Why Every Company Needs a Story

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.

Bob Klein, Andover's vice-president of sales, says that once the management understood it was competing with a host of "black-box companies," it rewrote its story to differentiate the business. The competition sold its product through large electrical contractors, the cheapest and most direct route to the construction market. But that channel offered a crude solution: energy-management systems that were little more than add-ons to a building's electrical system. Andover recast itself as being in the "comfort business." It began selling through distributors that specialized in temperature-control systems. It paid a higher price for more-specialized access to the market, giving up margin to those distributors who understood its products. But since Andover's products were better integrated into the overall mechanics of office buildings, the company surpassed the competition, and the business took off from there.

Stories that reflect a recognition of the truth that drives a business can retain their vitality, even as the market evolves. Today Andover Controls remains in the comfort business, but its management has redefined what that means. The company increasingly integrates its products into "intelligent" buildings, in which security, mechanics, electronics, and electricity are tightly interwoven. That awareness has guided an approach to the market that depends even more on specialized distribution and strategic alliances with other vendors. Of the 350 "black-box" manufacturers that sprang up in the late '70s, Klein says, there are no more than 40 still in business. Andover Controls, with $60 million in sales in the United States and Europe and now aggressively expanding in Asia, is among the five largest.

The point of view: space for the listener
Good stories fire the listener's imagination. They draw people in and include them in the storytelling process. That describes what happened at Rocky Mountain Motorworks, in Woodland Park, Colo., a distributor of aftermarket parts for German cars, when founder Chris Nowak recently set out to recraft the company story.

Nowak started the business 10 years ago, and as of last year it had grown to $6.2 million in sales. But Nowak wanted to broaden Rocky Mountain Motorworks' possibilities, and he needed a new story that would reflect that greater potential.

He seized upon the idea of offering a lifetime warranty on all parts. What made the new story so effective was that just about anyone listening would be affected by it. "We said to our vendors, 'We need certain things from you,'" he recalls. The company set up a vendor-evaluation program that tracked every part that came through the door and ranked the vendors according to the number of defective parts each had shipped. At the end of the year, says Nowak, "we let them know where they stood. I told them I expected to recover 100% of my costs due to returns." For Nowak, it took a fair amount of coaxing and cajoling to get his vendors to come around to the idea. They worried about being measured against -- and played off -- one another. But Nowak offered them higher margins and the prospect, too, of higher sales.

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