Narrative and Numbers: The Value of Stories in Business
The Managerial Challenge
While much of this book has been written from the perspective of investors in companies and how they can combine storytelling and number-crunching skills in investing, there are lessons for managers and founders of businesses as well.
In keeping with the narrative/number mix over the corporate life cycle, the challenges faced by managers/founders shifts as a company ages. Early in the life cycle, founders need to be compelling storytellers, capable of convincing investors of the viability and potential of a business, even when there are no results (or even products) to point to.
As the firm transitions from the idea to the business stage, the promoters of the business need to bring business-building skills into the equation to convert promises to numbers. When the firm starts to grow, the test for managers is whether they can start delivering results that back up the story.
In maturity, managers need to frame their narratives to match up to the numbers that are being delivered; continuing to tell a growth story when a company’s revenues are flat will lead to a loss of credibility. In the final stages, managers will be tested on their ability to get past denial, accept that the business is in decline, and act accordingly.
A soaring narrative is more exciting and is likely to attract more investor attention and yield a higher valuation or pricing for the company than a smaller, more constrained one. However, a soaring narrative will also require more resources to convert into reality and is more likely to result in disappointments down the road.
The following table summarizes the structure well.
What are the qualities that make for a good top manager?
The answer depends on where a company is in its life cycle. Early in a company’s life, you want a visionary top manager, adept at packaging and telling a compelling story. As the company grows, the skill set you look for will shift to include more business-building skills, and those will be displaced by more administrative capabilities with mature companies. Finally, in decline, you want a realist running the business, someone who has no qualms about shrinking its size.