STORYTELLING IS THE KEY TO INVESTOR ENGAGEMENT

JUNE, 2014

Storytelling is the key

to investor engagement
Stories exert a powerful influence on human thoughts
and behavior. They consolidate memory, shape
emotions, cue heuristics and biases in judgment...

STORYTELLING IS THE KEY TO INVESTOR ENGAGEMENT

JUNE, 2014

Storytelling is a lost art in the business world.1 No place is this more apparent
than within the realm of investor relations (IR), where finance executives
and their legal advisers now manage the narrative for investors at many
companies.2 Its fair to say that as bright as these seasoned professionals may
be, trained corporate storytellers they most often are not.
The exposure this shortcoming creates for

The brute force of ownership is not required

companies can be significant. For one thing, it can

anymore because the big institutional players listen

prevent a company from maximizing its value-

to both sides and are willing to back the activist

creation potential. According to Rivel Research,

fund if they believe in them, says Gregory P. Taxin,

buy-side investors will pay a median premium of

president of the $1.5 billion hedge fund Clinton

10 percent to those companies that employ effective

Group. You can win with persuasion and ideas. 5

IR, while discounting a company a median of 20

percent for ineffective IR.3 Among other things,
effective IR is said to provide investors with insight
into a companys growth potential and the strategy
by which it will achieve this growth.4 In other words,
investors will reward those companies that develop
and nurture what we refer to as an investment
brand (see Defining the Investment Brand sidebar)
through effective corporate storytelling.

Notice he says, if they believe in them and not if

they have proof or if they can produce indisputable
facts. Likewise, note that persuasion and ideas
pave the road to victory, not concrete evidence
or reliable third-party and/or proprietary data.
Its no wonder then that the funds like Barington,
Starboard, Third Point and Trian are increasingly
incorporating whitepapers and other storytelling
vehicles in their fight strategies.6

Unfortunately, according to one highly respected

member of the investment community who asked
to remain anonymous, IR continues to get more
primitive as the markets keep getting more
sophisticated. As a result, many companies are
leaving money on the table.
At the same time, the lack of effective corporate
storytelling can cause a company to play right into

[we] trust our gut

even if the decision
flies in the face of all
the facts and figures.

the hands of the activist investor it seeks to avoid.

These funds understand that, in many ways, its
a war of words when competing for an investors
capital or vote and the advantage goes to the
trained storyteller. Sadly, too many companies are
not making their words count.

2014 Falls Communications. All rights reserved.

STORYTELLING IS THE KEY TO INVESTOR ENGAGEMENT

Connecting the dots

Why is corporate storytelling so important,

JUNE, 2014

WHAT IS HIGHLY IMPORTANT TO

INVESTORS VS. WHAT COMPANIES
GENERALLY DO WELL15

particularly within investor relations? Simple

[stories are] how we make [and] justify our

Q&A | 80% vs. 41%

decisions. [W]hen facts and information are framed

7

by a compelling story, youll not only hold the attention

Review of the business strategy | 78% vs. 44%

of your audience, but youll also make the information

presented more memorable. 8

Progress on achieving key goals | 66% vs. 33%

According to the U.S. Defense Advanced Research

Projects Agency (DARPA), which has spent millions

Forward-looking financial guidance | 60% vs. 30%

of dollars studying storytelling,9 stories exert a

powerful influence on human thoughts and behavior.
They consolidate memory, shape emotions, cue
heuristics and biases in judgment.10 This explains
why storytelling is a key component of the daily

Capital allocation plans | 60% vs. 23%

New previously undisclosed insight | 60% vs. 18%

updates U.S. presidents receive on the most pressing

intelligence and national security issues.11
Like any stakeholder group, the investment community
is not moved to action by data dumps, dense

Forward-looking operational guidance | 56% vs. 28%

A review of the financial results | 55% vs. 38%

PowerPoint slides or spreadsheets packed with

figures. 12 [N]o matter how compelling your facts are,

Business segment performance | 51% vs. 31%

if your audience isnt invested in what youre saying, all

the information will be lost on them. 13

Review of products and services | 41% vs. 34%

Evidence of this can be seen clearly in this recent

comparison between what is highly important

CSR/sustainability initiatives | 16% vs. 14%

to investors and what companies are effective in

discussing at a company-sponsored investor day

Investors

(fig. 1). Too often, companies are merely reporting data

when investors want the dots connected for them.
You have to court investors [stories] help attract and
motivate people.14

Companies

fig. 1
As Matt Sonefeldt, who heads up investor relations for

Its also important to understand who you are telling

LinkedIn, posted on October 2, 2013, Storytelling who

your story to, says Paul A. Ferrillo of Weil, Gotshal &

you are = the future direction of building a relationship

Manges LLP. Not only will this influence how you frame b/w public companies & long-term focused investors.
The good ones will do this well.
your story, but the manner in which you deliver it.

2014 Falls Communications. All rights reserved.

STORYTELLING IS THE KEY TO INVESTOR ENGAGEMENT

JUNE, 2014

The art of corporate storytelling

And even if they could, why would you leave it

Investors are looking for greater context and insight

products and services to life for customers through

into the business as they have neither the time nor

storytelling, so too should you use storytelling to

the patience to unpack a companys value proposition

illuminate the value you offer investors.

in todays data-driven, technology-accelerated global

markets. They are looking for what Simon Sinek refers
to as the why and the how of the companys story.16

The investment
community is not
moved to action by
data dumps, dense
PowerPoint slides or
spreadsheets packed
with figures.

