcalfe, who in 1979 founded 3Com Corp., a computer-networking company, recalls the unexpected benefits of telling his start-up's story to would-be investors. "You're learning each time about your business," he explains. "You get a sense of what resonates with your audience. You learn to listen to the counterarguments." Metcalfe figures he told 3Com's story "1,000 times in 997 different ways" to venture capitalists, each rendition a refinement of what had come before. That process helped deepen his appreciation of why he had created the company to begin with. Long after Metcalfe had successfully secured financing, and at a time when 3Com already employed a total of 2,000 people, Metcalfe would still meet with small groups of employees on Friday mornings, when he would regale them with company lore.

"The classic business story is much like the classic human story," says Mark Helprin. "There is rise and fall; the overcoming of great odds; the upholding of principles despite the cost; questions of rivalry and succession; and even the possibility of descent into madness." Helprin, the noted author of such novels as Winter's Tale and Ellis Island, also follows business as a member of the Wall Street Journal's editorial board.

Fortunately, it doesn't take a novelist to craft a company's story. To survive the early years, in fact, most entrepreneurs develop an instinctive feel for fiction, an ability to describe vividly to others a product or a business that has yet to exist. But like successful products, good stories don't end after the first iteration. They need to be told and retold, shaped and reshaped. Still, the stories worth telling contain basic elements that both engage the listener and remind the company of where it needs to go. Those elements include --

The starting point: a simple, recognizable truth
At the heart of every good business story there lies a truth that is simple enough for the management to communicate, and so recognizable that others can quickly connect with it. SatCon Technology, based in Cambridge, Mass., makes electromechanical products for markets from aerospace to autos. SatCon's work is complex and often theoretical, best expressed as a tangle of equations on a blackboard. But chairman David Eisenhaure can boil SatCon's mission down to a single accessible idea: "We bring a higher level of intelligence to machines." As a result, Eisenhaure says, SatCon can attract its share of gifted employees.

Eisenhaure, who took SatCon public in 1992, believes in what he calls "the elevator story." He explains: "You have to be able to describe to the person standing next to you what your company does before he gets off at the next floor. It's got to be simple. If it's too complex, then something's wrong."

Simple, truthful stories force the entrepreneur to strip away cant and complexity, to articulate what the business really does. Dick Morley, who has been a New Hampshireñbased seed-capital investor for 25 years, says that entrepreneurs frequently make the mistake of overstating their stories. Ego compels them to believe they can do too much, when settling for doing one thing well is what really matters. Morley believes that the truth emerges when an entrepreneur grasps not what his company does but what business it's in. "GM is not in the car business," Morley asserts. "You can't buy a car from GM; you buy it from the dealer. GM is a manufacturing company." Similarly, he labels Honda an "engine maker," while Harley-Davidson "sells dreams" and Mercedes-Benz "makes statements."

Morley says an entrepreneur's drive to discover the truth at the heart of a company forces him or her "to give everything away except its core competency." But pinpointing that can actually take a long time. He cites one of his investments, Andover Controls Inc., of Andover, Mass., a maker of automation devices for buildings, which struggled back in the mid 1970s. The company had started in the solar-energy business but languished with that industry. As the energy crisis dragged on, Andover moved into the manufacture of climate controls. "They kept saying they were in the building-controls business, but the business didn't go anywhere," says Morley. Andover found itself mired in a market crowded with 350 other companies.