to chance? Just as you bring the value of your

There is an art to corporate storytelling; much of

it hinging on what Malcolm Gladwell would refer
to as The Stickiness Factor19 (i.e., what makes it
memorable, what makes it easily retold by others,
etc.). Chip and Dan Heath explored this idea further
in their book, Made to Stick, and determined that this
requires, among other things:20
1. Simplicity the essential core of the idea
2. Unexpectedness captures and maintains

the attention / interest to convey the idea

3. Concreteness makes the idea clear

4. Credibility makes people believe the idea

DEFINING THE INVESTMENT BRAND

In order to engage investors and enhance value more

As Sinek explains in his book, Start With Why, the

effectively through communications, at Falls

reason the why is so important is that it speaks

Communications we believe that companies must

directly to the sections of the brain that control

decision-making. On the other hand, the brain
processes results the what elsewhere.17
Why trumps what because [we] trust our gut even
if the decision flies in the face of all the facts and
figures.18 In fact, companies that focus on what at
the expense of why are actually making the
decision-making process harder for investors.
To wit, the numbers cannot speak for themselves.

complement and support the compliance mandate of

investor relations with sophisticated branding and
marketing strategies. By utilizing fully the 3Cs of IR
compliance, context, channels companies can create
an authentic and differentiated investment brand.
Among other things, a strong investment brand can cut
through the daily noise of stock traders and enable a
company to make genuine connections with long-term
investors. The investment brand not only reflects the
central essence of the company but also speaks to the
companys distinctive competitive advantage, including
its track record of strategic execution.

2014 Falls Communications. All rights reserved.

STORYTELLING IS THE KEY TO INVESTOR ENGAGEMENT

JUNE, 2014

The science of
corporate storytelling

The science of corporate storytelling starts with

Though highly complementary, corporate

in, including:

research. First and foremost, you must have a

clear-eyed view of your business from the outside

storytelling and financial reporting are two different

things. This can be seen within the framework of
our 3Cs of IR model (fig. 2). Corporate storytelling
is the output of the context component of

1. How do investors view the industry and/or the

end markets? How does this match up with

historic views and future outlook?

effective IR, while financial reporting comes

2. What is the current investor base composition?

through the compliance portion. And while they

3. What is the current investor sentiment for the

may be as different as why and what, both require

rigorous discipline to ensure that they accurately

4. What does the gap analysis of the companys

represent the companys business and offer

investors the timely insight necessary to make an
informed decision.

The cornerstone
of effective
investor
communications

Compliance

Context

investor engagement versus current/desired

peers look like?

5. What does the companys media coverage look

THE THREE Cs OF INVESTOR RELATIONS

Reaffirms and
reinforces the
investment
brand

company and its current/desired peers?

like on a quantitative and qualitative basis against

the coverage generated by peers?

6. What are the primary external factors that

influence valuation and what conclusions can be

drawn when they are mapped?

7. How well does the companys current story

resonate with investors?

Channels

Ensures investors have access to

information when they want it, how
they want it and where they want it

fig. 2

2014 Falls Communications. All rights reserved.

STORYTELLING IS THE KEY TO INVESTOR ENGAGEMENT

JUNE, 2014

Similarly, you will need to have an unvarnished

This data which should be audited and reconciled

view of the company from the inside out, such as:

regularly as you would your financial and enterprise

1. Can the company clearly articulate its strategic

vision (i.e., does it know where its going and how
it is going to get there)?
2. What is the companys current story and how
does it deliver it to investors?
3. What aspects of the companys story are unknown,
unrecognized or misunderstood that could be
assets to value creation if told in a compelling and
meaningful way?

risk-management reporting will ensure that your

corporate narrative properly aligns the business and
the investment brand. This alignment is critical to
long-term value creation.
On a day-to-day basis, corporate storytelling can
mean the difference between an investment in your
company rather than a peer. Storytelling can enhance
the understanding of the enterprise by simplifying its
complexity and neutralizing potential value deflators.
And in times of organizational distress, including

4. How competitive is the company in the marketplace?

shareholder activism, effective corporate storytelling

5. What is the historic/current level of management

can mean the difference between a vote of support

credibility within the investment community and

and a vote of no confidence.

what are the contributing factors?

6. What is the companys historic/current

Simply put, effective storytelling is the key to

investor engagement.

performance-to-expectations ratio and what are

the contributing factors?
7. What does the segmentation of the investment
audience look like?

Notes
3 Reasons to Master the Art of Storytelling, Inc. April 9, 2012

11

Rivel Research, 2013

Tablets, Breaking Defense, April 21, 2014

Ibid.

12

Boardrooms Rethink Tactics to Defang Activist Investors,

January 16, 2011

1

Inside the Presidents Daily Briefing; DNI Moves With Care To

The Psychological Power of Storytelling, Psychology Today,

DealBook/The New York Times, November 11, 2013

13

Ibid.

14

Why Storytelling Is the Ultimate Weapon, FastCompany,

No Barbarians at the Gate; Instead a Force for Change,

DealBook/The New York Times, January 6, 2014

May, 2, 2012

Activist Investing White Papers, The Activist Investor, April 22, 2014

15

Rivel Research, 2013

3 Reasons to Master the Art of Storytelling, Inc. April 9, 2012

16

Start With Why by Simon Sinek, 2011

17

Ibid.

18

Ibid.

19

The Tipping Point: How Little Things Can Make a Big Difference

The Psychological Power of Storytelling, Psychology Today,

January 16, 2011

9

The Department of Everything, Senator Tom A. Coburn, M.D.,

November 2012
10

Defense Dept. Research Arm DARPA Tackles Storytime,

FastCompany, February 11, 2011

2014 Falls Communications. All rights reserved.

by Malcolm Gladwell, 2002

20

Made to Stick: Why Some Ideas Survive and Other Die

by Chip and Dan Heath, 2007

Rob Berick
+1 216 472 6680
rberick@fallscommunications.com

50 Public Square Floor 25

Cleveland, OH 44113
216.696.0229
fallscommunications.com